Thursday, October 27, 2011

Stocks Soaring into Final Hour on Less Global Debt Angst, Diminishing Global Growth Fears, Less Financial Sector Pessimism, Short-Covering

Broad Market Tone:

  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Every Sector Rising
  • Volume: Above Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 25.46 -14.74%
  • ISE Sentiment Index 110.0 +30.95%
  • Total Put/Call .93 -7.0%
  • NYSE Arms .48 -45.22%
Credit Investor Angst:
  • North American Investment Grade CDS Index 116.18 -9.65%
  • European Financial Sector CDS Index 188.63 -16.41%
  • Western Europe Sovereign Debt CDS Index 309.33 -9.61%
  • Emerging Market CDS Index 255.15 -14.06%
  • 2-Year Swap Spread 33.0 -4 bps
  • TED Spread 42.0 +1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .00% -1 bp
  • Yield Curve 208.0 +16 bps
  • China Import Iron Ore Spot $120.20/Metric Tonne -5.65%
  • Citi US Economic Surprise Index 15.20 +.3 point
  • 10-Year TIPS Spread 2.18 +9 bps
Overseas Futures:
  • Nikkei Futures: Indicating +160 open in Japan
  • DAX Futures: Indicating +90 open in Germany
  • Higher: On gains in my Biotech, Tech, Retail and Medical sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short and then added some back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is very bullish, as the S&P 500 trades above its 200-day moving-average with volume on less financial sector pessimism, falling global debt angst, diminishing global growth worries, short-covering and technical buying. On the positive side, Coal, Alt Energy, Oil Service, Steel, Networking, Bank, I-Banking, Homebuilding, Gaming and Road & Rail shares are especially strong, rising more than 6.0%. Small-cap and cyclical shares are substantially outperforming. (XLF) has traded very well throughout the day. Lumber is up +1.28% and copper is soaring +6.56%. The 10-year yield is rising +19 bps to 2.39%. The Germany sovereign cds is plunging -17.05% to 71.33 bps, the France sovereign cds is falling -15.85% to 158.33 bps, the Spain sovereign cds is dropping -15.3% to 322.17 bps, the Portugal sovereign cds is falling -11.6% to 986.67 bps, the Ireland sovereign cds is falling -10.4% to 700.33 bps, the Russia sovereign cds is plunging -18.7% to 185.67 bps and the UK sovereign cds is dropping -13.98% to 72.0 bps. Moreover, the European Investment Grade CDS Index is falling -10.7% to 147.44 bps. On the negative side, Utility, Telecom, Wireless, Biotech, Drug and Retail shares are underperforming. Rice is still close to its multi-year high, rising +33.5% in about 15 weeks. The TED spread 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 continues to pick up downside steam, plunging -37.4% since February 16th and -33.6% since Sept. 7th. The AAII % Bulls jumped to 43.0 this week, while the % Bears plunged to 25.0, which is another negative. It appears as though Europe has successfully kicked the can down the road one last time. However, while European cds are plunging today, I suspect some of this is related to diminishing perceptions of their usefulness rather than improving perceptions of credit quality. Some gauges of European debt angst are actually higher today. One of the large problems over the last 15 years is the market rewarding politicians for short-term "fixes" to major problems that have devastating longer-term consequences. In my opinion, the actions that European officials have taken over the last 48 hours have dramatically raised the odds for a global recession next year. Volume and breadth were healthy today. In the short-term, stocks should be able to build on recent gains over the coming weeks after a brief period of consolidation. I expect US stocks to trade modestly higher into the close from current levels on less financial sector pessimism, diminishing global growth worries, short-covering, less global debt angst and technical buying.

1 comment:

Anonymous said...

AAPL is up 0.97 %
while the Russell is up 5.26%
and QQQ is up 3.85 %??? Leading stocks?