Tuesday, May 10, 2005

Stocks Lower Mid-day on Worries Over a Hedge Fund Blow-up

Indices
S&P 500 1,170.60 -.70%
DJIA 10,321.07 -.60%
NASDAQ 1,968.44 -.56%
Russell 2000 597.64 -.87%
DJ Wilshire 5000 11,537.68 -.64%
S&P Barra Growth 565.35 -.62%
S&P Barra Value 601.03 -.77%
Morgan Stanley Consumer 580.74 -.44%
Morgan Stanley Cyclical 708.54 -.97%
Morgan Stanley Technology 445.81 -1.10%
Transports 3,523.17 -1.01%
Utilities 366.71 -.30%
Put/Call .83 -1.19%
NYSE Arms 1.54 +138.56%
Volatility(VIX) 14.31 +4.07%
ISE Sentiment 115.0 -20.13%
US Dollar 84.46 -.20%
CRB 301.67 +.29%

Futures Spot Prices
Crude Oil 52.15 +.23%
Unleaded Gasoline 151.00 +1.53%
Natural Gas 6.72 +.76%
Heating Oil 145.75 +1.20%
Gold 427.90 +.23%
Base Metals 124.43 +.45%
Copper 145.80 +.79%
10-year US Treasury Yield 4.23% -1.21%

Leading Sectors
Biotech +.84%
Oil Tankers +.49%
Restaurants +.15%

Lagging Sectors
I-Banks -1.47%
Airlines -2.58%
Steel -3.65%
BOTTOM LINE: The Portfolio is lower mid-day on losses in my Airline and Semiconductor longs. I exited a few longs this morning as they hit stop-losses, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is light. Measures of investor anxiety are higher. Today’s overall market action is modestly negative considering last week’s gains and the rebound from morning lows. I am closely monitoring the “sentiment” with respect to oil. I do not believe the fundamentals justify current prices. It is the belief that 4Q oil demand will outstrip supply that is currently propping up prices. As inventories build and demand continues to decelerate, I believe this perception will change and provide the catalyst for the accelerated decline I envision in the second half of the year. I expect US stocks to trade mixed into the close as short-covering ahead of Cisco’s report offsets worries over a hedge fund blow-up.

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