Wednesday, October 19, 2011

Stocks Falling into Final Hour on Rising Global Growth Concerns, Profit-Taking, Technical Selling, More Shorting

Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Slightly Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 35.18 +11.47%
  • ISE Sentiment Index 82.0 +10.81%
  • Total Put/Call 1.14 +14.0%
  • NYSE Arms 1.94 +377.75%
Credit Investor Angst:
  • North American Investment Grade CDS Index 131.55 -3.22%
  • European Financial Sector CDS Index 224.54 -3.39%
  • Western Europe Sovereign Debt CDS Index 334.0 -2.62%
  • Emerging Market CDS Index 306.67 +3.05%
  • 2-Year Swap Spread 37.0 unch.
  • TED Spread 39.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 189.0 -2 bps
  • China Import Iron Ore Spot $153.40/Metric Tonne -1.73%
  • Citi US Economic Surprise Index 8.50 -2.1 points
  • 10-Year TIPS Spread 1.95 -3 bps
Overseas Futures:
  • Nikkei Futures: Indicating -25 open in Japan
  • DAX Futures: Indicating -63 open in Germany
  • Slightly Lower: On losses in my Tech and Retail sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 rolls over again at the upper end of its 2-month range, despite falling Eurozone debt angst, some positive US economic data and falling food/energy prices. On the positive side, Utility, Medical and Education shares are higher on the day. Gold is down -1.22%, oil is falling -2.52% and the UBS-Bloomberg Ag Spot Index is down -1.4%. The Germany sovereign cds is down -5.65% to 87.5 bps, the US sovereign cds is down -7.5% to 43.92 bps and the UK sovereign cds is down -4.67% to 84.0 bps. On the negative side, Alt Energy, Oil Tankers, Oil Service, Steel, Internet, Computer, Disk Drive, Networking, Bank and I-Banking shares are especially weak, falling more than -3.0% on the day. Cyclical and small-cap shares are substantially underperforming. Lumber is down -3.2% and Copper is plunging -4.3%. Rice is still close to its multi-year high, rising +30.2% in about 14 weeks. The Libor-OIS Spread is still at 33.0 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 gains in most of the rest of Asia, the Shanghai Composite fell -.25% overnight and is still near its recent lows, -15.3% ytd. Ukraine shares made another new multi-year low today and are down -48.5% ytd. China Iron Ore Spot continues to pick up downside steam, falling -23.03% since February 16th and -18.4% since Sept. 7th. Stocks should have performed better today given the news, which is always a red flag. It appears as though investors are starting to focus more on the ongoing global economic slowdown and a little less on the short-term Eurozone debt band-aid, which is also a negative. One of my longs, (ISRG), surged to a new record high today on decent volume. The shares are extended short-term, but I still still see substantial outperformance over the longer-term. I expect US stocks to trade mixed-to-lower into the close from current levels on rising global debt angst, rising global growth fears, more shorting, profit-taking and technical selling.

1 comment:

Tim- said...

ISRG make a great product, doctors that use is have nothing but great things to say about it. but how in an environment where anything/everything in the medical industry is being cut because of budgeting and cost savings could you feel good being long this name? i realize the addressable market is big on paper... but in reality, there is no way they ever capture all of those sales