North American Investment Grade CDS Index 113.75 bps +1.34%
European Financial Sector CDS Index 132.02 bps +1.28%
Western Europe Sovereign Debt CDS Index 155.0 bps +.43%
Emerging Market CDS Index 263.73 bps +.32%
2-Year Swap Spread 18.0 +1 bp
TED Spread 17.0 unch.
Economic Gauges:
3-Month T-Bill Yield .13% unch.
Yield Curve 199.0 -6 bps
China Import Iron Ore Spot $141.50/Metric Tonne -.98%
Citi US Economic Surprise Index -53.10 +5.5 points
10-Year TIPS Spread 1.55% -2 bps
Overseas Futures:
Nikkei Futures: Indicating +1 open in Japan
DAX Futures: Indicating -32 open in Germany
Portfolio:
Slightly Lower: On losses in my Tech and Medical long positions
Disclosed Trades: None
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 moves back near session lows despite a morning reversal higher off S&P 500 1,040, a firmer euro and better action in beaten-up bank stocks. On the positive side, Coal, Gold, Paper, Telecom, Insurance, REIT and Airline stocks are relatively strong, rising .50%+. (XLF) and (IYR) have outperformed throughout the day. Oil trades as if another meaningful break lower is in the offing over the coming weeks. Weekly retail sales rose +2.8% this week versus a +2.7% gain the prior week. On the negative side, Education, Networking, Disk Drive, Computer, Gaming, HMO, Medical and Oil Service shares are especially weak, falling more than 1.25%. Technology sector shares are heavy. The 10-year yield is falling another -6 bps to 2.47%, which is back near its recent lows, which is a big negative. Copper is falling -1.9% and Lumber is down -3.3% today. The Hungary sovereign cds is rising +4.21% to 368.59 bps, the Greece sovereign cds is gaining another +2.13% to 957.16 bps, the Ireland sovereign cds is rising +2.43% to 341.0 bps and the Japan sovereign cds is gaining +2.94% to 69.52 bps. Overall, key cds indices continue their recent worrisome trend higher. Broad market action is worse than the major averages suggest again today. However, volume remains light and the bears were unable to break the market convincingly lower so far this afternoon. If the bears are unable to break the S&P 500 below 1,040 by tomorrow's close, I suspect we could see a surge in short-covering into week's end. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and technical buying.
Corporate Default Swaps Head for Biggest Monthly Rise Since May in Europe. The cost of insuring against losses on European corporate bonds rose, posting the biggest monthly increase since May, on concern a slowdown in the U.S. recovery will trigger a global double-dip recession. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings climbed 53 basis points this month to 532, and was 7 basis points higher today, according to JPMorgan Chase & Co. at 4 p.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 13.25 basis points this month and 0.75 basis points today to 118.25, JPMorgan prices show. The index is up 45 basis points this year. The Markit iTraxx Financial Index of 25 banks and insurers is up 32.5 basis points this month and 1.5 basis points today at 148, the highest level since July 7. The gauge has more than doubled since the start of the year. Ireland led an increase in the cost of insuring against losses on government debt, with credit-default swaps on the nation climbing 10.5 basis points to 252, the highest level since March 2009, according to data provider CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments jumped 43.25 basis points this month to 158, the biggest monthly increase since it started trading last year. The gauge is 2 basis points higher today and up from about 69 basis points at the start of the year.
Fed Saw Risk August Decision Would Send Wrong Signal. Some Federal Reserve officials were concerned last month that a decision to stop their securities holdings from shrinking would send the wrong signal that the central bank was ready to resume large-scale asset purchases, minutes of the Aug. 10 meeting showed. Also, a few policy makers said the economic effects of the decision “likely would be quite small,” the Fed’s Open Market Committee said in a report today in Washington. At the same time, some officials saw “increased downside risks to the outlook for both growth and inflation” and voiced concern that further shocks would cause “significant slowing in growth.”
Business Activity in U.S. Expands at Slower Pace Than Estimated, ISM Says. Business activity in the U.S. expanded in August at the slowest rate this year, a private survey showed, adding to evidence the recovery is cooling. The Institute for Supply Management-Chicago Inc. said today its business barometer fell to 56.7 this month, the lowest since November, from 62.3 in July.
