Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as investment manager performance angst, mostly positive earnings reports, diminishing economic fear, seasonal strength and buyout speculation offset profit-taking, rising eurozone sovereign debt angst and more shorting. My intermediate-term trading indicators are giving mostly bullish signals and the Portfolio is 100% net long heading into the week.

Market Week in Review

S&P 500 1,225.85 +3.60%*



The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,225.85 +3.60%
  
• DJIA 11,444.08 +2.93%
  
• NASDAQ 2,578.98 +2.85%
  
• Russell 2000 736.59 +4.73%
  
• Wilshire 5000 12,717.56 +3.70%
  
• Russell 1000 Growth 559.27 +3.55%
  
• Russell 1000 Value 619.87 +3.62%
  
• Morgan Stanley Consumer 737.66 +2.0%
  
• Morgan Stanley Cyclical 975.34 +5.17%
• Morgan Stanley Technology 642.98 +2.45%
  
• Transports 4,923.40 +3.56%
  
• Utilities 409.60 +1.17%
  
• MSCI Emerging Markets 48.28 +4.93%
  
• Lyxor L/S Equity Long Bias Index 1,005.57 +.30%
  
• Lyxor L/S Equity Variable Bias Index 855.04 +.02%
  
• Lyxor L/S Equity Short Bias Index 763.17 -.46%
  

Sentiment/Internals

• NYSE Cumulative A/D Line +109,856 +4.37%
  
• Bloomberg New Highs-Lows Index +1,139 +857
  
• Bloomberg Crude Oil % Bulls 59.0 +391.67%
  
• CFTC Oil Net Speculative Position +130,108 +3.86%
  
• CFTC Oil Total Open Interest 1,433,324 +2.77%
  
• Total Put/Call .68 -21.84%
  
• OEX Put/Call 1.08 +45.95%
  
• ISE Sentiment 153.0 +77.91%
  
• NYSE Arms .70 -41.17%
  
• Volatility(VIX) 18.26 -13.86%
• S&P 500 Implied Correlation Index 51.91% -20.27%
  
• G7 Currency Volatility (VXY) 12.13 -6.04%
  
• Smart Money Flow Index 9,477.94 +.34%
  
• Money Mkt Mutual Fund Assets $2.800 Trillion -.2%
  
• AAII % Bulls 48.23 -5.86%
  
• AAII % Bears 29.79 +37.92%
  

Futures Spot Prices

• CRB Index 313.56 +4.29%
  
• Crude Oil 86.85 +6.63%
  
• Reformulated Gasoline 218.0 +5.79%
  
• Natural Gas 3.94 -2.65%
  
• Heating Oil 238.48 +6.53%
  
• Gold 1,397.70 +2.79%
  
• Bloomberg Base Metals 246.43 +5.62%
  
• Copper 394.85 +5.42%
  
• US No. 1 Heavy Melt Scrap Steel 315.0 USD/Ton -4.16%
  
• China Hot Rolled Domestic Steel Sheet 4,311 Yuan/Ton +1.01%
• S&P GSCI Agriculture 479.22 +4.41%
  

Economy

• ECRI Weekly Leading Economic Index 123.20 +.16%
  
• Citi US Economic Surprise Index +26.0 +24.3 points
  
• Fed Fund Futures imply 51.8% chance of no change, 49.2% chance of 25 basis point cut on 12/14
• US Dollar Index 76.55 -.93%
  
• Yield Curve 216.0 -10 basis points
  
• 10-Year US Treasury Yield 2.53% -7 basis points
  
• Federal Reserve's Balance Sheet $2.283 Trillion +.20%
  
• U.S. Sovereign Debt Credit Default Swap 41.83 +3.41%
• Illinois Municipal Credit Default Swap 266.0 -1.60%
  
