Tuesday, September 21, 2010

Stocks Lower into Final Hour on Rising Financial Sector Pessimism, Profit-Taking, Increasing Economic Fear, More Shorting


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 22.22 +3,35%
  • ISE Sentiment Index 102.0 -3.77%
  • Total Put/Call .97 +22.78%
  • NYSE Arms .73 +113.82%
Credit Investor Angst:
  • North American Investment Grade CDS Index 107.24 bps -.49%
  • European Financial Sector CDS Index 121.79 bps +5.90%
  • Western Europe Sovereign Debt CDS Index 155.91 bps -.05%
  • Emerging Market CDS Index 237.15 bps +1.29%
  • 2-Year Swap Spread 19.0 -2 bps
  • TED Spread 14.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .15% unch.
  • Yield Curve 216.0 -9 bps
  • China Import Iron Ore Spot $139.20/Metric Tonne -.57%.
  • Citi US Economic Surprise Index -8.90 +4.8 points.
  • 10-Year TIPS Spread 1.84% +5 bps
Overseas Futures:
  • Nikkei Futures: Indicating -57 open in Japan
  • DAX Futures: Indicating +28 open in Germany
Portfolio:
  • Slightly Higher: On gains in my Tech, Retail and Medical long positions
  • Disclosed Trades: Added (IWM)/(QQQQ) hedges and added to my (EEM) short
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades near session lows on worrisome FOMC comments and (XLF/IYR) weakness. On the positive side, Airline, Road & Rail and HMO shares are especially strong, rising 1.0%+. Select growth stocks continue to trade much better than the broad market. Lumber is rising another +4.50%. Weekly retail sales rose +2.7% this week versus a +2.9% gain the prior week. On the negative side, Education, REIT, Hospital, I-Banking and Software shares are under pressure, falling more than .75%. (XLF) and (IYR) have been a bit heavy throughout the day. The Euro Financial Sector CDS Index is rising significantly for the second day in a row, gaining another +5.9%, which is a large negative. The Portugal sovereign cds is rising +2.39% to 368.47 bps and the Ireland sovereign cds is gaining another +.57% to another record of 431.27 bps. Furthermore, key credit default swap indices continue to trend higher, even as equities rally, which is a major negative. Commodities, in general, continue to trade poorly given the euro's strength and the 10-year yield has dropped -21 bps from Friday's high in yield, which is also a large negative. The Shanghai Composite was unable to hold a rally again overnight after breaking below its 50-day moving average for the first time since April last week, rising +.11%. I did not think the FOMC statements were positive or surprising. Asian equities could come under pressure tonight, as a result. I expect US stocks to trade modestly lower into the close from current levels on rising economic fear, profit-taking, more shorting and increasing financial sector pessimism.

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