Banks in Europe Would Face Fines for Failing to Report Derivatives Trading. Banks and companies that fail to report trading in over-the-counter derivatives face fines under rules being considered by the European Union. The draft law would force traders to “report the details of any OTC derivative contract” they have entered into “no later than the working day following the execution” of the trade, according to a European Commission document obtained by Bloomberg News.
Irish Government, Banks Debt Risk Rises, Default Swaps Show. The cost of insuring against default on Irish government and bank debt rose, according to data provider CMA. Credit-default swaps on Irish sovereign debt climbed 10.5 basis points to 352, the highest level since March 2009. Contracts on Allied Irish Banks Plc increased 22.5 basis points to 523.5, the highest since April 2009. Swaps on Anglo Irish Bank Corp. jumped 15 basis points to 614, the highest in more than 13 months. Irish Life & Permanent Group Holdings Plc increased 14.5 to 396 and Bank of Ireland rose 15 to 393.5, both the highest since July.
Gold Advances to Two-Month High on Haven Demand Amid Global Equity Slump. Gold futures rose to a two-month high as slumping global equity markets boosted the appeal of bullion for investors seeking a haven. The MSCI World Index of stocks has dropped about 4 percent in August, heading for the biggest monthly decline since May, on concern that the economic rebound is slowing. Before today, gold gained 13 percent this year, reaching a record $1,266.50 an ounce in June. “Gold is the primary beneficiary of this general angst over the economy,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “The flight-to-safety bid is back on, and Treasury yields are a joke now. That’s a good setup for gold to go higher.” Gold futures for December delivery rose $8.60, or 0.7 percent, to $1,247.80 an ounce at 11:11 a.m. on the Comex in New York. Earlier, the price touched $1,249.40, the highest since June 28.
Yuan Set for Biggest Monthly Drop Since 1994 as Economy Slows, Dollar Gains. The yuan had its biggest monthly loss since January 1994 after China’s government sought to support economic growth and the U.S. currency rallied. The yuan declined 0.5 percent in August, trimming gains since the central bank ended a two-year dollar peg on June 19 to 0.3 percent. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major trading partners, gained 2 percent this month. Central bank governor Zhou Xiaochuan yesterday told a meeting in Beijing that policy makers should maintain financial stability, amid calls for faster appreciation in the currency from trading partners. “Policy makers didn’t allow fast appreciation of the yuan because economic growth has slowed,” said Guan Jiaying, a Beijing-based currency analyst at China Citic Bank Corp.
Panasonic Says Samsung Starts Price War for 3-D TVs in U.S. Panasonic Corp., the world’s largest maker of plasma televisions, said it may fail to meet its sales target for 3-D sets after Samsung Electronics Co. unleashed an “unexpected” price war in the U.S. “No one can keep up” with price cuts by Samsung in the world’s biggest TV market, Yoshiiku Miyata, a managing executive officer at Osaka-based Panasonic’s TV business, said in an Aug. 30 interview.
Chinese Aluminum Goods to Face Higher U.S. Tariffs After Subsidies Ruling. Chinese exporters of aluminum products used in window and door frames will face higher U.S. tariffs after the Commerce Department ruled that they receive unfair government subsidies. In a preliminary decision released today, the department said the additional tariff would be as much as 138 percent in a case brought by the United Steelworkers union and closely held aluminum manufacturers in nine U.S. states.
Why We Fourth and What We Achieved. Saddam had launched multiple wars, used weapons of mass destruction and aided global terrorism. Now Iraq's government is an ally and represents all the Iraqi people. The U.S. effort in Iraq is not over. Some 50,000 U.S. troops, together with a robust diplomatic presence, continue to train and assist Iraq's security forces and support its democratic progress. The American people, our coalition allies and especially the Iraqi people have paid an enormous price. It is important to remember why.
Local Cos.: Credit Still Tight at Bigger Banks. Despite two years of the Fed pumping massive amounts of money into the banking system, some local business owners say credit is still too tight to meet the financial needs of many firms. Large national and “super-regional” banks are simply not providing enough commercial credit, though smaller community banks are trying to step up to the plate, business executives say
Public Sours on Health Care Reform as Midterms Loom. A new poll shows that public support for health care reform dropped sharply in August — a dagger in Democrats’ hopes that their landmark legislation will help them in November’s midterm.
