Wednesday, February 08, 2012

Stocks Slightly Higher into Final Hour on More Financial/Tech Sector Optimism, Short-Covering, Asian Stock Gains

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 18.14 +2.78%
  • ISE Sentiment Index 110.0 +8.91%
  • Total Put/Call .82 +9.33%
  • NYSE Arms .86 -26.23%
Credit Investor Angst:
  • North American Investment Grade CDS Index 96.26 +1.72%
  • European Financial Sector CDS Index 163.20 +4.75%
  • Western Europe Sovereign Debt CDS Index 325.73 +.48%
  • Emerging Market CDS Index 257.21 +.50%
  • 2-Year Swap Spread 28.25 -1.5 bps
  • TED Spread 43.75 -.5 bp
  • 3-Month EUR/USD Cross-Currency Basis Swap -68.25 +4.0 bps
Economic Gauges:
  • 3-Month T-Bill Yield .07% unch.
  • Yield Curve 172.0 unch.
  • China Import Iron Ore Spot $144.70/Metric Tonne -1.04%
  • Citi US Economic Surprise Index 76.40 -1.2 points
  • 10-Year TIPS Spread 2.20 unch.
Overseas Futures:
  • Nikkei Futures: Indicating -10 open in Japan
  • DAX Futures: Indicating +39 open in Germany
  • Slightly Higher: On gains in my Tech sector longs
  • Disclosed Trades: Covered all of my (IWM), (QQQ) hedges, then added some back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 trades near session highs, despite recent sharp gains, global growth fears and Eurozone debt angst. On the positive side, Alt Energy, Computer, Semi, Disk Drive, Bank and HMO shares are especially strong, rising more than +1.0%. Tech and Financial shares have traded well throughout the day. Copper is up +.7% and Gold is down -.75%. Oil continues to trade poorly given the stock rally, euro rally, rising interest from speculators, falling euro debt angst, subsiding emerging market hard-landing fears, improving US data and rising Mid-east tensions. Major Asian indices rose around +1.5% overnight, led by a +2.4% gain in Shanghai. The Japan sovereign cds is falling -5.6% to 116.86 bps and the US sovereign cds is falling -4.2% to 38.24 bps. On the negative side, Coal, Oil Tanker, Steel, Biotech and Airlines shares are under pressure, falling more than -1.0%. The Transports have underperformed throughout the day again. Lumber is falling -.85%. The Portugal sovereign cds is still up +12.0% in less than 3 weeks. Lumber is down -2.2% since its Dec. 29th high despite the better US economic data, more dovish Fed commentary, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the weekly MBA Purchase Applications Index has been around the same level since May 2010. The Baltic Dry Index has plunged over -60.0% from its Oct. 14th high and is now down over -50.0% ytd. The 10Y T-Note Yield is unch. today at 1.98%, but remains a concern considering the recent stock rally, falling Eurozone debt angst and improvement in US economic data. The Philly Fed’s ADS Real-Time Business Conditions Index has stalled over the last month after showing meaningful improvement from mid-Nov. through year-end. The Western Europe Sovereign CDS Index is still fairly close to its Jan. 9th all-time high. The TED spread, 2Y Euro Swap Spread, 3M Euribor-OIS spread and Libor-OIS spread have improved, but are still at stressed levels. China Iron Ore Spot has plunged -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are up +485.0% ytd to the highest level since March of last year and approaching their April 2010 record. US stocks continue to trade very well. Almost all negatives are currently being ignored as the “buy every dip” mentality remains firmly in place. While this can continue a while longer, European economic data must begin to trend notably better over the coming months for the S&P 500 to break above approaching technical resistance, in my opinion. Given the austerity measures that have yet to take hold in the region, this remains a large question mark. For an intermediate-term equity advance from current levels, I would still expect to see further European credit gauge improvement, subsiding hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-higher into the close from current levels on US economic optimism, short-covering, a bounce in the euro and tech/financial sector optimism.


Anonymous said...

theyenguy said...

Some believe that Greece is going to default on its debt, if this be the case would not an invetment in gold bulion or volatility, TVIX, VIXY, VIXM, be a better investment?