• Western Europe Sovereign Debt Credit Default Swap Index 165.66 +11.94%
  
• 10-Year TIPS Spread 2.10% -5 basis points
  
• TED Spread 17.0 -1 basis point
  
• N. America Investment Grade Credit Default Swap Index 85.27 -1.30%
  
• Euro Financial Sector Credit Default Swap Index 101.70 +8.43%
  
• Emerging Markets Credit Default Swap Index 189.43 -7.33%
  
• CMBS Super Senior AAA 10-Year Treasury Spread 260.0 +15 basis points
  
• M1 Money Supply $1.780 Trillion +.92%
• Business Loans 605.30 +.58%
  
• 4-Week Moving Average of Jobless Claims 456,000 +.4%
  
• Continuing Claims Unemployment Rate 3.4% -10 basis points
  
• Average 30-Year Mortgage Rate 4.24% +1 basis point
  
• Weekly Mortgage Applications 787.30 -5.02%
  
• ABC Consumer Confidence -46 +1 point
  
• Weekly Retail Sales +2.60% -10 basis points
  
• Nationwide Gas $2.83/gallon +.02/gallon
  
• U.S. Heating Demand Next 7 Days 20.0% below normal
• Baltic Dry Index 2,495 -6.83%
  
• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 45.0 +20.0%
  
• Rail Freight Carloads 232,717 -1.23%
  
• Iraqi 2028 Government Bonds 95.40 +2.12%
  

Best Performing Style

• Small-Cap Value +5.07%

Worst Performing Style

• Mid-Cap Growth +3.55%

Leading Sectors

• Gaming +8.12%
• Coal +8.07%
• Banks +7.01%
• Construction +6.98%
• Homebuilding +6.96%

Lagging Sectors

• Software +.67%
• Drugs +.29%
• Foods +.04%
  
• Biotech -.67%
• Education -3.87%

One-Week High-Volume Gainers

One-Week High-Volume Losers

*5-Day Change

Stocks Slightly Higher into Final Hour on Less Financial Sector Pessimism, Tax Policy/Election Optimism, Earnings Optimism, Less Economic Fear

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Mixed
  
• Volume: Slightly Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.26 -1.40%
  
• ISE Sentiment Index 176.0 +40.63%
  
• Total Put/Call .69 -6.76%
  
• NYSE Arms .64 +18.35%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 85.27 bps -3.32%
  
• European Financial Sector CDS Index 102.33 bps +5.77%
  
• Western Europe Sovereign Debt CDS Index 165.66 bps +1.84%
  
• Emerging Market CDS Index 190.0 bps +1.37%
  
• 2-Year Swap Spread 15.0 unch.
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% +1 bp
  
• Yield Curve 217.0 +1 bp
  
• China Import Iron Ore Spot $153.20/Metric Tonne unch.
  
• Citi US Economic Surprise Index +26.0 +13.2 points
  
• 10-Year TIPS Spread 2.10% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +65 open in Japan
• DAX Futures: Indicating +11 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech, Ag and Biotech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades consolidates recent gains despite fears over a possible "sell the news" reaction to the election/Fed announcement and euro sovereign debt concerns. On the positive side, Education, Construction, I-Banking, Bank, Disk Drive and Coal shares are especially strong, rising 1.0%+. (XLF)/(IYR) have been relatively strong throughout the day. Cyclicals are strongly outperforming. Copper is rising another +1.05%. The North American Investment Grade CDS Index is continuing its recent downtrend, which is a large positive. The 10-year yield is rising +5 bps to 2.54%. The ECRI Weekly Leading Economic Index rose to 123.90 this week from 123.20 the prior week and is now at the best level since the week of May 21. Moreover, the Citi US Economic Surprise Index is now at the best level since May 26th. The correlation between S&P 500 stocks and the index has plunged -16.32% over the last 5 days to 51.69%, which is the lowest level since Bloomberg data began in November 2008. On the negative side, Biotech, Software and Oil Tanker shares are under pressure, falling more than 1.0%. The Spain sovereign cds is gaining +5.36% to 247.95 bps and the Greece sovereign cds is gaining +3.24% to 888.06 bps. The Western Europe Sovereign CDS Index is now near its record high set May 7th at 174.12 bps, which is a large negative. This is likely beginning to pressure the euro currency. US stocks will likely further consolidate recent gains over the near-term, however I am starting to keep a very close eye on European debt issues once again. I expect US stocks to trade mixed-to-higher into the close from current levels on tax policy/election optimism, less economic fear, buyout speculation, investment manager performance angst, diminishing financial sector pessimism, short-covering and earnings optimism.

