Thursday, June 09, 2011

Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Financial/Commodity Sector Strength

Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Light
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 17.30 -7.93%
  • ISE Sentiment Index 120.0 +53.85%
  • Total Put/Call 1.08 -7.69%
  • NYSE Arms .49 -55.46%
Credit Investor Angst:
  • North American Investment Grade CDS Index 98.33 +1.53%
  • European Financial Sector CDS Index 114.25 +1.90%
  • Western Europe Sovereign Debt CDS Index 197.25 +2.42%
  • Emerging Market CDS Index 217.56 -1.13%
  • 2-Year Swap Spread 19.0 -1 bp
  • TED Spread 21.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .03% unch.
  • Yield Curve 257.0 unch.
  • China Import Iron Ore Spot $172.60/Metric Tonne +.52%
  • Citi US Economic Surprise Index -98.20 +10.5 points
  • 10-Year TIPS Spread 2.21% +1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +98 open in Japan
  • DAX Futures: Indicating +27 open in Germany
  • Higher: On gains in my Retail, Biotech, Medical and Tech sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns, rising eurozone debt angst and rising food/energy prices. On the positive side, HMO, Oil Service, Agriculture and Road & Rail shares are especially strong, rising more than +1.75%. Cyclicals are outperforming. (XLF) has traded well throughout the day. The 10-year yield is bouncing +6 bps higher to 3.0%. Lumber is gaining +.36%. The AAII % Bulls fell to 24.42%, while the % Bears jumped to 47.67 this week, which is also a big positive. On the negative side, Steel, Airline, Gaming, REIT and Biotech shares are lower on the day. (IYR) has been heavy throughout the day. Oil is rising +.63% and the UBS-Bloomberg Ag Spot Index is gaining +.62%. The US price for a gallon of gas is down -.02/gallon today to $3.73/gallon. It is up .59/gallon in less than 4 months. The Spain sovereign cds is gaining +2.0% to 258.66 bps, the Italy sovereign cds is climbing +2.28% to 161.33 bps, the Portugal sovereign cds is gaining +1.48% to 719.47 bps, the Greece sovereign cds is surging +1.93% to 1,519.28 bps, the Ireland sovereign cds is up +1.2% to 690.83 bps, the Belgium sovereign cds is rising +3.24% to 145.17 bps and the UK sovereign cds is rising +4.3% to 61.84 bps. The Portugal sovereign, Ireland sovereign and Greece sovereign cds are hitting new record highs today. The Citi Latin America Economic Surprise Index remains close to a 52-week low. (SINA), a beloved Chinese momentum stock, has continued to crash on large volume. The Shanghai Composite fell another -1.7% last night and looks to be rolling over again technically. US stocks had become very oversold and today's bounce is welcome. However, breadth isn't that great, volume is light and leadership is poor. Much of today's advance appears to be related to short-covering. As well, none of the fundamentals that have been weighing on equities are showing any improvements yet. This stock bounce could last another couple of days, but we need to see some real improvements in fundamentals before stocks will likely mount a more convincing move higher. I expect US stocks to trade mixed-to-lower into the close from current levels on global growth worries, rising eurozone debt concerns, emerging markets inflation fears, rising Mideast unrest, rising food/energy prices and more shorting.

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