Broad Market Tone: - Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Volume: Light
- Market Leading Stocks: Performing In Line
Equity Investor Angst: - VIX 17.47 -2.67%
- ISE Sentiment Index 110.0 +12.24%
- Total Put/Call .89 -3.26%
- NYSE Arms 1.02 +36.28%
Credit Investor Angst:- North American Investment Grade CDS Index 94.86 -1.29%
- European Financial Sector CDS Index 165.92 -.76%
- Western Europe Sovereign Debt CDS Index 351.70 +.60%
- Emerging Market CDS Index 238.59 -.07%
- 2-Year Swap Spread 26.0 +.5 bp
- TED Spread 40.0 +.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -65.75 -1.75 bps
Economic Gauges:- 3-Month T-Bill Yield .08% unch.
- Yield Curve 171.0 unch.
- China Import Iron Ore Spot $142.60/Metric Tonne unch.
- Citi US Economic Surprise Index 39.0 -6.6 points
- 10-Year TIPS Spread 2.29 +3 bps
Overseas Futures: - Nikkei Futures: Indicating +59 open in Japan
- DAX Futures: Indicating +4 open in Germany
Portfolio:
- Higher: On gains in my Tech, Retail and Medical sector longs
- Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 trades back near recent highs despite rising energy prices, a weak euro and rising global growth fears. On the positive side, Coal, Alt Energy, Oil Tanker, Disk Drive and Retail shares are especially strong, rising more than +1.25%. Financial shares have traded well throughout the day. Small-caps are strongly outperforming. Copper is rising +1.53%. Major Asian indices rose around +1.25% overnight, despite more disappointing data out of China, led by a +2.1% gain in Indian shares. I still don’t believe that the imminent aggressive easing by China that many have been expecting for months will come to fruition in the near-term. The Japan sovereign cds is down -2.7% to 109.60 bps and the Brazil sovereign cds is down -4.23% to 128.16 bps. Moreover, the European Investment Grade CDS Index is down -2.1% to 113.81 bps. On the negative side, Energy, Oil Service, Steel, Internet, Airline and Road&Rail shares are
lower on the day. Oil is rising +.7%, Gold is gaining +.65% and Lumber is down -1.9%. The Transports have lagged throughout the day. The 10Y T-Note Yield at 2.03%, remains a concern considering the recent stock rally, falling Eurozone debt angst and improvement in US economic data.
As well, the Philly Fed/ADS Real-Time Business Conditions Index is down -17.1% over the last 5 days and continues to trend lower from its mid-December peak.
Lumber is -4.2% 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 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 +711.0% 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. Major European indices were mixed as a +.67% gain in Germany offset a -1.11% loss in Italian shares. The Bloomberg European Financial Services/Bank Index fell -.53%.
While the current European “can-kicking” may satisfy politicians’ needs for short-term stability, I continue to believe their recent actions will eventually result in an even more intense debt crisis over the intermediate-term. US stocks continue to trade very well. I have a small long position in shares of (TFM), which is hitting a new high today. The stock is slightly extended short-term, but is breaking out of its post-IPO range and should outperform over the intermediate-term. I am still looking for signs of another move lower in the major averages before the end of next week. 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 Eurozone debt angst, rising energy prices, rising global growth fears, more shorting, technical selling and profit-taking.
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