Tuesday, September 20, 2011

Stocks Slightly Lower into Final Hour on Rising Eurozone Debt Angst, US Tax Hike Worries, Global Growth Concerns, Technical Selling


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 32.06 -2.05%
  • ISE Sentiment Index 101.0 +62.90%
  • Total Put/Call 1.11 +12.12%
  • NYSE Arms .96 -48.76%
Credit Investor Angst:
  • North American Investment Grade CDS Index 132.65 +3.53%
  • European Financial Sector CDS Index 271.77 +1.44%
  • Western Europe Sovereign Debt CDS Index 348.50 +2.36%
  • Emerging Market CDS Index 312.50 +2.7%
  • 2-Year Swap Spread 30.0 -2 bps
  • TED Spread 35.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 178.0 -1 bp
  • China Import Iron Ore Spot $177.40/Metric Tonne -.06%
  • Citi US Economic Surprise Index -42.30 -.1 point
  • 10-Year TIPS Spread 1.92 +3 basis points
Overseas Futures:
  • Nikkei Futures: Indicating -51 open in Japan
  • DAX Futures: Indicating -35 open in Germany
Portfolio:
  • Slightly Higher: On gains in my Biotech/Medical sector longs and Index hedges
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my EEM short and then covered some of them
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 weakens this afternoon at its downward-sloping 50-day moving average on rising Eurozone debt angst, US tax hike concerns, some more disappointing economic data, emerging markets inflation fears and global growth worries. On the positive side, Drug, Biotech, Medical, Computer Service and Utility shares are especially strong, rising more than +1.0%. Lumber is rising +2.2%. Weekly retail sales rose +4.5% versus a +4.7% gain the prior week. On the negative side, Road & Rail, Education, Homebuilding, Construction, HMO, Hospital, Networking, Disk Drive, Computer, Software, Paper, Steel, Alt Energy and Coal shares are under meaningful pressure, falling more than -1.5%. Cyclicals and small-caps are substantially underperforming again. Oil is rising +.39%, Gold is jumping +1.35% and Copper is falling -1.94%. Rice is still very near its multi-year high, rising +32.5% in about 11 weeks. The average US price for a gallon of gas is -.01/gallon today to $3.58/gallon. It is up .44/gallon in about 7 months. The Germany sovereign cds is gaining +4.6% to 94.33 bps, the China sovereign cds is gaining +2.0% to 172.15 bps, the Japan sovereign cds is rising +4.2% to 127.49 bps, the Saudi sovereign cds is surging +5.86% to 117.50 bps, the UK sovereign cds is gaining +3.16% to 85.17 bps, the France sovereign cds is surging +2.6% to 186.17 bps, the Italy sovereign cds is rising +5.36% to 514.83 bps, the Belgium sovereign cds is gaining +2.1% to 272.17 bps, the Brazil sovereign cds is gaining +2.0% to 172.15 bps and the Spain sovereign cds is jumping +2.7% to 417.83 bps. The Germany sovereign cds surpassed its Feb. 24, 2009 record high today. As well, the Japan sovereign cds also hit an all-time high today. The France and Italy sovereign cds are still very near their record highs. The China sovereign cds is braking to the highest level since April 2009. The Russia sovereign cds is close to breaking out of a multi-year trading range. The Western Europe Sovereign CDS Index and European Financial Sector CDS Index are still near their all-time highs. The 2-Year Euro Swap Spread is very close to a multi-year high. The 3-Month Euro Basis Swap is falling -6.03 bps to -98.06 bps and has given back about half its gains since last week's European liquidity measures. The TED spread is still very near the highest level since July 2010 despite Europe's recent efforts. The China Blended Corporate Spread Index is continuing its parabolic move higher, rising another 15.0 bps to 683.0 bps. Brazilian equities fell -1.25% today and are now down -18.6% ytd. Select growth stock leaders continue to prop up the major averages. Breadth and volume were poor even as the major averages surged this morning. The 10-year yield continues to fall too much. Various credit gauges continue to indicate rising global recession fears. However, it appears to me equity investors continue to expect stagnation, rather than true recession, which is likely the main reason a handful of true growth stocks are seeing huge outperformance and multiple expansion. Gauges of European debt angst must stabilize very soon for equities too build on recent gains. I expect US stocks to trade modestly lower into the close from current levels on profit-taking, rising Eurzone debt angst, global growth worries, emerging markets inflation fears, US tax hike worries and more shorting.

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