Monday, October 31, 2011

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


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 27.11 +10.52%
  • ISE Sentiment Index 65.0 -22.62%
  • Total Put/Call 1.24 +26.53%
  • NYSE Arms 2.14 +149.64%
Credit Investor Angst:
  • North American Investment Grade CDS Index 119.53 +4.36%
  • European Financial Sector CDS Index 209.98 +10.52%
  • Western Europe Sovereign Debt CDS Index 320.0 +2.14%
  • Emerging Market CDS Index 271.55 +3.78%
  • 2-Year Swap Spread 31.0 unch.
  • TED Spread 44.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield -.02% -2 bps
  • Yield Curve 192.0 -10 bps
  • China Import Iron Ore Spot $118.40/Metric Tonne +1.28%
  • Citi US Economic Surprise Index 18.0 +.2 point
  • 10-Year TIPS Spread 2.11 -4 bps
Overseas Futures:
  • Nikkei Futures: Indicating -93 open in Japan
  • DAX Futures: Indicating +214 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Biotech, Tech and Medical 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 trades back below its 200-day moving-average on more Eurozone debt angst, profit-taking, rising global growth worries, rising financial sector pessimism, technical selling and more shorting. On the positive side, Utility, HMO and Restaurant shares are higher on the day. Lumber is up +.71%, the UBS-Bloomberg Ag Spot Index is down -1.45% and Gold is falling -1.09%. On the negative side, Coal, Alt Energy, Oil Tanker, Oil Service, Ag, Steel, I-Bank, Homebuilding and Energy shares are under sigificant pressure, falling more than -3.0%. Cyclial shares are relatively weak. (XLF) has underperformed throughout the day. Oil is flat and copper is dropping 2.06%. The 10-year yield is falling -14 bps to 2.17%. Major European equity indices fell 3-4% today. The Germany sovereign cds is jumping +10.81% to 84.67 bps, the France sovereign cds is surging +10.3% to 176.0 bps, the Spain sovereign cds is climbing +7.97% to 339.17 bps, the Italy sovereign cds is rising +12.5% to 444.33 bps, the China sovereign cds is jumping +6.65% to 125.41 bps, the Belgium sovereign cds is gaining +8.74% to 269.17 bps and the UK sovereign cds is gaining +13.12% to 83.0 bps. Moreover, the European Investment Grade CDS Index is gaining +5.11% to 142.19 bps. Rice is still close to its multi-year high, rising +31.0% in about 4 months. The Italian/German 10-year yield spread surged another +22.21 bps today to 406.79 bps, which is a new all-time high. The TED spread continues to hit new cycle highs and is at the highest since June 2010. The Libor-OIS spread is still very near the widest since July 2010. The 2-Year Euro Swap spread is still very close to its recent highs, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -38.3% since February 16th and -34.6% since Sept. 7th. Given the amount of negative news over the weekend and recent sharp equity gains, US stocks are holding up pretty well so far. I continue to believe investor complacency regarding the intermediate-term situation in Europe, and thus the global economy, is still fairly high. The vast majority of investors appear to believe that hedgie performance-chasing, a "kick the can" European debt "solution" and seasonality will continue to boost stocks substantially into year-end. While I can see one more surge in stocks over the coming weeks, I suspect the rally may falter before year-end as large outperforming funds reposition for 1Q and more global economic uncertainty. I expect US stocks to trade mixed-to-lower into the close from current levels on rising financial sector pessimism, rising European debt angst, global growth fears, profit-taking, more shorting and technical selling.

1 comment:

theyenguy said...

The rise of the seigniorage of Neoauthoritarianism, that is the rise of the seigniorage of diktat, is seen in the write down of Greek debt simply by the edict of the EU leaders, and their call for leveraging of the EFSF monetary authority, as well as the call for bank recapitalizations.

Neoliberalism was marked by democratic government of sovereign nation state; but Neoauthoritarianism is marked by autocratic rule of sovereign leaders ruling in regional economic government as called for by the Club of Rome in 1974. Sovereignty resides in sovereign leaders as sovereign individuals are a mirage on the Neoauthoritarian desert of the real. Freedom and choice are epitaphs on tombstones oaf a bygone era.

Both money and credit began their death process today October 31, 2011 when the Yen fell from 130. Diktat has began its rise to become a currency and together with gold, will be the only form of sovereign wealth.