Monday, December 13, 2010

Stocks Higher into Final Hour on Commodity Strength, Technical Buying, Short-Covering, Seasonal Strength


Broad Market Tone:

  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Most Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 16.86 -4.26%
  • ISE Sentiment Index 196.0 -14.78%
  • Total Put/Call .64 -14.67%
  • NYSE Arms .55 +5.34%
Credit Investor Angst:
  • North American Investment Grade CDS Index 86.09 bps -2.40%
  • European Financial Sector CDS Index 144.27 bps +1.14%
  • Western Europe Sovereign Debt CDS Index 187.50 bps +1.08%
  • Emerging Market CDS Index 209.51 bps -1.98%
  • 2-Year Swap Spread 21.0 -2 bps
  • TED Spread 18.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .12% +1 bp
  • Yield Curve 269.0 +1 bp
  • China Import Iron Ore Spot $166.90/Metric Tonne +.72%
  • Citi US Economic Surprise Index +1.40 -.3 point
  • 10-Year TIPS Spread 2.20% +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +57 open in Japan
  • DAX Futures: Indicating +6 open in Germany
Portfolio:
  • Slightly Higher: On gains in my Tech long positions
  • Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite recent equity gains, China inflation worries, US tax policy uncertainty and rising eurozone sovereign debt angst. On the positive side, Education, Homebuilding, Disk Drive, Steel, Gold, Oil Service, Energy, Oil Tanker and Utility shares are especially strong, rising more than 1.0%. (XHB) is continuing its recent outperformance. Copper is rising +2.54% and is breaking convincingly to a new 52-week high. The S&P GSCI Ag Spot Index is also surging +2.37%. The Italy sovereign cds is dropping -5.1% to 208.67 bps, the Hungary sovereign cds is falling -2.28% to 367.22 bps and the UK sovereign cds is declining -4.16% to 67.97 bps. On the negative side, Hospital and Restaurant shares are under pressure, falling more than 1.0%. Small-caps are underperforming. Transport shares are also relatively weak. The China sovereign cds is gaining +2.18% to 72.05 bps and the Greece sovereign cds is climbing +1.58% to 961.26 bps. Moreover, the Emerging Markets Sovereign CDS Index is up +2.43% to 196.97 bps. The European Financial Sector CDS Index continues to trend higher(still below May/June levels). Short/Intermediate-term gauges of investor sentiment remain overly bullish, which is a big negative. Given the jump in the Shanghai Composite last night and strength in the euro currency today, I am somewhat surprised that equities aren't putting in a better showing. Today may just be another healthy consolidation day, however some stocks look a bit "tired." I expect US stocks to trade mixed-to-lower into the close from current levels on China inflation worries, profit-taking, US tax policy uncertainty, more shorting and ongoing eurozone debt fears.

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