Tuesday, April 19, 2011

Stocks Rising Into Final Hour on Commodity Sector Strength, Less Eurozone Debt Angst, Short-Covering, Bargain-Hunting

Broad Market Tone:

  • Advance/Decline Line: About Even
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 15.85 -6.60%
  • ISE Sentiment Index 126.0 +29.90%
  • Total Put/Call .88 +2.33%
  • NYSE Arms .86 -61.72%
Credit Investor Angst:
  • North American Investment Grade CDS Index 95.23 -1.10%
  • European Financial Sector CDS Index 87.87 -5.12%
  • Western Europe Sovereign Debt CDS Index 181.75 bps +2.54%
  • Emerging Market CDS Index 204.70 -1.13%
  • 2-Year Swap Spread 17.0 unch.
  • TED Spread 22.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .05% unch.
  • Yield Curve 270.0 -2 bps
  • China Import Iron Ore Spot $178.80/Metric Tonne -1.16%
  • Citi US Economic Surprise Index +19.90 -.3 point
  • 10-Year TIPS Spread 2.63% +3 bps
Overseas Futures:
  • Nikkei Futures: Indicating +49 open in Japan
  • DAX Futures: Indicating +43 open in Germany
  • Slightly Higher: On gains in my Medical, Retail and Tech sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of 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 near session high despite emerging markets inflation worries, rising energy prices, Mideast unrest, earnings jitters and Japan concerns. On the positive side, Energy, Oil Service, Ag, Steel, Paper, Hospital, HMO and Homebuilding shares are especially strong, rising more than 1.0%. Cyclicals are outperforming. The 10-year yield is falling -2 bps to 3.35%. Copper is rising +1.0%. The Italy sovereign cds is falling -4.17% to 151.80 bps, the Russia sovereign cds is declining -4.08% to 132.93 bps and the US sovereign cds is falling -3.2% to 47.75 bps. Tech sector leader (AAPL) is trading better technically. On the negative side, Education, Gaming, Biotech, I-Banking, Oil Tanker and Alt Energy shares are under mild pressure, falling more than .5%. Tech and financial shares are underperforming. Small-caps are also underperforming. Oil is rising +.4% and lumber is declining -.89%. The US price for a gallon of gas is rising +.01/gallon today to $3.84/gallon. It is up .72/gallon in 63 days. The UK sovereign cds is gaining +1.86% to 59.13 bps, the Greece sovereign cds is gaining +2.69% to 1,332.36 bps and the Emerging Markets Sovereign CDS Index is gaining +1.47% to 161.11 bps. The Greece sovereign cds is making another new record high. The Bloomberg Autos Anchored Index is surging another +4.8% today and is making a new record high, exceeding its prior peak on May 22, 2009, which is also a big negative. The Shanghai Composite finished at session lows last night, falling -1.9%. The quality of today's bounce is lacking on poor volume, leadership and breadth. The S&P 500 is still slightly below its 50-day moving average. Given the obvious headwinds, investor complacency remains fairly elevated as evidenced by the extreme speculative action in Chinese internet stocks and low investor angst readings seen in various market gauges. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less eurozone debt angst, bargain-hunting and more economic optimism.

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