Broad Market Tone: - Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst: - VIX 16.16 +6.81%
- ISE Sentiment Index 61.0 -46.49%
- Total Put/Call 1.14 +16.33%
- NYSE Arms 2.09 +74.03%
Credit Investor Angst:- North American Investment Grade CDS Index 89.21 +3.55%
- European Financial Sector CDS Index 156.55 +10.84%
- Western Europe Sovereign Debt CDS Index 227.99 -.75%
- Emerging Market CDS Index 239.20 +4.0%
- 2-Year Swap Spread 26.75 -.25 basis point
- TED Spread 41.25 +2.5 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -53.0 +.75 bp
Economic Gauges:- 3-Month T-Bill Yield .07% -2 basis points
- Yield Curve 191.0 -1 basis point
- China Import Iron Ore Spot $145.20/Metric Tonne +.21%
- Citi US Economic Surprise Index 29.0 -.6 point
- 10-Year TIPS Spread 2.38 -2 basis points
Overseas Futures: - Nikkei Futures: Indicating a -187 open in Japan
- DAX Futures: Indicating a -5 open in Germany
Portfolio:
- Slightly Lower: On losses in my Tech and Retail sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short, 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, profit-taking, more shorting and rising global growth fears. On the positive side, Computer Service, Utility and Restaurant shares are slightly higher on the day. Technology shares are holding up relatively well. Oil is falling -1.2% and Gold is down -.4%. On the negative side, Coal, Oil Tanker, Energy, Oil Service, Steel, Homebuilding and Road & Rail
shares are under significant pressure, falling more than -2.5%. Small-caps and the Transports are also underperforming. Lumber is down -.9% and Copper is down -1.9%. Major European indices fell around -1.5%, led by a -1.7% decline in Italy. The Bloomberg European Financial Services/Bank Index is fell -1.9%.
The France sovereign cds is up +4.74% to 175.12 bps, the Spain sovereign cds is rising +2.07% to 432.34 bps, the Germany sovereign cds is rising +4.5% to 73.50 bps, the Russia sovereign cds jumped +4.68% to 174.42 bps, the Brazil sovereign cds is up +4.5% to 121.49 bps and the Italy sovereign cds is rising +3.6% to 376.75 bps. Moreover, the European Investment Grade CDS Index is rising +4.1% to 96.33 bps. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its mid-December peak despite investor perceptions that the US economy is accelerating.
Lumber is -10.5% since its Dec. 29th high despite the better US economic data, 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 around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +750.0% ytd. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. The most economically sensitive stocks are substantially underperforming today.
The blowup in the (TVIX) ETF is a concern for market psychology. One of my longs, market leader (AAPL), isn't trading quite as well of late. The stock weakened into the afternoon for the second day in a row. I suspect we could see some more equity profit-taking/new shorting into quarter-end, given the big move higher in the major averages. For the recent equity advance to maintain traction, 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-higher into the close from current levels on short-covering, more tech sector optimism and investor performance angst.
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