Wednesday, April 06, 2011

Stocks Higher into Final Hour on Less Financial/Tech Sector Pessimism, Short-Covering, Diminishing Eurozone Debt Angst, Fund Inflows

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 16.77 -2.78%
  • ISE Sentiment Index 147.0 +40.0%
  • Total Put/Call .70 -14.63%
  • NYSE Arms .82 -2.91%
Credit Investor Angst:
  • North American Investment Grade CDS Index 92.70 -.86%
  • European Financial Sector CDS Index 76.58 -12.11%
  • Western Europe Sovereign Debt CDS Index 162.69 bps -.70%
  • Emerging Market CDS Index 198.72 -.63%
  • 2-Year Swap Spread 17.0 unch.
  • TED Spread 24.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .05% -1 bp
  • Yield Curve 270.0 +4 bps
  • China Import Iron Ore Spot $176.10/Metric Tonne +1.27%
  • Citi US Economic Surprise Index +34.60 -2.5 points
  • 10-Year TIPS Spread 2.58% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +106 open in Japan
  • DAX Futures: Indicating +18 open in Germany
  • Slightly Higher: On gains in my Medical, Retail, Tech and Biotech sector longs
  • Disclosed Trades: Covered my (IWM)/(QQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite weaker economic data, Mideast unrest, rising energy prices, rising long-term rates and recent equity gains. On the positive side, Education, Bank, Wireless, Disk Drive and Semi shares are especially strong, rising 1.0%+. Tech and financial shares are outperforming. Copper is surging +2.57%. The Spain sovereign cds is falling -8.92% to 200.91 bps, the Italy sovereign cds is falling -6.36% to 129.66 bps, the Portugal sovereign cds is falling -5.7% to 551.66 bps, the Ireland sovereign cds is dropping -8.2% to 530.03 bps, the Belgium sovereign cds is falling -6.59% to 117.17 bps, the UK sovereign cds is dropping -6.4% to 47.56 bps and the US sovereign cds is falling -6.4% to 36.18 bps. On the negative side, HMO, Telecom, Steel, Ag, Oil Service, Energy, Alt Energy and Coal shares are under pressure, falling more than -.75%. Cyclicals are underperforming. Gold is rising +.22%, oil is up +.65% and Lumber is falling -3.24%. Lumber has broken down from the trading range that it had been in since mid-Dec. of last year. The 10-year yield is rising +6 bps to 3.54%. The US price for a gallon of gas is up +.02 today to $3.71/gallon. It is up .59/gallon in 50 days. The California Muni CDS is rising +10.71% to 230.40 bps. (XLF) is now trading above its 50-day moving average, which is a big positive. As well, the MS Tech Index is trading a bit better. However, leadership is lacking. As well, overall trading is still choppy with lackluster breadth/volume. The market seems to be anticipating a reversal lower in energy prices, which would likely send the S&P 500 to a new 52-week high. However, if this reversal fails to materialize soon, equity weakness is likely. I expect US stocks to trade mixed-to-higher into the close from current levels on less financial/tech sector pessimism, short-covering, bargain-hunting, fund inflows, buyout speculation and less eurozone debt angst.

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