Wednesday, September 28, 2011

Stocks Dropping into Final Hour on Rising Eurozone Debt Angst, Global Growth Worries, Rising Financial Sector Pessimism, Technical Selling


Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 39.53 +4.96%
  • ISE Sentiment Index 53.0 -20.90%
  • Total Put/Call 1.37 +22.32%
  • NYSE Arms .46 +46.01%
Credit Investor Angst:
  • North American Investment Grade CDS Index 137.78 +3.43%
  • European Financial Sector CDS Index 246.17 +1.98%
  • Western Europe Sovereign Debt CDS Index 340.83 +.45%
  • Emerging Market CDS Index 351.60 +2.67%
  • 2-Year Swap Spread 30.0 +1 bp
  • TED Spread 36.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 175.0 unch.
  • China Import Iron Ore Spot $172.60/Metric Tonne unch.
  • Citi US Economic Surprise Index -42.0 -.2 point
  • 10-Year TIPS Spread 1.87 -3 basis points
Overseas Futures:
  • Nikkei Futures: Indicating -51 open in Japan
  • DAX Futures: Indicating -61 open in Germany
Portfolio:
  • Slightly Higher: On gains in my Technology/Retail sector longs, Emerging Markets shorts and Index hedges
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered them
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 rolls over at its downward-sloping 50-day moving average again on rising Eurozone debt angst, rising financial sector pessimism, global growth worries, profit-taking, technical selling and more shorting. On the positive side, Computer Service, Telecom and Retail shares are rising on the day. Oil is falling -3.2%, gold is down -2.8% and the UBS-Bloomberg Ag Spot Index is falling -2.25%. The 10-year yield is rising +4 bps to 2.0%. The Ireland sovereign cds is falling -3.98% to 715.33 bps and the Israel sovereign cds is falling -3.47% to 193.17 bps. On the negative side, Coal, Alt Energy, Oil Tanker, Oil Service, Steel, Paper, Networking, HMO, Construction and Road & Rail shares are under significant pressure, falling more than 3.0%. Cyclicals and small-caps are substantially underperforming. (XLF) has also been relatively weak throughout the day. Lumber is falling -1.4% and copper is plunging -7.6%. Rice is still close to its multi-year high, rising +28.0% in about 12 weeks. The average US price for a gallon of gas is -.01/gallon today to $3.47/gallon. It is up .33/gallon in about 7 months. The Germany sovereign cds is gaining +4.0% to 104.0 bps, the France sovereign cds is rising +4.8% to 178.33 bps, the Italy sovereign cds is rising +3.06% to 459.50 bps, the China sovereign cds is rising +4.85% to 164.86 bps and the UK sovereign cds is rising 4.33% to 90.17 bps. The Western Europe Sovereign CDS Index and the European Financial Sector CDS Index are still near their records. The FRA/OIS spread is rising another +2.99 bps to 45.59 bps. The China sovereign cds is still right near the highest level since April 2009. The China Development Bank Corp cds is rising another +.5% to 333.32 bps, which is the highest since March 2009. As well, the China Blended Corporate Spread Index, which has been moving higher in a parabolic fashion, is jumping back near its recent multi-year high, rising +23.0 bps to 818.0 bps. The Shanghai Composite, which continues to trade very poorly, fell another -.95% overnight, leaving it down -14.8% ytd at the lowest level since July 2010. Various global credit angst gauges continue to trend higher, which remains a large negative. I cautioned a few months ago that Asia was becoming a bigger problem than most investors perceived and today fear's over hard-landings in the region are intensifying. As well, it appears as though Germany is realizing the massive long-term damage that the recent suggested leveraged debt "solution" would do to their country, which once again leaves the problem in limbo. I expect US stocks to trade modestly lower into the close from current levels on profit-taking, rising Eurozone debt fears, rising financial sector pessimism, more shorting and global growth concerns.

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