Wednesday, June 15, 2011

Stocks Falling into Final Hour on Soaring Eurozone Debt Angst, Rising Global Growth Worries, Emerging Markets Inflation Fears, Technical Selling

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 21.12 +15.66%
  • ISE Sentiment Index 67.0 -58.13%
  • Total Put/Call 1.36 +32.04%
  • NYSE Arms 1.87 +205.51%
Credit Investor Angst:
  • North American Investment Grade CDS Index 97.76 +.78%
  • European Financial Sector CDS Index 130.50 +15.20%
  • Western Europe Sovereign Debt CDS Index 222.08 +3.90%
  • Emerging Market CDS Index 225.85 +3.95%
  • 2-Year Swap Spread 25.0 +5 bps
  • TED Spread 20.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .05% unch.
  • Yield Curve 259.0 -6 bps
  • China Import Iron Ore Spot $173.0/Metric Tonne +.12%
  • Citi US Economic Surprise Index -97.70 -2.3 points
  • 10-Year TIPS Spread 2.22% -3 bps
Overseas Futures:
  • Nikkei Futures: Indicating -105 open in Japan
  • DAX Futures: Indicating -32 open in Germany
  • Slightly Lower: On losses in my Retail, Medical and Tech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short and then covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades near session lows as it approaches its 200-day moving average on global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns and soaring eurozone debt angst. On the positive side, Gaming, Restaurant, Biotech and Defense shares are relatively strong, falling less than -1.0%. The UBS-Bloomberg Ag Spot Index is declining -1.15% and oil is plunging -4.2%. Distillate demand has dropped -3.6% over the last 4 weeks versus last year. The potential downside in oil is rather large still, in my opinion. On the negative side, Coal, Alt Energy, Energy, Oil Service, Ag, Networking, Insurance, Construction, Education, Tobacco, REIT, Homebuilding, HMO, I-Banking, Wireless and Software shares are under significant pressure, falling more than -2.5%. Small-caps and cyclicals are underperforming. (XLF) has been relatively weak again today. Tech shares also continue to trade poorly. Lumber is falling another -3.0% and Copper is down -1.33%. Shanghai copper inventories are surging +20.1% today. Lumber has plunged -33% in less than 3 months. The 10-year yield is falling too much again, declining -13 bps to 2.96%. The US price for a gallon of gas is -.01/gallon today to $3.69/gallon. It is up .55/gallon in less than 4 months. The Greece sovereign cds is soaring +9.65% to 1,761.32 bps, the Spain sovereign cds is rising +5.72% to 288.67 bps, the Italy sovereign cds is rising +6.46% to 180.0 bps, the Portugal sovereign cds is rising +7.78% to 794.17 bps, the Ireland sovereign cds is gaining +5.82% to 767.67 bps and the UK sovereign cds is gaining +4.46% to 65.81 bps. The Spain and UK sovereign cds have broken out technically. The Greece, Ireland and Portugal sovereign cds are hitting new record highs again today. The jump in the 2-year swap spread over the last 2 days is also a big concern. 3-Month Shibor is also surging +36 bps to 5.28%. The Shanghai Composite finished at session lows last night, falling -.9% and India's Sensex also continues to trade poorly, dropping another -.96%. Both Chinese and Indian govt officials continue to sound hawkish as they deal with inflation problems that are more pronounced than many investors perceive. As well, Spanish and Italian equities fell over -2.0% today and remain under significant pressure. Israeli stocks have been very poor performers over the last 6 weeks and are now down -11.3% ytd. Gauges of investor angst are finally nearing levels that are more appropriate for the current macro backdrop, which is a large positive. However, it appears as though uncertainty regarding the current Greece debt situation will remain until late next week at the earliest. Many key stocks are breaking or are at key technical levels, as well. The S&P 500 will likely test its 200-day moving average by week's end. I expect US stocks to trade mixed-to-lower into the close from current levels on more global growth worries, rising eurozone debt concerns, technical selling, emerging markets inflation fears, rising Mideast unrest and more short-selling.

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