Tuesday, September 29, 2009

Stocks Slightly Lower into Final Hour on Healthcare Reform Worries, Profit-Taking, More Shorting

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Financial longs, Defense longs and Education longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is slightly lower, sector performance is mixed and volume is about average. Investor anxiety is high. Today’s overall market action is neutral. The VIX is falling .08% and is high at 24.85. The ISE Sentiment Index is below average at 125.0 and the total put/call is around average at .78. Finally, the NYSE Arms has been running below average most of the day, hitting .34 at its intraday trough, and is currently .76. The Euro Financial Sector Credit Default Swap Index is falling 1.47% today to 65.25 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 .48% to 96.96 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is falling 2 basis points to 19 basis points. The TED spread is now down 446 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 3.01% to 32.19 basis points. The Libor-OIS spread is unch. at 12 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 1 basis point to 1.74%, which is down 93 basis points since July 7th. The 3-month T-Bill is yielding .12%, which is up 3 basis points today. The MS Cyclical Index is outperforming, rising .8%, despite the weaker consumer confidence reading. Education, Retail, Paper, Gold, Defense, Oil Tanker, Oil Service and Homebuilding shares are especially strong, rising .5%+ today. After the initial mild morning sell-off on the consumer confidence data, the bears have once again been unable to gain any meaningful traction. The Retail Index is actually .75% higher on the news. Oil continues to trade “heavy” and looks technically weak. Despite meaningful gains in most of Asia last night, the Shanghai Composite fell again and is near its recent lows. (IYR) has been a drag throughout the day today. As well, some profit-taking is going on in the tech sector after a big quarterly gain. Nikkei futures indicate an +35 open in Japan and DAX futures indicate an +6 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices, less financial sector pessimism, investment manager performance anxiety and bargain-hunting.

No comments: