Thursday, October 20, 2011

Stocks Rising Into Final Hour on Euro Bounce, Short-Covering, Less Financial Sector Pessimism, Technical Buying


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Mixed
  • Volume: Slightly Above Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 34.79 +1.02%
  • ISE Sentiment Index 99.0 +19.28%
  • Total Put/Call 1.49 +34.23%
  • NYSE Arms .78 -57.96%
Credit Investor Angst:
  • North American Investment Grade CDS Index 135.64 +3.11%
  • European Financial Sector CDS Index 238.78 +5.74%
  • Western Europe Sovereign Debt CDS Index 340.67 +1.18%
  • Emerging Market CDS Index 318.08 +3.74%
  • 2-Year Swap Spread 37.0 unch.
  • TED Spread 41.0 +2.0 bps
Economic Gauges:
  • 3-Month T-Bill Yield .01% -1 bp
  • Yield Curve 191.0 +2 bps
  • China Import Iron Ore Spot $153.40/Metric Tonne -1.29%
  • Citi US Economic Surprise Index 14.40 +5.9 points
  • 10-Year TIPS Spread 1.97 +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +29 open in Japan
  • DAX Futures: Indicating +29 open in Germany
Portfolio:
  • Higher: On gains in my Biotech/Retail sector longs, Emerging Markets shorts and Index hedges
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added some back
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 reverses higher, despite rising global debt angst, tech sector weakness and global growth fears. On the positive side, Bank, I-Banking, Insurance and Road & Rail shares are especially strong, rising more than +1.5%. (XLF) has traded well throughout the day. Gold is down -1.31%. The US sovereign cds is down -2.2% to 42.85 bps. On the negative side, Semi, Networking, Medical, Gaming and Education shares are under pressure, falling more than -.75%. Small-cap shares are underperforming. Lumber is down -2.9% and Copper is plunging another -5.4%. Rice is still close to its multi-year high, rising +29.5% in about 14 weeks. The Libor-OIS Spread is rising 1.0 bp to 34.0 bps, which is the highest since July 2010. As well, the TED spread is now at the highest since June 2010. The 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. The Shanghai Composite fell another -1.94%, hitting the lowest since March 2009 and is now down -17.0% ytd. Major European stock indices fell 2-3%. China Iron Ore Spot continues to pick up downside steam, falling -24.0% since February 16th and -19.4% since Sept. 7th. AAII % Bulls fell to 35.99 this week, while the % Bears fell to 34.6, which remains a large negative given the macro backdrop. Weakness in Asian-related equities and copper signal intensifying global growth worries, yet many of the Transports have had huge moves of the lows, which is noteworthy. I continue to believe any leveraging of the EFSF as a short-term band-aid to the Eurozone debt crisis would have dramatically negative long-term consequences for the region, notwithstanding trader optimism towards this part of the "solution." 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 tech sector pessimism.

2 comments:

Anonymous said...

http://www.cnbc.com/id/44976466

Anonymous said...

Why do u see a levered EFSF solution as negative for the region? What other solution exists?