Wednesday, June 29, 2011

Stocks Rising into Final Hour on Less Financial Sector Pessimism, Falling Eurozone Debt Angst, Short-Covering, Window Dressing

Broad Market Tone:

  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Most Rising
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 17.64 -7.98%
  • ISE Sentiment Index 109.0 unch.
  • Total Put/Call .96 +5.49%
  • NYSE Arms .47 -28.75%
Credit Investor Angst:
  • North American Investment Grade CDS Index 98.49 -2.26%
  • European Financial Sector CDS Index 119.0 -6.54%
  • Western Europe Sovereign Debt CDS Index 234.16 -2.23%
  • Emerging Market CDS Index 218.81 -2.64%
  • 2-Year Swap Spread 24.0 +1 bp
  • TED Spread 23.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .01% -1 bp
  • Yield Curve 265.0 +10 bps
  • China Import Iron Ore Spot $166.80/Metric Tonne -.95%
  • Citi US Economic Surprise Index -100.20 -.8 point
  • 10-Year TIPS Spread 2.38% +9 bps
Overseas Futures:
  • Nikkei Futures: Indicating +48 open in Japan
  • DAX Futures: Indicating +19 open in Germany
  • Higher: On gains in my Retail, Biotech, Medical and Tech longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 builds on recent gains despite global growth concerns, emerging market inflation fears, rising food/energy prices and US debt ceiling worries. On the positive side, Ag, Steel, Bank, I-Banking, Oil Service, Energy and Oil Tanker shares are especially strong, rising more than +1.5%. (XLF) has traded well throughout the day. The 10-year yield is rising +9 bps to 3.12%. Copper is rising +2.87% and Lumber is jumping +4.06%. The Italy sovereign cds is falling -5.59% to 183.17 bps, the Belgium sovereign cds is falling -3.26% to 159.0 bps and the UK sovereign cds is falling -4.43% to 63.55 bps. Moreover, the European Investment Grade CDS Index is falling -4.08% to 82.88. On the negative side, Airline, Gaming, Education, Homebuilding, Hospital, Medical, Semi, and Disk Drive shares are lower on the day. Small-caps are underperforming. (XHB) has been heavy throughout the day. Oil is rising +2.2%, gold is gaining +.7% and the UBS-Bloomberg Ag Spot Index is rising +.2%. The US price for a gallon of gas is -.01/gallon today to $3.54/gallon. It is up .40/gallon in less than 5 months. The Greece sovereign cds is rising +.91% to 2,055.05 bps. The Shanghai Composite fell -1.11% overnight and is now down -2.8% ytd. As well, despite the jump in commodities and global equity rally, Brazil's Bovespa was flat today and is down -10.0% ytd. Breadth and volume remain lackluster on the US exchanges. The S&P 500 will likely test its 50-day moving average over the coming days. The euro currency has bounced up to a technical level of resistance. I will closely monitor the situation in Europe for signs that the contagion is subsiding in a meaningful way. I expect US stocks to trade mixed-to-higher from current levels into the close on short-covering, quarter-end window dressing, less eurozone debt angst, less financial sector pessimism and technical buying.

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