Thursday, April 14, 2011

Stocks Slightly Higher into Final Hour on Short-Covering, Technical Buying, Bargain-Hunting

Broad Market Tone:

  • Advance/Decline Line: Slightly Higher
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 16.50 -2.48%
  • ISE Sentiment Index 111.0 -11.90%
  • Total Put/Call .99 +19.28%
  • NYSE Arms 1.15 -5.94%
Credit Investor Angst:
  • North American Investment Grade CDS Index 95.54 +.84%
  • European Financial Sector CDS Index 83.08 -.78%
  • Western Europe Sovereign Debt CDS Index 170.08 bps +2.61%
  • Emerging Market CDS Index 201.86 +2.03%
  • 2-Year Swap Spread 17.0 +1 bp
  • TED Spread 21.0 -2 bps
Economic Gauges:
  • 3-Month T-Bill Yield .07% +2 bps
  • Yield Curve 273.0 unch.
  • China Import Iron Ore Spot $183.30/Metric Tonne +.77%
  • Citi US Economic Surprise Index +25.80 -3.8 points
  • 10-Year TIPS Spread 2.63% +1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -13 open in Japan
  • DAX Futures: Indicating +43 open in Germany
  • Higher: On gains in my Medical, Retail, Tech and Biotech sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and then added them back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades at session highs despite rising energy prices, emerging market inflation fears, financial sector weakness, disappointing economic data and rising eurozone debt angst. On the positive side, Tobacco, Food, Restaurant, REIT, Drug, Biotech, Medical, Disk Drive, Paper, Energy and Utility shares are especially strong, rising more than .75%. (IYR) has traded well throughout the day. The Transports are trading better today. Small-caps are also outperforming. The Spain sovereign cds is falling -1.0% to 219.82 bps. On the negative side, Airline, Homebuilding, Hospital, I-Banking, Bank, Ag and Defense shares are under pressure, falling more than .5%. (XLF) has been heavy throughout the day again. Cyclicals are also underperforming. Oil is rising +1.3%, gold is jumping +1.22% and lumber is falling -2.97%. The US price for a gallon of gas is unch. today at $3.81/gallon. It is up .69/gallon in 58 days. The 10-year TIPS spread is building slightly on recent gains. The US dollar continues to trade very poorly, given the situation in Europe and recent equity weakness, which is helping to boost oil/gold again. The Portugal sovereign cds is rising +3.68% to 592.66 bps, the Belgium sovereign cds is rising +3.57% to 131.17 bps and the Greece sovereign cds is surging +4.79% to 1,139.05 bps. The Greece sovereign cds is making another new record high. As well, the California Municipal cds is rising +3.2% to 235.35 bps. Oil is not trading like a major top is in place as of yet, which is a large broad equity market negative. For the third consecutive day, the major averages are once again displaying exceptional resilience in the face of a number of potential downside catalysts as the S&P 500 trades back to its 50-day moving average. If the bears are unable to break us convincingly lower on tomorrow morning's likely disappointing economic data, I suspect we could see another more meaningful late afternoon surge in equities. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting and technical buying.

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