Monday, October 17, 2011

Stocks Falling Into Final Hour on Rising Global Debt Angst, Global Growth Fears, Technical Selling and Profit-Taking

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 32.58 +15.37%
  • ISE Sentiment Index 81.0 -41.73%
  • Total Put/Call 1.09 +10.10%
  • NYSE Arms 1.75 +159.64%
Credit Investor Angst:
  • North American Investment Grade CDS Index 133.17 +2.64%
  • European Financial Sector CDS Index 226.45 +1.35%
  • Western Europe Sovereign Debt CDS Index 340.33 -1.4%
  • Emerging Market CDS Index 309.42 +4.16%
  • 2-Year Swap Spread 39.0 unch.
  • TED Spread 39.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .02% +1 bp
  • Yield Curve 188.0 -9 bps
  • China Import Iron Ore Spot $153.40/Metric Tonne -2.60%
  • Citi US Economic Surprise Index 2.0 -.2 point
  • 10-Year TIPS Spread 1.95 -3 bps
Overseas Futures:
  • Nikkei Futures: Indicating -90 open in Japan
  • DAX Futures: Indicating -40 open in Germany
  • Slightly Lower: On losses in my Tech, Biotech and Medical sector longs
  • Disclosed Trades: Added to my (QQQ)/(IWM) hedges and to my (EEM) short, then covered some of them
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 rolls over at the upper end of its 2-month range on rising global debt angst, rising global growth worries, profit-taking, more shorting, rising financial sector pessimism and technical selling. On the positive side, Utility shares are higher on the day. Major Asian equity indices finished 1-2% higher overnight. Oil is falling -1.15%, lumber is gaining +2.08%, gold is down -.5% and the UBS-Bloomberg Ag Spot Index is falling -.64%. The Spain sovereign cds is falling -6.53% to 355.17 bps and the Israel sovereign cds is falling -10.1% to 150.12 bps. On the negative side, Coal, Oil Tankers, Computer, Disk Drive, Bank, Alt Energy, Oil Service, Steel, Networking, Construction, Homebuilding and Education shares are especially weak, falling more than 3.0%. Cyclicals and small-caps are substantially underperforming. (XLF) has traded poorly throughout the day. Copper is falling -1.4%. Rice is still close to its multi-year high, rising +30.5% in about 14 weeks. The Brazil sovereign cds is gaining +1.2% to 154.3 bps, the France sovereign cds is rising +1.0% to 184.67 bps and the US Muni CDS Index is climbing +1.0% to 208.0 bps. The Libor-OIS Spread is still at 32.0 bps, which is the highest since July 2010. As well, the TED, 2-Year Euro Swap and 2-Year swap spreads are still very close to their recent highs, which is also noteworthy considering the recent strong equity advance. The Western Europe Sovereign CDS Index, the European Financial Sector CDS Index and the Asia-Pacific Sovereign CDS Index are still near their records and trending higher despite their recent pullbacks. India's Sensex fell -.34%, despite gains in the rest of Asia overnight, and is now down -17.0 ytd. Major European equity indices fell 1-2% today. Brazil's Bovespa fell -2.1% today and is now down -22.3% ytd. China Iron Ore Spot continues to pick up downside steam, falling -20.1% since February 16th. The accumulation of bad news over the last few days finally caught up with equity investors. (IBM) reports after the close today. Given the stock is right near all-time highs, the tech sector's recent relative strength and their exposure to Europe, I will closely monitor the stock's reaction to the report as a tell for the broad market. I expect US stocks to trade mixed-to-lower into the close from current levels on rising global debt angst, rising financial sector pessimism, global growth fears, more shorting, profit-taking and technical selling.

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