Monday, March 22, 2010

Stocks Reversing Higher into Final Hour on Short-Covering, Less Sovereign Debt Angst, Technical Buying

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Above Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 16.93 -.24%
  • ISE Sentiment Index 131.0 +22.43%
  • Total Put/Call .92 -5.15%
  • NYSE Arms .60 -52.97%
Credit Investor Angst:
  • North American Investment Grade CDS Index 91.47 bps +6.32%
  • European Financial Sector CDS Index 78.66 bps +10.18%
  • Western Europe Sovereign Debt CDS Index 76.72 bps -2.44%
  • Emerging Market CDS Index 223.21 bps +2.52%
  • 2-Year Swap Spread 19.0 bps -1.0 bp
  • TED Spread 15.0 +2.0 bps
Economic Gauges:
  • 3-Month T-Bill Yield .14% -1 bp
  • Yield Curve 269.0 bps -1 bp
  • Copper Days Demand 15.26 days +1.65%
  • Citi US Economic Surprise Index +41.80 +3.4 points
  • 10-Year TIPS Spread 2.20% unch.
Overseas Futures:
  • Nikkei Futures: Indicating -100 open in Japan
  • DAX Futures: Indicating +12 open in Germany
  • Higher: On strength in my Retail, Medical, Biotech and Tech long positions
  • Disclosed Trades: Covered all my (IWM)(QQQQ) hedges, covered some of my (EEM) short
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the major averages reverse morning losses, despite the recent surge in credit default swaps, China bubble/trade concerns, healthcare reform fears, tax hike worries and Greece bailout concerns. On the positive side, Airline, Gaming, Hospital, Disk Drive, Semi and Computer shares are especially strong, rising 2.0%+. Small-cap and market leading stocks are also outperforming. Despite an equity rally, bounce in the euro and rise in oil, gold is lower on the day, the 10-year yield is down slightly and inflation expectations are stable. On the negative side, I-Bank, Insurance, Oil Service, Energy, Oil Tanker, Coal and Utility stocks are down on the day. Transportation shares are also underperforming. The market's performance today is very impressive, considering the news, its technically overbought state and overseas losses. The passage of this health-care reform package is a huge long-term negative for US stocks and the economy if implemented, in my opinion. However, a lifting of the uncertainty regarding this outcome is likely providing a near-term boost to stocks. The debt situation in Europe continues to bare close monitoring. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less sovereign debt angst and technical buying.

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