Broad Market Tone: - Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst: - VIX 19.19 +9.28%
- ISE Sentiment Index 79.0 -28.83%
- Total Put/Call 1.01 unch.
- NYSE Arms 1.71 +8.88%
Credit Investor Angst:- North American Investment Grade CDS Index 98.75 +2.77%
- European Financial Sector CDS Index 244.39 +1.98%
- Western Europe Sovereign Debt CDS Index 273.51 -.06%
- Emerging Market CDS Index 247.63 +1.94%
- 2-Year Swap Spread 29.0 +.75 basis point
- TED Spread 39.5 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -41.5 +1.25 basis point
Economic Gauges:- 3-Month T-Bill Yield .07% -1 basis point
- Yield Curve 162.0 -4 basis points
- China Import Iron Ore Spot $144.10/Metric Tonne -.55%
- Citi US Economic Surprise Index -23.40 +.8 point
- 10-Year TIPS Spread 2.21 -5 basis points
Overseas Futures: - Nikkei Futures: Indicating a -205 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Slightly Lower: On losses in my Tech, Biotech, Medical and Retail sector longs
- Disclosed Trades: Added to my (IWM), (QQQ) hedges, added to my (EEM) short, then covered some of them
- Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 breaks convincingly below its 50-day moving average on rising Eurozone debt angst, less financial/tech sector optimism, high energy prices, rising global growth fears and less US economic optimism. On the positive side, Utility and Airline shares are slightly higher on the day. Oil is falling -4.0%. The Belgium sovereign cds is down -2.7% to 237.89 bps and the Italian/Germany 10Y Yld Spread is falling -.97% to 385.02 bps. On the negative side, Coal, Oil Tanker, Alt Energy, Oil Service, Steel, Software, Networking, Defense, Internet, Semi, Bank, Energy, Biotech and HMO
shares are under significant pressure, falling more than -2.25%. Financial/Tech shares have lagged throughout the day. As well, cyclical shares are relatively weak again. Copper is falling -.46%, Gold is gaining +.43% and Lumber is down -.94%. Major Asian indices were mostly lower overnight, led down by a -1.9% decline in India. The Sensex broke down technically, closed below its 200-day moving average and is down -9.1% since Feb. 22. Major European indices are falling -1.75%, led down by a -1.95% decline in Germany. Italy is down another -1.55% and is now down -18.8% since March 19. As well, Russia is plunging -4.1% on the decline in oil and is breaking down technically. The Bloomberg European Bank/Financial Services Index is down -.8% and is now down -17.0% since March 19.
The Portugal sovereign cds is rising +4.0% to 1,010.51 bps, the Russia sovereign cds is gaining +1.9% to 189.02 bps, the Brazil sovereign cds is up +2.3% to 122.75 bps and the US sovereign cds is gaining +1.4% to 40.07 bps. Moreover, the European Investment Grade CDS Index is jumping +2.7% to 144.72 bps. US Rail Traffic continues to soften.
The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak.
Moreover, the Citi US Economic Surprise Index has fallen back to early-Oct. levels. Lumber is -5.0% since its Dec. 29th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +603.0% ytd.
China's March refined-copper imports fell -8.0% on the month.
Singapore Electronics exports decelerated to a gain of +2.8% in March from a +23.3% gain in February. I continue to believe there is a fairly high level of complacency among US investors regarding the rapidly deteriorating situation in Europe.
The Citi Eurozone Economic Surprise Index is falling another -6.9 points today to -34.7, which is the lowest since mid-November of last year.
The recent intensification of the downturn in Eurozone economies raises the odds of further sovereign/bank downgrades over the coming weeks. The 10Y T-Note continues to trade too well, copper continues to trade poorly and the euro has turned lower the last 3 days despite weaker US economic data. Oil is falling to the lower end of the range it has been trapped in for the last few months. I expect oil to fall another $10/bbl+ by the fall assuming no serious supply disruptions. Fitch is out warning today of a Eurozone breakup. As well, a senior official of the Greek Ministry of Finance is saying today that “Greece will exit from the Euro.” I continue to believe that the ECB’s LTRO plan will be viewed in a very negative light over the coming months and that the Eurozone will not exist in its current form over the intermediate-term. Given the upcoming US “fiscal cliff”, intensely negative political rhetoric and likely reigniting of the European debt crisis, more equity investor caution is warranted into the second half of the year. 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 US economic optimism, high energy prices, rising global growth fears, more shorting, profit-taking and less financial/tech sector optimism.
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