Today's Headlines

Bloomberg:

• U.S. Economy: Payrolls Increase for First Time in Five Months. Employment in the U.S. rose in October for the first time in five months, a sign businesses may be starting to gain confidence in the prospects for a faster pace of growth. Payrolls climbed 151,000, exceeding all estimates in a Bloomberg News survey of economists and following a revised 41,000 drop the prior month that was smaller than initially estimated, Labor Department figures showed today in Washington. Private payrolls expanded the most since April, while the jobless rate held at 9.6 percent.
• Copper Rises to 28-Month High as Chilean Strike May Curb Output. Copper prices rose to a 28-month high after workers went on strike at a mine in Chile, the world’s largest producer of the metal. The walkout at Collahuasi, the world’s fourth-largest copper mine, started at 7 a.m. New York time after wage negotiations failed, said Jacqueline Cerda, a union official. Inventories of copper in warehouses monitored by the London Metal Exchange have declined 27 percent this year to the lowest level since October 2009.
• Cotton Rises to Record for Fourth Day as Demand in China Erodes Stockpiles. Cotton futures in New York rose to a record for the fourth straight day as concerns mounted that that global demand led by China, the world’s biggest user, will outstrip supplies and reduce inventories.
• Bernanke Will Fail in Bid to Use 'Poison as Cure,' Ex-Fund Head Burry Says. Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, said Federal Reserve Chairman Ben S. Bernanke is trying to use “poison as the cure” by pumping more cash into the economy to spur growth. The attempt to bolster growth is reminiscent of Alan Greenspan’s actions to revive the economy after 2001, Burry said in a telephone interview from Cupertino, California. The former Fed chairman helped create an unsustainable boom in U.S. property prices with his policies, leading to the worst global financial crisis since the Great Depression, he said. Boosting the economy “was the point of inflating the housing bubble,” Burry said yesterday. “It was the intent that the house would become the ATM machine, and help us through those rough times, post-dot-com, -Enron, -WorldCom, -Iraq and - 9/11. That’s why I say they’re using the poison as the cure.” The Fed’s support for asset values isn’t helping the “real” economy, and is creating “dangerous signs of a potential free fall” in the dollar and will be unsustainable, he said in the interview. It’s also probably causing investors, including fixed-income buyers, to take too much risk, in a repeat of their behavior in the period before markets began to collapse in 2007, he said.
• Janus Overseas Turns to US with Emerging Markets 'Secret' Out. Brent Lynn has beaten 96 percent of rivals since taking over the Janus Overseas Fund in 2003, in part by investing in stocks from emerging markets such as India and Brazil. Now Lynn is finding attractive bets closer to home. Delta Air Lines Inc., Ford Motor Co. and Bank of America Corp. were top 10 holdings as of Sept. 30 at the $13 billion mutual fund, which more than doubled its weighting in U.S. stocks in the past three years while cutting emerging-market holdings by a third. “Some of the best investing opportunities may be in the developed markets of the United States and Europe,” Lynn said in a telephone interview from Denver, where Janus Capital Group Inc. is based.
• Bank of America(BAC), Citigroup(C) Said to Test Apple(AAPL) iPhone. Steve Jobs may soon bag a pair of the biggest U.S. banks as iPhone supporters. Bank of America Corp. and Citigroup Inc. are considering whether to let employees use the Apple Inc. phone as an alternative to Research In Motion Ltd.’s BlackBerry for corporate e-mail, said three people familiar with the plans. The banks are testing software for the iPhone that’s designed to make it secure enough for company messages, said the people, who didn’t want to be named because the plans aren’t public. The tests are the latest sign that RIM may be losing its tight grip on the corporate smartphone market. Companies are experimenting with alternatives, including the iPhone and devices that use Google Inc.’s Android software, as their workers adopt those smartphones for personal use. “People are delighted with their iPhones and Android phones and they want to use them for work,” said Roger Entner, head of telecom research at Nielsen Co. “The result is RIM now has real competition for corporate customers.”
• Fresh Market(TFM) Rallies 59% After $290 Million IPO. Fresh Market Inc., the Greensboro, North Carolina-based grocery chain, surged as much as 59 percent after raising $290 million in its initial public offering. The company climbed 51 percent to $33.15 as of 10:46 a.m. New York time in Nasdaq Stock Market trading after earlier advancing to $35. Fresh Market sold 13.2 million shares for $22 each, after offering them at $18 to $20 apiece yesterday, according to a filing with the Securities and Exchange Commission and data compiled by Bloomberg.
• Pfizer(PFE) Pill Leads Race to Dominate $12 Billion Arthritis Market. Pfizer Inc., the world’s biggest drugmaker, leads a race against three rivals to sell the first new pill in a decade for rheumatoid arthritis, a joint disease treated by injected drugs with $12 billion in annual sales. The tablet, called tasocitinib, curbed inflammation and stopped the disease from worsening, Pfizer reported last week. Pfizer may edge out shots sold by Johnson & Johnson, Abbott Laboratories, and Amgen Inc. if research to be presented Nov. 10 at the American College of Rheumatology in Atlanta suggests its tablet is also a safe alternative.