Democrats Seek Separation From Nancy Pelosi. Some of the Democratic Party’s most endangered lawmakers are taking steps to distance themselves from Speaker Nancy Pelosi in an attempt to inoculate themselves from charges that they are beholden to the unpopular House leader and supportive of the ambitious national Democratic agenda.
Reuters:
Gartner Lowers Second-Half PC Sales Forecast. Technology research firm Gartner cut its forecast for personal computer sales for the second half of the year by 2 percent, signaling that a resurgence in tech spending that started earlier this year may not be as strong as expected. Worldwide PC shipments are now projected to grow by just over 15 percent for July through December, said Gartner. That's slightly lower than its previous forecast, largely due to the return of economic uncertainty in the United States and Western Europe.
Xinhua:
China's banking regulator will "strictly implement" government policies aimed at curbing soaring housing prices, citing Ye Yanfei, a China Banking Regulatory Commission official. Ye, deputy head of the CBRC's statistics department, said the agency will restrain "speculative" investment in real estate, support the construction of affordable housing and control risk.
DigiTimes:
Intel(INTC) Almost Halves Prices for Core i7-950. Intel recently dropped the price of its quad-core Core i7-950 processors to US$294 from US$562 to defend from AMD's recent price cuts for its quad-core Athlon II X4 640 CPU from US$122 to US$99, according to sources from motherboard makers.
DRAM Contract Prices Continue to Fall, Says DRAMeXchange. DRAM contract prices continue trending downwards in the second half of August, according to DRAMeXchange. Pricing in the spot market is also facing a continual drop amid weak demand. Late August contract prices for mainstream 1Gb DDR3 chips have gone down by up to 5% to US$2.22-2.41, driving the price of 2GB DDR3 modules to US$40 on average, DRAMeXchange data show. Meanwhile, same-density DDR2 parts have slid by up to 2% for the same period slashing 2GB DDR3 module prices to US$36. The recent fall in DRAM prices is encouraging PC makers to increase memory content per PC. However, demand is growing at a slower pace than output from the supply side, commented Nobunaga Chai, analyst for semiconductor at Digitimes Research.
Oil Supply Climbing to One-Month High in Bloomberg Survey: Energy Markets. U.S. crude oil inventories probably increased to a one-month high last week amid signs that U.S. economic growth is slowing, a Bloomberg News survey showed. Supplies rose 1.55 million barrels, or 0.4 percent, in the seven days ended Aug. 27 from 358.3 million a week earlier, according to the median of 12 analyst estimates before an Energy Department report tomorrow. The gain would leave stockpiles at the highest level since July 23. “These inventory numbers are getting too big to ignore, particularly because this is the case across the board,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “At the very least they will present the market with a strong headwind.” Prices may drop as stockpiles approach the 2010 high of 365 million reached on May 21. Demand is set to decline during the next two months as refineries idle units to perform seasonal maintenance.Inventories of distillate fuel, a category that includes heating oil and diesel, probably climbed 1 million barrels, or 0.6 percent, from 176 million, the survey showed. Stockpiles in the week ended Aug. 20 were the highest since 1983. “We’re looking at the highest inventory levels in a generation,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “You have to go back at the early years of Ronald Reagan’s administration to find distillate supplies this high.” U.S. stockpiles of oil and fuel climbed 8.9 million barrels to 1.14 billion in the week ended Aug. 20, the highest level since at least 1990, when the Energy Department began to collect weekly data. On a monthly basis, supplies are at the highest level since October 1983. Inventories have climbed for eleven weeks, the longest stretch since July 2007.
IMF Changes, Expands Crisis-Prevention Credit Lines. The International Monetary Fund, which has shored up economies from Romania to Greece over the past 18 months, approved changes to its credit line program to encourage countries to turn to the fund before crises develop. Its flexible credit line, reserved for countries that pre- qualify based on sound fundamentals, will be extended for up to two years and have no set limits. A new credit line with additional policy requirements for economies with “moderate vulnerabilities” also was created, the IMF said in a statement.
ACLU Sues U.S. Over Targeted Killing of Citizens. The American Civil Liberties Union sued the U.S. government over an alleged policy of killing American citizens who are suspected of terrorism. The lawsuit, filed today in federal court in Washington, argued that such targeted assassinations by the government are unconstitutional. “A program that authorizes killing U.S. citizens, without judicial oversight, due process or disclosed standards is unconstitutional, unlawful and un-American,” ACLU Executive Director Anthony Romero said in a statement announcing the filing of the case against U.S. President Barack Obama, the Defense Department and the Central Intelligence Agency.
