Friday, March 19, 2010

Stocks Falling into Final Hour on Tax Hike Worries, Rising Sovereign Debt Angst, China Bubble Fears, Profit-Taking

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector is Falling
  • Volume: Heavy
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 17.18 +3.37%
  • ISE Sentiment Index 107.0 -14.4%
  • Total Put/Call .89 +15.58%
  • NYSE Arms 1.53 +14.09%
Credit Investor Angst:
  • North American Investment Grade CDS Index 86.03 bps +2.55%
  • European Financial Sector CDS Index 74.0 bps +9.38%
  • Western Europe Sovereign Debt CDS Index 75.75 bps +5.45%
  • Emerging Market CDS Index 218.15 bps +3.73%
  • 2-Year Swap Spread 20.0 bps +1.5 bps
  • TED Spread 13.0 +1.0 bp
Economic Gauges:
  • 3-Month T-Bill Yield .15% unch.
  • Yield Curve 270.0 bps -1 bp
  • Copper Days Demand 15.01 days -.17%
  • Citi US Economic Surprise Index +38.40 +.7 point
  • 10-Year TIPS Spread 2.20% -4 bps
Overseas Futures:
  • Nikkei Futures: Indicating -109 open in Japan
  • DAX Futures: Indicating +1 open in Germany
  • Lower: On weakness in my Financial, Retail and Tech 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 mildly bearish as the major averages trade just modestly lower, despite a recent surge in credit default swaps, China bubble concerns, healthcare reform fears, rate hike worries and Greece bailout concerns. On the positive side, HMO and Defense shares are posting gains today. Energy prices, which were beginning to become am economic problem again, are falling from their elevated state on more US dollar strength and demand worries after India raised rates. On the negative side, Airline, Computer, Oil Service, Coal and Oil Tanker stocks are under meaningful pressure, falling more than -2.5%. Market leaders are continuing their recent trend of underperformance. Small-caps are also underperforming. It is hard to gauge whether option expiration is weighing on the broad market or helping to prop it up from an otherwise more serious decline. I still believe trading early next week will give us a better indication of whether today's weakness is just a healthy pullback or the beginning of a more significant decline. I expect US stocks to trade modestly lower into the close from current levels on tax hike fears, China bubble worries, rising sovereign debt angst, profit-taking, technical selling and more shorting.

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