Tuesday, May 13, 2008

Stocks Mixed into Final Hour as Less Economic Pessimism Offsets Rising Energy Prices

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Networking longs, Computer longs and Gaming longs. I added to my (AMSC) long and took profits in a trading long today, thus leaving the Portfolio 100% net long. The tone of the market is mixed as the advance/decline line is about even, sector performance is mixed and volume is below average. Investor anxiety is slightly below average. Today’s overall market action is mildly bullish. The VIX is rising .7% and remains above average at 17.9. The ISE Sentiment Index is above average at 178.0 and the total put/call is below average at .74. Finally, the NYSE Arms has been running around average most of the day and is currently .98. Broad market action is more impressive considering the rise in oil and financial sector news/weakness. The market still trades as though the many bears are again running low on firepower. The rise in the US dollar is a large positive. Large institutions may be beginning to shift assets out of Treasuries and foreign stocks into US equities. Unlike gold, oil is ignoring the rise in the dollar so far, but I suspect a break below 1.53 versus the euro would begin to pressure oil. The TED spread is falling another 3 basis points today to 86 basis points, which is the lowest since February 19th and down from 204.0 on March 19th, which is a significant positive. The European Financial Sector Credit Default Swap Index is falling .97 basis points to 63.1 basis points. Nikkei futures indicate a +47 open in Japan and DAX futures indicate a +38 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, diminishing credit market angst and less economic pessimism.

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