Wednesday, March 17, 2010

Stocks Higher into Final Hour on Less Economic Fear, Diminishing Financial Sector Pessimism, Short-Covering, Technical Buying

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Rising
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 16.75 -5.31%
  • ISE Sentiment Index 155.0 -3.13%
  • Total Put/Call .86 +17.81%
  • NYSE Arms .91 +68.59%
Credit Investor Angst:
  • North American Investment Grade CDS Index 81.87 bps -2.82%
  • European Financial Sector CDS Index 72.58 bps +.80%
  • Western Europe Sovereign Debt CDS Index 67.71 bps +.18%
  • Emerging Market CDS Index 211.02 bps -3.14%
  • 2-Year Swap Spread 17.50 bps -1.5 bps
  • TED Spread 12.0 bps +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .15% unch.
  • Yield Curve 272.0 bps -2 bps
  • Copper Days Demand 15.06 days -.35%
  • Citi US Economic Surprise Index +37.0 +.4 point
  • 10-Year TIPS Spread 2.25% unch.
Overseas Futures:
  • Nikkei Futures: Indicating -16 open in Japan
  • DAX Futures: Indicating unch. open in Germany
  • Higher: On strength in my Financial, Retail and Tech long positions
  • Disclosed Trades: None
  • Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is neutral as the major averages build slightly on recent gains, but are trading near session lows despite strength overseas. On the positive side, (XLF) and (IYR) have outperformed throughout most of the day. Cyclical shares are outperforming. REIT, Restaurant, Bank, Networking, Semi, Software, Paper, Energy and Coal shares are especially strong, rising .75%+. Despite another rise in commodity prices, inflation expectations are stable and long-term rates are slightly lower. On the negative side, Steel, Disk Drive and Airline stocks are under pressure. Market leaders are underperforming again today, which remains a red flag. As well, given the gains overseas and recent technical breakout, today's performance is mildly disappointing. Citi lowered the financial sector to Neutral this afternoon, which is pressuring (XLF) a bit. So far, the weakness has been contained and the bears have been unable once again to gain any meaningful traction. Uncertainty over healthcare reform is also likely weighing on the broad market this afternoon. One of my longs, (RUE), beat estimates and raised guidance after the close yesterday, which is lifting the shares to a new high. I still think the stock has further near-term and intermediate-term upside. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering and technical buying.


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Gary said...