Thursday, June 16, 2011

Stocks Slightly Higher Into Final Hour on Bargain-Hunting, Short-Covering, Financial Sector Strength

Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 24.51 +15.15%
  • ISE Sentiment Index 78.0 +13.04%
  • Total Put/Call 1.18 -12.59%
  • NYSE Arms 1.20 -46.59%
Credit Investor Angst:
  • North American Investment Grade CDS Index 99.59 +1.87%
  • European Financial Sector CDS Index 126.83 +1.57%
  • Western Europe Sovereign Debt CDS Index 228.33 +2.81%
  • Emerging Market CDS Index 230.99 +2.46%
  • 2-Year Swap Spread 27.0 +2 bps
  • TED Spread 21.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .04% -1 bp
  • Yield Curve 253.0 -6 bps
  • China Import Iron Ore Spot $174.20/Metric Tonne +.69%
  • Citi US Economic Surprise Index -101.10 -3.4 points
  • 10-Year TIPS Spread 2.18% -4 bps
Overseas Futures:
  • Nikkei Futures: Indicating -31 open in Japan
  • DAX Futures: Indicating -43 open in Germany
  • Slightly Higher: On gains in my Retail longs, Index hedges and emerging market shorts
  • 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 bearish as the S&P 500 hovers at its 200-day moving average on global growth worries, more poor US economic data, emerging markets inflation fears, Mideast unrest and rising eurozone debt angst. On the positive side, Utility, Defense, Bank, Insurance, Retail, Restaurant, Food and Tobacco shares are higher on the day. The UBS-Bloomberg Ag Spot Index is declining -.83%, lumber is rising +1.1% and oil is down another -.65%. On the negative side, Coal, Alt Energy, Ag, Steel and Semi shares are under significant pressure, falling more than -2.0%. Cyclicals are underperforming again. Tech shares continue to trade poorly. Copper is down -.28%. Shanghai copper inventories have risen +28% in 5 days. The 10-year yield is falling too much again, declining -5 bps to 2.92%. The US price for a gallon of gas is unch. today at $3.69/gallon. It is up .55/gallon in less than 4 months. The Greece sovereign cds is soaring +17.0% to 2,065.86 bps, the Spain sovereign cds is rising +3.73% to 299.33 bps, the Italy sovereign cds is rising +1.6% to 181.33 bps, the Portugal sovereign cds is rising +2.21% to 815.0 bps, the Brazil sovereign cds is jumping +4.32% to 115.83 bps, the Ireland sovereign cds is gaining +4.43% to 801.67 bps and the Belgium sovereign cds is gaining +4.13% to 159.67 bps. The Greece, Ireland and Portugal sovereign cds are hitting new record highs again today. The jump in the 2-year swap spread over the last 3 days is also a big concern. 3-Month Shibor is also surging +31 bps to 5.59%. The Shanghai Composite finished at session lows last night, falling another -1.5% and is now down -5.1% ytd. India's Sensex also continues to trade poorly, dropping another -.8%, and is now down -12.3% ytd. Brazil's Bovespa fell another -1.3% and is now down -12.3% ytd. The AAII % Bulls rose to 29.0 this week, while the % Bears fell to 42.75, which is a negative considering recent events. Many key US stocks are unable to bounce at their 200-day moving averages, as well. Until gauges of credit angst start to reverse lower, it is hard to see how the major averages can mount a sustainable advance. 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, rising Mideast unrest and more short-selling.

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