Friday, June 17, 2011

Stocks Rising into Final Hour on Less Eurozone Debt Angst, Diminishing Financial Sector Pessimism, Short-Covering, Falling Energy Prices

Broad Market Tone:

  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Mixed
  • Volume: Above Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 22.03 -3.08%
  • ISE Sentiment Index 92.0 +17.95%
  • Total Put/Call 1.17 +.86%
  • NYSE Arms .82 -5.29%
Credit Investor Angst:
  • North American Investment Grade CDS Index 99.59 unch.
  • European Financial Sector CDS Index 124.82 -1.13%
  • Western Europe Sovereign Debt CDS Index 224.67 -1.61%
  • Emerging Market CDS Index 230.95 +.10%
  • 2-Year Swap Spread 26.0 -1 bp
  • TED Spread 22.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .02% -2 bps
  • Yield Curve 256.0 +3 bps
  • China Import Iron Ore Spot $173.60/Metric Tonne -.34%
  • Citi US Economic Surprise Index -101.90 -.8 point
  • 10-Year TIPS Spread 2.18% unch.
Overseas Futures:
  • Nikkei Futures: Indicating +49 open in Japan
  • DAX Futures: Indicating +17 open in Germany
  • Slightly Higher: On gains in my Retail longs, Index hedges and emerging market/commodity shorts
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered some of them
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 hugs the flatline and hovers right above its 200-day moving average despite a bounce in the euro, less eurozone credit angst, financial sector strength, lower energy prices and short-covering. On the positive side, Airline, Road & Rail, Telecom and Computer Service shares are especially strong, rising more than +.75%. (XLF) is outperforming. The Transports have traded well throughout the day, as well. Lumber is rising +1.45% and oil is down another -2.1%. The Spain sovereign cds is falling -3.79% to 288.82 bps, the Italy sovereign cds is falling -4.06% to 174.63 bps, the Greece sovereign cds is declining -7.12% to 1,925.50 bps, the Belgium sovereign cds is falling -5.39% to 151.25 bps, the Ireland sovereign cds is falling -3.97% to 772.55 bps and the UK sovereign cds is falling -5.43% to 63.68 bps. On the negative side, Oil Service, Ag, Internet, Computer, Semi, Disk Drive, Wireless, Biotech, Construction and Education shares are under pressure, falling more than -.75%. Small-caps are underperforming. Tech shares continue to trade very poorly. Copper is down -.63% and the UBS-Bloomberg Ag Spot Index is +.27%. Shanghai copper inventories have risen +28% in 5 days. The 10-year yield is flat at 2.93% despite declining eurozone debt angst. The US price for a gallon of gas is -.01/gallon today to $3.68/gallon. It is up .54/gallon in less than 4 months. The Illinois muni cds is climbing +2.13% to 197.0 bps. 3-Month Shibor is up another +8 bps to 5.67%. The Shanghai Composite finished at session lows last night, falling another -.81% and is now down -5.9% ytd. India's Sensex also continues to trade poorly, dropping another -.64%, and is now down -12.9% ytd. Brazil's Bovespa fell another -.01% and is now down -12.3% ytd. Singapore Electronics Exports fell -15.2% in May, which is the largest decline since June 2009. Many key US stocks continue to trade horribly as they slice through their 200-day moving averages without even a bounce. Over the last hour S&P said it may cut its credit rating for Italy. Much of today's action feels related to quadruple-witching. Trading early next week will likely give a better indication of whether or not the S&P 500 can bounce at its 200-day or break down. 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 and rising Mideast unrest.

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