Toyota Prius May Lead Japan Car Sale Collapse as Subsidies End. The Prius hybrid has spearheaded sales growth for Toyota Motor Corp. in Japan for more than a year, helped by government subsidies. The model will likely bear the brunt of plunging demand as the support ends. “A collapse in sales is unavoidable,” said Hiromi Inoue, the new-car sales chief for Tokyo Toyopet Motor Sales Co. “The daily pace of orders for the Prius is already dropping. We are bracing ourselves for the coming crisis.”
Buy Stocks as Municipal Yields Reach 43-Year Lows: Commentary by Joe Mysak. Don’t worry about too much red ink in state and local budgets and not enough money in public pension plans. Forget about the prospect of inflation. That’s what the municipal market is telling investors. The last time yields were this low, Jacqueline Susann had been on the bestseller list with “Valley of the Dolls” for 62 weeks. The oldest gauge of yields in the market, the Bond Buyer 20-General Obligation Bond Index, fell to 3.88 percent last week, below the recent record low of 3.94 percent it reached in October 2009. Yields were last this low on May 11, 1967.
Hon Hai, Foxconn International Shares Tumble After Earnings Miss Estimates. Hon Hai Precision Industry Co., the largest contract manufacturer of electronics, and handset unit Foxconn International Holdings Ltd. fell in Asian trading after they reported earnings that missed analysts’ estimates. Hon Hai lost 6.6 percent to NT$113 as of 10:27 a.m. in Taipei, set for its biggest decline since May 2009. Foxconn International, the world’s biggest contract manufacturer of mobile phones, dropped 9 percent to HK$5.06 in Hong Kong, widening its lead as the worst performer on the benchmark Hang Seng Index this year.
Wall Street Journal:
With Cash on Hand and Shares Falling, Companies Look to Spend. With a big drop in the major stock indexes this month, corporations are increasingly looking for opportunities to buy battered shares--both their own and those belonging to other companies. Investors remain skittish, sending the Dow Jones Industrial Average down 3.8% in August and opening the door for U.S. companies sitting on some $2.03 trillion in cash to grab undervalued stocks caught in the selloff. And with another $20 billion or so in proposed deals occurring since Friday's close, the merger-and-acquisition market remains a big area of spending.
The Surge and Afghanistan by John McCain. Unless he understands the reason for success in Iraq, the president is unlikely to lead a successful strategy against the Taliban. Today President Obama will deliver a major speech to mark the draw down of U.S. forces in Iraq to 50,000 troops. He will likely point out, as his administration has rightly argued, that Iraq still faces major challenges—foremost its inability to form a government—and that neither American sacrifice nor our commitment to Iraq's success is ending today. Yet our troops are returning with honor, which makes this a fitting time to reflect on the causes of their victory and on what lessons from Iraq can help us win the war in Afghanistan.
House Travel Stipends Probed. Congressional investigators are questioning a half-dozen lawmakers for possibly misspending government funds meant to pay for overseas travel, according to people familiar with the matter. The investigation follows a Wall Street Journal article in March that said lawmakers had used daily cash stipends, meant to cover certain costs of official government travel overseas, to cover expenses that appeared to be unauthorized by House rules. An independent ethics board has referred the matter to the House ethics committee.
U.S. Wants Report Card for Cars. System Would Rate Fuel Economy, Emissions; Industry Says Government Veers Into Issuing Opinions. The government proposed labeling each new passenger vehicle with a letter grade from A to D based on its fuel efficiency and emissions, part of a broader effort by the Obama administration to promote electric cars and other advanced-technology vehicles. The proposed new rules, released jointly Monday by the Environmental Protection Agency and the Transportation Department, would be the most substantial change in 30 years to the familiar price-and-mileage labels affixed to the windows of new cars at dealerships. The proposed changes —which come as the Obama administration enforces stringent new rules to boost overall fuel economy—were criticized by the car industry, which said the government would be crossing the line between requiring responsible advertising and making value judgments about vehicles. "The proposed letter grade falls short because it is imbued with school-yard memories of passing and failing," said Dave McCurdy, president of the Alliance of Automobile Manufacturers, the industry's largest trade group. A spokeswoman for the alliance added that "grades may inadvertently suggest a government label of approval."
