Tuesday, May 11, 2010

Stocks Mostly Higher into Final Hour on Less Economic Fear, Short-Covering, Bargain-Hunting

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Declining
  • Volume: Above Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 28.45 -1.28%
  • ISE Sentiment Index 115.0 +38.55%
  • Total Put/Call 1.11 +8.82%
  • NYSE Arms 1.79 +182.99%
Credit Investor Angst:
  • North American Investment Grade CDS Index 103.88 bps +1.40%
  • European Financial Sector CDS Index 116.50 bps -1.78%
  • Western Europe Sovereign Debt CDS Index 120.33 bps +1.12%
  • Emerging Market CDS Index 240.50 bps +.34%
  • 2-Year Swap Spread 31.0 +3 bps
  • TED Spread 28.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .15% unch.
  • Yield Curve 269.0 +1 bp
  • China Import Iron Ore Spot $175.30/Metric Tonne -.11%
  • Citi US Economic Surprise Index +14.40 -.3 point
  • 10-Year TIPS Spread 2.26% +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +49 open in Japan
  • DAX Futures: Indicating +10 open in Germany
  • Slightly Higher: On gains in my Biotech, Retail and Medical long positions
  • Disclosed Trades: Covered all of my (IWM), (QQQQ) hedges and then added them back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as equities trade slightly high despite more euro weakness and China bubble fears. On the positive side, HMO, Road/Rail, Gaming, Hospital, Biotech, Bank, Networking, Gold and Oil Serivce stocks are especially strong, rising .75%+. Small-caps are strongly outperforming, with the Russell 2000 rising +1.1%. The Greece sovereign cds is falling -8.08% to 542.42 bps and the Portugal sovereign cds is dropping -12.5% to 229.70 bps. Oil is falling -1.24% on euro weakness and worries over China demand. Weekly retail sales rose +3.3% this week, up from a +2.4% gain the prior week. On the negative side, I-Banking, Education, Internet, Paper, Steel, Ag, Energy and Coal shares are underperforming today, falling .75%+. The Shanghai Composite continues to trade poorly and is now in a technical bear market. The Latin America Economic Surprise Index is falling to -15.50 today, which is the lowest since Dec . 23, 2009. Most gauges of credit angst are moving higher today. The S&P 500 came close to its 50-day moving average during today's rally. However, I suspect the euro and Chinese stocks will need to stabilize before a clear break above this level is in the offing. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear and bargain-hunting.

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