Wall Street Journal:

• Euro Area Woes Edge Toward Spain, Italy. The carnage in Europe’s smaller bond markets is continuing Friday, and the risk is that bigger, stronger economies like Spain and Italy might get infected. It now costs roughly $246,000 annually to insure $10 million of Spanish debt for five years compared with $235,000 on Thursday, according to data provider Markit. Ireland’s insurance cost jumped gain, to a fifth consecutive record of $610,000, a leap of $28,000 from Thursday evening. And the premium that Spain and Italy would have to pay investors over Germany to borrow from the capital markets has also edged higher. More pressure on Italy and Spain -– Europe’s third- and fourth-biggest economies -– would signal a worsening of the region’s latest sovereign-debt flare-up. Spain’s central bank reported this morning that growth stalled in the third quarter, which won’t help matters in Madrid. Data provider Markit’s SovX Western Europe index, which tracks investor anxiety about sovereign default, jumped to a record Friday. There’s talk that Russia and Norway’s sovereign wealth funds are souring on Spanish and Irish government bonds. Investors may be a little worried about what will happen if one of Europe’s main “clearing” firms, LCH.Clearnet, hikes up the cost of trading Irish bonds next week, as has been mooted. Lastly, there’s this Sunday’s local elections in Greece. Greek Prime Minister George Papandreou has warned that he’ll call snap elections in December if his party doesn’t do well. One of the things connecting Greece, Ireland and Portugal during this latest credit flare-up has been fears of political turmoil. So, what’s next? Many analysts are saying the euro can’t possibly stay this resilient against the dollar given the raft of problems licking at its edge. “There is every chance that peripheral Europe weighs on the euro into year-end,” notes Chris Turner, an analyst at ING in London. If the euro does take a major hit, that will probably wake U.S. investors up to Europe’s problems again.
• House Speaker Pelosi to Run for Minority Leader. House Speaker Nancy Pelosi says she will run for the post of minority leader in the new Congress, rather than bow to Democratic critics who want her to step down after the drubbing her party took in the midterm elections. "Our work is far from finished,'' Ms. Pelosi said in a letter to colleagues released Friday. It continued: "We have no intention of allowing our great achievements to be rolled back. It is my hope that we can work in a bipartisan way to create jobs and strengthen the middle class.
• Fed's Hoenig: Rates Must Go Up. Federal Reserve Bank of Kansas City President Thomas Hoenig will speak before real estate agents Friday as the housing market struggles to recover. His message: interest rates need to go up. He gave The Wall Street Journal a preview.
• U.S. Faces G-20 Opposition Over Fed Stimulus. The Federal Reserve's fresh round of bond purchasing to boost the U.S. economy will generate broad opposition at next week's summit of the Group of 20 leading world economies.

