Broad Market Tone: - Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst: - VIX 20.95 +11.38%
- ISE Sentiment Index 66.0 -17.5%
- Total Put/Call .96 -1.03%
- NYSE Arms 1.89 -24.32%
Credit Investor Angst:- North American Investment Grade CDS Index 104.56 +2.42%
- European Financial Sector CDS Index 257.55 +8.79%
- Western Europe Sovereign Debt CDS Index 278.84 +2.23%
- Emerging Market CDS Index 271.20 +4.0%
- 2-Year Swap Spread 31.25 +2.75 basis points
- TED Spread 38.75 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -56.75 -2.75 basis points
Economic Gauges:- 3-Month T-Bill Yield .08% unch.
- Yield Curve 169.0 -3 basis points
- China Import Iron Ore Spot $148.0/Metric Tonne unch.
- Citi US Economic Surprise Index 4.50 -.1 point
- 10-Year TIPS Spread 2.25 +2 basis points
Overseas Futures: - Nikkei Futures: Indicating a -160 open in Japan
- DAX Futures: Indicating -23 open in Germany
Portfolio:
- Slightly Lower: On losses in my Tech, Retail and Biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some
- Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 is trading near session lows and breaking below its 50-day moving average on rising Eurozone debt angst, less financial/homebuilding sector optimism, rising global growth fears, profit-taking, more shorting and high energy prices. On the positive side, Coal shares are slightly higher on the day. Weekly retail sales rose +4.1% versus a +3.6% gain the prior week. Oil is falling -1.13% and Lumber is rising +.19%. On the negative side,
Oil Tanker, Paper, Disk Drive, Biotech, HMO, Homebuilding, Retail, Gaming, Networking, Bank and Construction shares are under significant pressure, falling more than -2.75%. Small-cap and Cyclical shares are underperforming again.
Gold is gaining +1.22% and Copper is down -1.76%. The 10-year yield is falling -7 bps to 1.98%. Major Asian indices were mostly lower, led down by a -1.2% decline in Hong Kong. Major European indices plunged around -3.0% today, led down by a -5.0% decline in Italy. Spanish equities fell another -3.0% and are now down -13.2% ytd. As I have been cautioning for awhile, this remains a large red flag for the region. As well, the
Bloomberg European Financial Services/Bank Index plunged another -4.3% today.
This index is down -15.4% in about 3 weeks and is now convincingly below its 200-day moving average.
The Germany sovereign cds rose +2.3% to 75.50 bps, the France sovereign cds is gaining +5.8% to 189.57 bps, the Italy sovereign cds is gaining +4.65% to 437.73 bps, the Spain sovereign cds is up +4.6% to 485.73 bps, the Russia sovereign cds is jumping +6.1% to 204.32 bps and the China sovereign cds is gaining 4.8% to 116.65 bps. Moreover, the European Inv Grade CDS Index is soaring +10.1% to 146.36 bps and the Emerging Markets Sovereign CDS Index jumped +7.0% to 295.50 bps. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating.
Moreover, the Citi US Economic Surprise Index has fallen back to mid-Oct. levels. Lumber is -6.0% since its Dec. 29th high despite the better US economic data, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the weekly MBA Home 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 -18.5% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +724.0% ytd.
China's March copper imports fell -4.6% on the month.
Overall, credit gauges continue to weaken too much as Europe's debt crisis appears to be in the early stages of reigniting. The Italian/German 10Y Yld Spread is up +17.0% in 5 days.
German bond yields continue to fall rapidly, despite perceptions that their economy is strong and labor costs are starting to rise too much, which is another large red flag. Stocks are getting short-term oversold for the first time in awhile, however any bounce will likely prove short-lived unless the situation in Europe begins to calm very soon. For the recent equity advance to regain traction, I would 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, less financial sector optimism, rising global growth fears, profit-taking and high energy prices.
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