Monday, June 13, 2011

Stocks Slightly Higher into Final Hour on Short-Covering, Bargain-Hunting, Lower Food/Energy Prices, Euro Currency Bounce

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Mixed
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 19.26 +1.86%
  • ISE Sentiment Index 106.0 -10.17%
  • Total Put/Call 1.07 -7.76%
  • NYSE Arms .86 -29.18%
Credit Investor Angst:
  • North American Investment Grade CDS Index 98.75 -.05%
  • European Financial Sector CDS Index 120.67 +3.31%
  • Western Europe Sovereign Debt CDS Index 211.58 +2.26%
  • Emerging Market CDS Index 223.31 +.90%
  • 2-Year Swap Spread 20.0 +1 bp
  • TED Spread 21.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .04% +1 bp
  • Yield Curve 259.0 +2 bps
  • China Import Iron Ore Spot $172.30/Metric Tonne -.46%
  • Citi US Economic Surprise Index -96.60 +1.2 points
  • 10-Year TIPS Spread 2.18% +1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -5 open in Japan
  • DAX Futures: Indicating -1 open in Germany
  • Higher: On gains in my Retail, Medical and Tech sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and then added them back
  • Market Exposure: 50 % Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite global growth worries, emerging markets inflation fears, rising Mideast unrest, Japan nuclear concerns and rising eurozone debt angst. On the positive side, Software, Telecom, Bank, Drug and Airline shares are especially strong, rising more than +.75%. (XLF) has traded well throughout the day. Oil is falling -1.9%, the UBS-Bloomberg Ag Spot Index is declining -.46% and gold is down -1.06%. On the negative side, Coal, Energy, Oil Service, Ag, Steels, Paper, Internet, Networking shares are especially weak, falling more than -.75%. Cyclicals and Small-caps are underperforming. Lumber is dropping another -1.3%. The US price for a gallon of gas is down -.02/gallon today to $3.70/gallon. It is up .56/gallon in less than 4 months. The Spain sovereign cds is gaining +3.8% to 283.39 bps, the Italy sovereign cds is climbing +3.83% to 177.50 bps, the Portugal sovereign cds is gaining +3.73% to 766.33 bps, the Greece sovereign cds is surging +1.84% to 1,589.77 bps, the Ireland sovereign cds is up +4.36% to 738.84 bps, the Belgium sovereign cds is rising +3.82% to 154.66 bps and the UK sovereign cds is rising +1.93% to 65.14 bps. The Spain sovereign cds is very close to a technical breakout. Moreover, the Portugal sovereign, Ireland sovereign and Greece sovereign cds are hitting new record highs again today. The Citi Latin America Economic Surprise Index is dropping another -11.6 points today to -52.10, which is the lowest level since May 15th, 2009. Brazil's Bovespa is falling another -1.0% today and is down -10.4% ytd as it tests its recent lows. Canadian stocks continue to trade very poorly, as they fall further below their 200-day moving averages, and are now down -3.8% ytd. Most of the fundamentals that have been weighing on equities are not improving yet. However, the technical weakness in energy prices could be a big positive for the broad market longer-term if it continues or accelerates to the downside, which is likely. The debt situation in Europe continues to deteriorate and unrest in China seems to be spreading. Today's mid-day stock bounce looks again like mostly short-covering as breadth remains poor and volume lackluster. The VIX remains subdued, which is also a concern. 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, technical selling and more shorting.

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