Broad Market Tone: - Advance/Decline Line: Lower
- Sector Performance: Most Declining
- Volume: Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst: - VIX 17.49 +1.33%
- ISE Sentiment Index 97.0 -15.65%
- Total Put/Call .92 -8.91%
- NYSE Arms .90 +8.55%
Credit Investor Angst:- North American Investment Grade CDS Index 94.20 +1.30%
- European Financial Sector CDS Index 161.62 +.45%
- Western Europe Sovereign Debt CDS Index 346.0 +1.47%
- Emerging Market CDS Index 238.07 -1.91%
- 2-Year Swap Spread 25.0 -1.25 bps
- TED Spread 41.50 +.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -72.50 -.25 bp
Economic Gauges:- 3-Month T-Bill Yield .06% -1 bp
- Yield Curve 171.0 -2 bps
- China Import Iron Ore Spot $143.20/Metric Tonne unch.
- Citi US Economic Surprise Index 45.10 unch.
- 10-Year TIPS Spread 2.24 -4 bps
Overseas Futures: - Nikkei Futures: Indicating +13 open in Japan
- DAX Futures: Indicating -5 open in Germany
Portfolio:
- Slightly Higher: On gains in my Retail sector longs and index hedges
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 trades lower on rising Eurozone debt angst, high energy prices, global growth fears, technical selling and profit-taking. On the positive side, Utility, Computer Service and Retail shares are slightly higher on the day. Oil is falling -2.3%. Major Asian indices rose around +.75% overnight, led by a +1.4% gain in Shanghai despite reports that China will stem any new property easing by local governments and some talk of Asian central bank tightening before year-end. Major European indices were mixed today, with the Bloomberg European Financial Services/Bank Index rising +.60%. The Brazil sovereign cds is falling -2.6% to 133.40 bps, the Saudi sovereign cds is down -3.9% to 132.66 bps and the Japan sovereign cds is down -2.78% to 116.94 bps. On the negative side, Education, Road & Rail, HMO, Hospital, Oil Service, Coal, Alt Energy, Construction, I-Banking, Networking, Semi, Energy and Oil Tanker shares are
under pressure, falling more than -1.0%. Small-caps are relatively weak again. Copper is falling -.50%. The 10Y T-Note Yield at 1.98%, remains a concern considering the recent stock rally, falling Eurozone debt angst and improvement in US economic data.
Despite the recent positive US economic data, the Philly Fed/ADS Real-Time Business Conditions Index has declined -5.08% over the last 5 days and continues to trend lower from its peak in mid-December.
Lumber is -4.0% 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 Western Europe Sovereign CDS Index is still fairly close to its Jan. 9th all-time high. Overall, credit gauge improvement has stalled over the last few weeks and these gauges are still at stressed levels.
China Iron Ore Spot has plunged -21.0% since Sept. 7th of last year. Shanghai Copper Inventories are up +707.0% ytd and are still very near their recent all-time high. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. The euro currency has traded poorly over the last 3 days. Shares of Yelp(YELP) are soaring +65% today, giving the company a $1.5B market cap. I would not be a buyer anywhere near current levels and this stock’s performance today is another red flag regarding investor sentiment, in my opinion. The Transports, while underperforming today, have outperformed for the week, rising +.97%. However the MS Tech Index underperformed for the week, falling -.63%, despite a +4.6% gain in Apple(AAPL) shares. Stocks are short-term overbought and still near intermediate-term resistance. I would become more aggressive on the long-side after further sideways action and then a convincing break above DJIA 13K and Naz 3K. For an intermediate-term equity advance from current levels, I would still expect to see further European credit gauge improvement, a further subsiding of 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-lower into the close from current levels on rising Eurozone debt angst, high energy prices, global growth fears, technical selling and profit-taking.
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