The Jewelry Prescription. Medical Bracelets Go High-Tech. Style Aside, More People Find They Should Wear Them.
Small-Business Hiring Shows Net Gain, But Pace Slows. Owners of small businesses sour on economy, ease back on hiring, surveys find. Small businesses in the U.S. saw net employment gains in August, but their hiring pace slowed from earlier this year, and small-business owners' outlook for the economy worsened significantly from July to August, according to two surveys released Monday.
Why Wall St. Is Deserting Obama. Daniel S. Loeb, the hedge fund manager, was one of Barack Obama’s biggest backers in the 2008 presidential campaign. A registered Democrat, Mr. Loeb has given and raised hundreds of thousands of dollars for Democrats. Less than a year ago, he was considered to be among the Wall Street elite still close enough to the White House to be invited to a speech in Lower Manhattan, where President Obama outlined the need for a financial regulatory overhaul. So it came as quite a surprise on Friday, when Mr. Loeb sent a letter to his investors that sounded as if he were preparing to join Glenn Beck in Washington over the weekend. “As every student of American history knows, this country’s core founding principles included nonpunitive taxation, constitutionally guaranteed protections against persecution of the minority and an inexorable right of self-determination,” he wrote. “Washington has taken actions over the past months, like the Goldman suit that seem designed to fracture the populace by pulling capital and power from the hands of some and putting it in the hands of others.” Over the weekend, the letter, with quotations from Thomas Jefferson, Ronald Reagan and President Obama, was forwarded around the circles of the moneyed elite, from the Hamptons to Silicon Valley. Mr. Loeb’s jeremiad illustrates how some of the president’s former friends on Wall Street and in business now feel about Washington. Mr. Loeb isn’t the first Wall Streeter to turn on the president.
More Observations on High Frequency Trading's Tyranny of Stock Markets. Anywhere one turns these days, bashing HFT is the new market normal. Having written 150 articles on the topic, beginning in April 2009, we are happy to have brought the world's attention to this most dangerous of market aberrations. Yet until the SEC finally bans the practices of micro churning, quote stuffing, positive feedback loop chasing, flash trading, subpennying, DMA accessing, and all other aspects conceived merely to provide some market participants with an unfair advantage over everyone else, the fight against HFT must continue.
Seeking Alpha:
State Default Risk. Below is a chart highlighting default risk for sixteen states that we have credit default swap (CDS) pricing for.
Politico:
Tidal Wave? 10-Point Poll Edge for GOP. Democrats thought things couldn't get much worse on the electoral front — and then they went home to campaign. A new Gallup poll released Monday shows Republicans with a record 10-point edge over Democrats on the "generic ballot" test — the question of whether voters prefer a Democratic or Republican congressional candidate. It’s the largest GOP polling edge at this stage in the 68 years of the generic ballot poll. The Gallup poll, coming at the end of a brutal August for Democrats and President Barack Obama, reinforces the rapidly forming prevailing view that the horizon is as bleak for Democrats as it ever has been.
Homebuyer's Tax Break Isn't 'High' on President's List. President Obama will be exploring a number of new options to jump-start the flagging economy – but reinstating the first-time homebuyer’s tax credit to prop up housing sales isn’t likely to be one of them, White House press secretary Robert Gibbs says.
USA Today:
Survey: Mortgage Closing Costs 37% Higher. A recent survey by Bankrate.com found that, on average, origination and third-party fees on a $200,000 purchase mortgage added up to $3,741 — a 37% jump over last year's average of $2,739. The fees can include appraisals, credit reports, a closing or settlement attorney and surveys. Some housing experts say costs are rising because lenders have had to hire more staff to comply with the requirements of the Jan. 1 rule. That includes auditors, inspection experts and others who make sure estimates are accurate. "Lenders have had to hire compliance people," David Leoncavallo, president of GFEazy, a Salt Lake City provider of compliance and other data for lenders. "To go up from $2,700 to $3,700 overnight is insane. Consumers should be upset."
Reuters:
Iran to Make Medical Reactor Fuel in Year - Report. Iran said it would produce in a year the nuclear fuel needed for a medical reactor in Tehran, a news agency reported on Monday, days after the Islamic state began loading fuel into its first atomic power plant. Iran's nuclear chief Ali Akbar Salehi said Tehran so far had produced 25 kg (55 lb) of uranium to a level of 20 percent purity for the Tehran reactor, the official Irna news agency quoted Salehi as saying in an interview with the country's Arabic-language TV station, Al-Alam.
