Friday, November 25, 2011

Stocks Slightly Lower into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Rising Energy Prices,


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 30.69 +6.98%
  • ISE Sentiment Index 92.0 -20.69%
  • Total Put/Call .96 +7.87%
  • NYSE Arms 3.63 +366.57%
Credit Investor Angst:
  • North American Investment Grade CDS Index 124.77 +2.07%
  • European Financial Sector CDS Index 280.17 +9.90%
  • Western Europe Sovereign Debt CDS Index 359.83 +6.56%
  • Emerging Market CDS Index 297.96 +5.98%
  • 2-Year Swap Spread 42.0 unch.
  • TED Spread 54.0 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -116.50 -7.5 bps
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 175.0 -3 bps
  • China Import Iron Ore Spot $139.40/Metric Tonne unch.
  • Citi US Economic Surprise Index 76.10 +1.2 points
  • 10-Year TIPS Spread 1.98 -7 bps
Overseas Futures:
  • Nikkei Futures: Indicating -114 open in Japan
  • DAX Futures: Indicating -31 open in Germany
Portfolio:
  • Slightly Lower: On losses in my tech and medical sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some them
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 turns down again near its 200-day moving average on rising Eurozone debt angst, rising global growth fears, profit-taking, financial sector pessimism and high energy prices. On the positive side, Restaurant, Drug, Food and Computer Service shares are holding up well, falling less than -1.0%. Lumber is rising +.43%, gold is falling -1.94% and oil is falling -2.4%. On the negative side, Coal, Alt Energy, Oil Tanker, Energy, Oil Service, Ag, Steel, Networking, Bank, I-Bank, Airline, Gaming, Homebuilding, Insurance, Hospital and Medical shares are under significant pressure, falling more than -3.0%. (XLF) has traded very poorly throughout the day. Cyclical and small-cap shares are also underperforming. Copper is falling -1.74% and the UBS-Bloomberg Ag Spot Index is rising +1.07%. The 10-Year Yield is falling to session lows, dropping -6 bps to 1.97%. The Germany sovereign cds is jumping +10.64% to 104.0 bps, the Spain sovereign cds is soaring +15.07% to 429.83 bps, the France sovereign cds is jumping +11.8% to 213.33 bps, the Italy sovereign cds is gaining +13.75% to 522.0 bps, the Russia sovereign cds is gaining +7.2% to 253.67 bps, the Belgium sovereign cds is gaining +12.5% to 323.17 bps and the UK sovereign cds is gaining +5.96% to 98.17 bps. Moreover, the European Investment Grade CDS Index is jumping +5.32% to 167.45 bps. The TED spread continues to trend higher and is at the highest since June 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is falling -6.64% to -116.50 bps. The Libor-OIS spread is very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. China Iron Ore Spot has plunged -27.4% since February 16th and -23.0% since Sept. 7th. The Citigroup Asia Economic Surprise Index is hovering right at its lowest since April 2009, falling -2.3 points today to -18.7. Last night, India said Industrial Output for October fell -7.0%, the first contraction since June 2009. India’s Sensex fell -2.3% and is down -19.6% ytd. Italian shares led Europe lower today, falling -4.3%, and are down -25.7% ytd. The AAII % Bulls rose to 38.57 this week, while the % Bears fell to 34.76%. As I have been saying for several days, investors seem complacent right now with respect to the high-stakes situation in Europe and the overall macro backdrop. So far, investors are disappointed with European officials’ latest debt crisis responses. This article from The Telegraph summarizes the real European debt crisis problem that is not being addressed. While I anticipate that more grand debt crisis can-kicking "solutions" will come out tomorrow, I suspect any ensuing equity rally will be less robust and sustainable than many expect due to excess bullish sentiment and the ongoing deterioration in the global economy. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, financial sector pessimism, rising global growth fears, profit-taking, more shorting, high energy prices and technical selling.

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