Friday, September 18, 2009

Stocks Higher into Final Hour on Less Economic Fear, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech longs, Financial longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, most sectors are rising and volume is heavy. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is rising .21% and is high at 23.70. The ISE Sentiment Index is very low at 82.0 and the total put/call is slightly above average at .88. Finally, the NYSE Arms has been running above average most of the day, hitting 1.58 at its intraday peak, and is currently .81. The Euro Financial Sector Credit Default Swap Index is rising 1.37% today to 71.66 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 2.63% to 104.17 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is up 1 basis point to 21 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 4.33% to 36.13 basis points. The Libor-OIS spread is unch. at 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 1.82%, which is down 85 basis points since July 7th. The 3-month T-Bill is yielding .08%, which is down 1 basis point today. The bears were unable to gain any traction from morning profit-taking again today. Restaurant, REIT, Homebuilding I-Banking, Telecom, Semi, Oil Service and Alt Energy shares are all outperforming today. (XLF) had been dragging on the major averages this morning, but has reversed to session highs over the last couple of hours, rising .4%. REITs have been leaders again today, which is a large broad market positive. Today’s gains are more impressive considering Shanghai’s 3.2% drop last night. It is also a positive to see gauges of investor angst rising today, despite another push higher in the averages. Nikkei futures indicate an +100 open in Japan and DAX futures indicate an +21 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering, lower energy prices, technical buying and investment manager performance anxiety.

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