CNBC:

• After Months of Feuding, Obama Makes Overture to Business Group. President Obama is moving to cool down his war with the United States Chamber of Commerce, one of the most bitter political feuds of the last two years.
• Health Care Stocks Losing Appeal Due to Reform Law. Once considered a reliable haven for investors, the health care market endured a major shake-up this year, and the industry is still trying to pick up the pieces. The U.S. government passed healthcare reform measures that impose a wide array of fees and regulations on health insurers, pharmaceutical companies, medical device makers and the rest of the sector.
• Half of Americans Have Lost Faith in the Fed: Survey. This lack of confidence comes at a critical juncture for the Federal Reserve, which on Wednesday announced a bold but risky program to pump more money into the economy to support the U.S. recovery.

Business Insider:

• Amazing, Free TV Streamed to Your iPad or Computer - A Cord-Cutter's Dream.

New York Times:

• Once on Sleepy Beat, CFTC is Suddenly Busy. Long dismissed as a lackadaisical regulator, the commission is suddenly on the move. Indeed, it is busier than ever: It opened a record 419 investigations over the last year, into things as diverse as small-time Ponzi schemes and claims of market manipulation.

CBS News:

• Keith Olbermann Suspended Indefinitely From MSNBC for Democratic Political Donations. Keith Olbermann has been suspended indefinitely without pay from MSNBC for making donations to three Democrats in violation of NBC's ethics policy. "I became aware of Keith's political contributions late last night," Phil Griffin, President of MSNBC, said in a statement. "Mindful of NBC News policy and standards, I have suspended him indefinitely without pay." Olbermann, who does not hide his liberal views, has acknowledged donations of $2,400 each to Kentucky Senate candidate Jack Conway and Arizona Reps. Raul Grijalva and Gabrielle Giffords during this election cycle.

Reuters:

• Human Genome(HGSI) Pins Blockbuster Hopes on Lupus Drug. Biotech company Human Genome Sciences Inc stands on the verge of blockbuster success with a new drug for a debilitating disease that has frustrated researchers for decades.
• American Tower(AMT) Sees Mobile Data Use Driving Demand. Wireless-tower operator American Tower Corp, which raised the full-year revenue forecast for its main business, is betting on rising mobile data usage to boost tower demand and plans to expand in international markets.

Dow Jones:

• Brazil Central Bank President Criticizes US Fed Move. Brazil Central Bank President Henrique Meirelles on Thursday became that country's latest official to criticize the U.S. Federal Reserve Board's move to stimulate the U.S. economy by buying bonds from the market. The move has "negative consequences for other countries, which is the case for Brazil," Meirelles told reporters after a speech at the University of Chicago Booth School of Business. "The quantitative easing creates excessive liquidity which overflows to countries like Brazil, and then we have to take measures to address that issue," he said. "It does create a problem.

Kathimerini:

• A Fitch Ratings Services team will arrive in Greece on Nov. 9 and Moody's Investors Service will send a delegation on Nov. 30 to assess the Greek economy.

Bear Radar

Style Underperformer:

• Large-Cap Growth (-.30%)

Sector Underperformers:

• 1) Oil Tankers -2.18% 2) Software -1.07% 3) Telecom -1.04%

Stocks Falling on Unusual Volume:

• OFG, STD, MRX, TI, SNCR, PT, DXCM, PODD, RRGB, FSYS, SAPE, PANL, NKTR, RBCN, WPRT and TLK
  

Stocks With Unusual Put Option Activity:

• 1) PLD 2) FLR 3) ESV 4) EWT 5) SD
  

Stocks With Most Negative News Mentions:

• 1) CISG 2) BIG 3) AIG 4) TASR 5) NWPX