Tuesday, June 22, 2010

Stocks Reversing Lower into Final Hour on Technical Selling, Rising Sovereign Debt Agnst, Increasing Energy Sector Pessimism, Economic Fear


Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 26.25 +5.51%
  • ISE Sentiment Index 119.0 +16.67%
  • Total Put/Call .97 +4.30%
  • NYSE Arms 2.66 +198.45%
Credit Investor Angst:
  • North American Investment Grade CDS Index 109.73 bps +3.69%
  • European Financial Sector CDS Index 140.85 bps +8.93%
  • Western Europe Sovereign Debt CDS Index 131.0 bps -1.50%
  • Emerging Market CDS Index 251.98 bps +2.44%
  • 2-Year Swap Spread 35.0 +2 bps
  • TED Spread 43.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .11% +1 bp
  • Yield Curve 249.0 -4 bps
  • China Import Iron Ore Spot $143.80/Metric Tonne -.35%
  • Citi US Economic Surprise Index -14.90 +.2 point
  • 10-Year TIPS Spread 2.01% -3 bps
Overseas Futures:
  • Nikkei Futures: Indicating -100 open in Japan
  • DAX Futures: Indicating -48 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Technology and Retail long positions
  • Disclosed Trades: Added to my (IWM)/(QQQQ) hedges, then covered some of them
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows, breaking convincingly back below its 200-day moving average. On the positive side, Drug, Telecom and I-Banking stocks are holding up relatively well. Copper is rising another +.9%. Weekly retail sales rose +3.1% versus a +3.1% gain the prior week and up from a +2.4% gain the first week of May. On the negative side, Airline, Road&Rail, Education, REIT, Paper, Oil Service, Energy, Oil Tanker and Coal shares are especially weak, falling 3.0%+. Cyclicals are substantially underperforming, falling -2.7%. It is a big negative to see Greece sovereign debt angst remain stubbornly high despite Europe's recent actions. The Greece sovereign cds is rising another +6.87% to 895.73 bps. Moreover, the Portugal sovereign cds is rising +7.7% to 302.21 bps and the Spain sovereign cds is surging +5.2% to 232.33 bps. Finally, the European Investment Grade CDS Index is rising +5.3% to 112.95 bps. The rise in shares of (AAPL) is helping to prevent an otherwise worse decline for the Naz. The 10-year yield is falling too much again, dropping 8 bps to session lows, which is further raising economic angst. As I said a few weeks ago, economic data over the next few months will likely show enough deterioration that worries over a full blown global economic double dip will rise meaningfully. The most cyclical stocks will likely continue to underperform through year-end. I expect US stocks to trade modestly lower into the close from current levels on profit taking, technical selling, rising US housing worries, rising energy sector pessimism, increasing sovereign debt angst. tax hike worries and more shorting.

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