Hedge Fund Managers More Bearish on US Stocks - Report. Almost half of all hedge fund managers are bearish about the U.S. stock market, up from 33 percent a month earlier, according to a new report released on Monday. Forty-seven percent of 104 hedge fund managers polled by TrimTabs and BarclayHedge in the last week said they were bearish on the Standard & Poor's 500 index, the research groups said. Only about 17 percent respondents said they were bullish on the S&P 500, down from 34 percent a month ago, they noted.
Financial Times:
US Housing Woes Compound Labor Concerns. Concerns that the depressed US housing sector will remain a drag on the US labor market have mounted following the loss of nearly 120,000 jobs in construction and related businesses in the last three months for which statistics were available. According to Financial Times analysis, the decline in housing-related employment was the biggest weight on private sector job creation as it slowed to an average of 51,000 jobs a month during the May-July period from 153,000 a month in February-April. US Labor Department data show that some 61,000 construction jobs were lost between May and July, with another 56,000 positions shed in ancillary areas, such as furniture, building products and financial services related to property.
China Business News:
China and Iran will sign a $2 billion contract to build railway networks in western Iran on Sept. 12, citing Iran's Roads and Transportation Minister Hamid Behbahani.
Evening Recommendations
None of note
Night Trading
Asian equity indices are -2.0% to -.50% on average.
Asia Ex-Japan Investment Grade CDS Index 133.50 +3.0 basis points.
Asia Pacific Sovereign CDS Index 121.25 -4.25 basis points.
S&P/CaseShiller 20 City Home Price Index for June is estimated to rise +.2% versus a +.47% gain in May.
9:45 am EST
The Chicago Purchasing Manager for August is estimated to fall to 57.0 versus a reading of 62.3 in July.
10:00 am EST
Consumer Confidence for August is estimated to rise to 50.7 versus a reading of 50.4 in July.
2:00 pm EST
FOMC Minutes
Upcoming Splits
(TSCO) 2-for-1
Other Potential Market Movers
The NAPM-Milwaukee for August, Bloomberg FCI for August, weekly ABC Consumer Confidence reading, weekly retail sales reports, Morgan Stanley Global Industrials Conference and the (GES) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and automaker shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 112.25 bps -.58%
European Financial Sector CDS Index 131.08 bps +.56%
Western Europe Sovereign Debt CDS Index 154.33 bps -.21%
Emerging Market CDS Index 260.81 bps +.74%
2-Year Swap Spread 17.0 unch.
TED Spread 17.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .13% -1 bp
Yield Curve 205.0 -4 bps
China Import Iron Ore Spot $142.90/Metric Tonne n/a
Citi US Economic Surprise Index -59.60 unch.
10-Year TIPS Spread 1.57% -7 bps
Overseas Futures:
Nikkei Futures: Indicating -119 open in Japan
DAX Futures: Indicating -5 open in Germany
Portfolio:
Lower: On losses in my Tech, Medical, Retail and Biotech long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges added to my (EEM) short
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 reverses lower on light volume despite strength in Asian shares and Friday's US stock reversal higher. On the positive side, Disk Drive and Education stocks are especially strong, rising .75%+. Copper is rising +1.03%, Lumber is gaining +1.66% and the S&P GSCI Ag Spot Index is gaining +.69%. On the negative side, HMO, Bank, Gaming, Homebuilding, I-Banking, Semi, Paper, Oil Tanker and Coal shares are especially weak, falling more than 2%. Small-caps and cyclicals are underperforming. The US sovereign cds is rising +2.67% today to 48.9 bps and is up +4.13% over the last 5 days. The Portugal sovereign cds is rising +1.96% to 338.81 bps and the Greece sovereign cds is gaining another +1.60% to 948.71 bps. Overall, key cds indices continue their recent worrisome trend higher. The euro continues to trade very poorly. I still believe the currency has much further downside over the long-term term. I am surprised at the extent of today's weakness after Friday's reversal higher. Broad market action is even worse than the major averages suggest. However, volume is very light. I will add further downside protection on any convincing break below S&P 500 1,040. I expect US stocks to trade modestly lower into the close from current levels on rising economic fear, more shorting, technical selling, china worries and rising sovereign debt angst.
