Tuesday, June 21, 2011

Stocks Surging into Final Hour on Less Eurozone Debt Angst, Euro Bounce, Technical Buying, Short-Covering

Broad Market Tone:

  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Every Sector Rising
  • Volume: About Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 18.35 -8.20%
  • ISE Sentiment Index 123.0 +1.65%
  • Total Put/Call .90 +2.27%
  • NYSE Arms .62 -30.13%
Credit Investor Angst:
  • North American Investment Grade CDS Index 96.03 -3.31%
  • European Financial Sector CDS Index 107.96 -6.34%
  • Western Europe Sovereign Debt CDS Index 220.0 -1.49%
  • Emerging Market CDS Index 224.99 -2.72%
  • 2-Year Swap Spread 26.0 -1 bp
  • TED Spread 22.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 260.0 +2 bps
  • China Import Iron Ore Spot $171.90/Metric Tonne -.87%
  • Citi US Economic Surprise Index -98.70 +.8 point
  • 10-Year TIPS Spread 2.20% +3 bps
Overseas Futures:
  • Nikkei Futures: Indicating +100 open in Japan
  • DAX Futures: Indicating +40 open in Germany
  • Higher: On gains in my Retail, Biotech, Medical and Tech longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, covered some of my (EEM) short and added to my (AAPL) long
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 bounces strongly off its 200-day moving average to session highs, despite eurozone debt angst, global growth concerns, emerging market inflation fears and higher food prices. On the positive side, Road & Rail, Education, Gaming, Construction, HMO, Hospital, Wireless, Networking, Disk Drive, Computer, Software, Internet, Paper, Steel, Ag, Oil Service, Energy and Coal shares are especially strong, rising more than +2.0%. Small-Caps and Cyclicals are outperforming again. The Transports are outperforming again as they move back to their 50-day moving average. Copper is rising +.42%. Oil is down -.15% despite the large equity rally and bounce in the euro, which is a large positive. The Spain sovereign cds is plunging -9.65% to 263.61 bps, the Italy sovereign cds is dropping -3.42% to 170.0 bps, the Portugal sovereign cds is dropping -4.29% to 750.0 bps, the Greece sovereign cds is falling -5.81% to 1,907.67 bps, the Ireland sovereign cds is falling -5.58% to 731.06 bps, the Russia sovereign cds is falling -5.09% to 141.53 bps and the Belgium sovereign cds is declining -5.83% to 145.67 bps. Weekly retail sales rose +3.9% versus a +3.7% gain the prior week. On the negative side, Tobacco, Drug and Utility shares are underperforming, rising less than +.50%. The UBS-Bloomberg Ag Spot Index is +1.01%. The US price for a gallon of gas is -.01/gallon today to $3.64/gallon. It is up .50/gallon in less than 4 months. India's Sensex continues to trade very poorly, only bouncing +.3% last night, and is now down -14.4% ytd. Today's rally is fairly high in quality with the exception of only average volume. As I speculated yesterday, the bulls have gained upside traction with US stocks still technically oversold and holding their 200-day moving averages, gauges of investor sentiment mostly depressed and a likely short-term positive catalyst coming from Greece. US stocks should build on today's sharp gains over the coming weeks. One of my longs, (AAPL), is finally surging today after a recent string of losses. The stock is absurdly cheap now. I continue to see substantial upside in the shares over the intermediate to longer-term. 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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