Monday, June 20, 2011

Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Technical Buying

Broad Market Tone:

  • Advance/Decline Line: Slightly Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 20.33 -6.96%
  • ISE Sentiment Index 119.0 +26.60%
  • Total Put/Call .90 -24.37%
  • NYSE Arms .86 +1.37%
Credit Investor Angst:
  • North American Investment Grade CDS Index 99.32 -.27%
  • European Financial Sector CDS Index 117.58 +1.38%
  • Western Europe Sovereign Debt CDS Index 223.33 -.59%
  • Emerging Market CDS Index 231.30 +.50%
  • 2-Year Swap Spread 27.0 +1 bp
  • TED Spread 23.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 258.0 +2 bps
  • China Import Iron Ore Spot $173.40/Metric Tonne -.12%
  • Citi US Economic Surprise Index -99.50 +2.4 points
  • 10-Year TIPS Spread 2.17% -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +75 open in Japan
  • DAX Futures: Indicating +36 open in Germany
  • Slightly Higher: On gains in my Retail longs, Biotech longs, Medical longs and emerging market/commodity shorts
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, covered some of my (EEM) short and added to my (SODA) long
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trade slightly higher despite rising eurozone debt angst, financial sector weakness, higher energy/food prices and ongoing weakness in some market leaders. On the positive side, Airline, Road & Rail, Retail, REIT, HMO, Medical Equipment, Software and Defense shares are especially strong, rising more than +.75%. Small-Caps and Cyclicals are outperforming. (IYR) is outperforming. The Transports have traded well throughout the day again. Lumber is rising +1.51%. On the negative side, Bank, Oil Service, Coal and Alt Energy shares are under mild pressure, falling more than -.50%. (XLF) has lagged throughout the day. Copper is down -.66%, the UBS-Bloomberg Ag Spot Index is +.56% and oil is rising +.3%. The 10-year yield is flat at 2.95% despite the rise in stocks. The US price for a gallon of gas is -.03/gallon today to $3.65/gallon. It is up .51/gallon in less than 4 months. The Greece sovereign cds is rising +4.86% to 2,019.01 bps, the China sovereign cds is jumping +6.31% to 82.04 bps, the Japan sovereign cds is surging +7.46% to 93.0 bps, the Russia sovereign cds is gaining +4.08% to 149.17 bps, the Egypt sovereign cds is gaining +4.85% to 316.75 bps and the Saudi sovereign cds is gaining +4.4% to 98.65 bps. The Shanghai Composite finished near session lows last night, falling another -.82% and is now down -6.7% ytd. India's Sensex also continues to trade very poorly, dropping another -2.04%, and is now down -14.6% ytd. Some key US stocks, continue to trade very poorly notwithstanding the recent bounce in the major averages. With US stocks still technically oversold near their 200-day moving averages, gauges of investor sentiment mostly depressed and a likely short-term positive catalyst coming from Greece, bulls could gain upside traction over the coming days. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and technical buying.

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