Wednesday, November 16, 2011

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Financial Sector Pessimism, Global Growth Fears, Rising Energy Prices

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: About Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 31.05 -.54%
  • ISE Sentiment Index 83.0 +3.75%
  • Total Put/Call 1.49 +35.45
  • NYSE Arms 1.03 +10.49%
Credit Investor Angst:
  • North American Investment Grade CDS Index 131.64 -1.06%
  • European Financial Sector CDS Index 277.89 +2.23%
  • Western Europe Sovereign Debt CDS Index 354.66 -1.32%
  • Emerging Market CDS Index 322.24 +.76%
  • 2-Year Swap Spread 51.0 +4 bps
  • TED Spread 47.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 175.0 -7 bps
  • China Import Iron Ore Spot $147.20/Metric Tonne +.62%
  • Citi US Economic Surprise Index 49.90 +5.3 points
  • 10-Year TIPS Spread 1.95 -7 bps
Overseas Futures:
  • Nikkei Futures: Indicating -60 open in Japan
  • DAX Futures: Indicating -74 open in Germany
  • Slightly Higher: On gains in my Index hedges and Emerging Markets shorts.
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short and then added them back
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 trades to session lows as it fails again at its 200-day moving-average on rising Eurozone debt angst, rising global growth worries, rising financial sector pessimism and rising energy prices. On the positive side, Oil Service and Homebuilding shares are higher on the day. Gold is falling -.85%, Lumber is rising +2.06% and the UBS-Bloomberg Ag Spot Index is declining -.78%. The Germany sovereign cds is down -3.18% to 94.0 bps, the France sovereign cds is down -3.89% to 224.83 bps, the UK sovereign cds is down -4.43% to 90.83 bps and the US sovereign cds is down -3.4% to 50.24 bps. On the negative side, Coal, Internet, Software, Bank, I-Banking, Medical, Hospital, HMO, Insurance, Restaurant and Road & Rail shares are under meaningful pressure, falling more than -2.0%. (XLF) has traded poorly throughout the day. Copper is down -.98% and oil is surging +2.4%. Major Asian indices fell 1-2% overnight. Hong Kong shares fell -2.0%, back to their downward-sloping 50-day moving average, and are now down -17.7% ytd. The Saudi sovereign cds is gaining +1.2% to 120.74 bps and the Brazil sovereign cds is rising +.34% to 167.25 bps. Moreover, the Asia Pacific Sovereign CDS Index is rising +2.4% to 157.50 bps. The TED spread continues to trend higher and is at the highest since June 2010. The 2-Year Swap spread is at the highest since May 2010 today. The FRA/OIS Spread is jumping +6.6 bps to 68.50 bps, which is the highest since May 2010. The 2yr Euro Swap Spread is still near the highest since Nov. 2008. The 3M Euro Basis Swap is falling -3.62 bps to -123.12 bps, which is the worst since November 2008. The Libor-OIS spread is at the widest since July 2009, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -23.3% since February 16th and -18.7% since Sept. 7th. The 10-year yield fell -4 bps to 2.00% today despite more positive US economic data. Oil continues to trade very well, which is also a large negative. As I said yesterday, given the recent and ongoing significant deterioration in gauges of Eurozone debt health, the big jumps in some gauges of stock investor bullish sentiment and the recent equity rally, investors seem a bit complacent. Stocks were holding up very well again today until Fitch's warning about US banks' European exposure this afternoon. The market's very negative reaction to these unsurprising statements is a bad sign. I still think the risk of another meaningful turn lower in stocks is substantial unless a positive catalyst emerges from Europe very soon. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, rising global growth worries, profit-taking, rising financial sector pessimism, more shorting, rising energy prices and technical selling.

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