Friday, April 15, 2011

Stocks Slightly Higher into Final Hour on Short-Covering, Economic Optimism, Technical Buying

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 15.44 -5.1%
  • ISE Sentiment Index 104.0 -5.45%
  • Total Put/Call .88 -7.37%
  • NYSE Arms 1.14 -2.71%
Credit Investor Angst:
  • North American Investment Grade CDS Index 94.44 -1.15%
  • European Financial Sector CDS Index 86.25 +3.06%
  • Western Europe Sovereign Debt CDS Index 172.42 bps +1.37%
  • Emerging Market CDS Index 200.66 -.40%
  • 2-Year Swap Spread 17.0 unch.
  • TED Spread 21.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .06% -1 bp
  • Yield Curve 272.0 -1 bp
  • China Import Iron Ore Spot $181.50/Metric Tonne -.98%
  • Citi US Economic Surprise Index +23.0 -2.8 points
  • 10-Year TIPS Spread 2.62% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -11 open in Japan
  • DAX Futures: Indicating +20 open in Germany
  • Slightly Higher: On gains in my Medical, Retail 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 slightly higher despite rising energy prices, some earnings disappointments, Japan concerns, emerging market inflation fears, tech sector weakness and rising eurozone debt angst. On the positive side, REIT, Construction, Medical Equipment and Utility shares are especially strong, rising more than 1.0%. (IYR) has traded well throughout the day again. Small-Caps are also outperforming again. The Japan sovereign cds is falling -1.79% and the US Muni CDS Index is dropping -1.5% to 149.89 bps. The 10-year yield is falling -9 bps to 3.41%. Lumber is rebounding +3.38%. On the negative side, Oil Tanker, Agriculture, Internet, Networking, Bank, Education and Airline shares are down on the day. The MS Tech Index has been heavy throughout the day. Oil is rising +1.02%, gold is jumping +.79% and copper is falling -.67%. The US price for a gallon of gas is rising +.01/gallon today to $3.82/gallon. It is up .70/gallon in 59 days. The Spain sovereign cds is jumping +7.23% to 235.42 bps, the Italy sovereign cds is rising +3.42% to 143.07 bps, , the Ireland sovereign cds is climbing +4.46% to 570.61 bps. Portugal sovereign cds is rising +1.93% to 603.47 bps, the Belgium sovereign cds is rising +4.06% to 136.94 bps and the Greece sovereign cds is surging +7.44% to 1,222.33 bps. The Greece sovereign cds is making another new record high. Moreover, the Spain sovereign cds has surged 20.1% in 5 days. Considering euro weakness today, oil's move higher is even more worrisome. For the fourth 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 above its 50-day moving average. However, the quality of the move higher over the last 2 days is poor. Breadth, volume and leadership are all lacking. Given the obvious headwinds, investor complacency is fairly elevated. Energy/food prices need to fall and eurozone debt angst needs to subside again before the major averages will likely make a serious stab at recent highs. I expect US stocks to trade modestly lower into the close from current levels on more shorting, tech sector weakness, rising eurozone debt angst, emerging market inflation fears, rising energy prices and profit-taking.

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