Tuesday, December 06, 2011

Stocks Rising Slightly into Final Hour on Eurozone Rumors, Short-Covering, Seasonality, Investor Performance Angst

Broad Market Tone:

  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Most Rising
  • Volume: Light
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 27.50 -1.22%
  • ISE Sentiment Index 171.0 +125.0%
  • Total Put/Call .76 -21.65%
  • NYSE Arms .70 +19.24%
Credit Investor Angst:
  • North American Investment Grade CDS Index 123.85 +2.62%
  • European Financial Sector CDS Index 256.66 +2.99%
  • Western Europe Sovereign Debt CDS Index 330.17 +1.54%
  • Emerging Market CDS Index 288.25 -.10%
  • 2-Year Swap Spread 43.0 unch.
  • TED Spread 54.0 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -117.0 +5 bps
Economic Gauges:
  • 3-Month T-Bill Yield .00% unch.
  • Yield Curve 183.0 +6 bps
  • China Import Iron Ore Spot $139.60/Metric Tonne -.14%
  • Citi US Economic Surprise Index 75.10 -2.1 points
  • 10-Year TIPS Spread 2.09 +2 bps
Overseas Futures:
  • Nikkei Futures: Indicating +55 open in Japan
  • DAX Futures: Indicating +39 open in Germany
  • Slightly Higher: On gains in my retail, biotech and medical sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some them
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 moves to session highs back to its 200-day moving average despite recent gains, rising Eurozone debt angst, rising global growth fears and high energy prices. On the positive side, Oil Tanker, Steel, Drug and Airline shares are especially strong, rising more than +1.25%. The 10-year Yield is rising +4 bps to 2.08%. Johnson Redbook Weekly Retail Sales rose +3.2% this week versus a +3.9% gain the prior week. This is still an decent rate, but a noticeable deceleration from Oct. On the negative side, Road & Rail, Restaurant, Bank, Networking, Internet and Oil Service shares are under mild pressure, falling more than -.5%. (XLK) has underperformed throughout the day. Copper is falling -.33%, lumber is down -1.2%, the UBS-Bloomberg Ag Spot Index is +.34% and gold is gaining +.6%. 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 very near the highest since March 2009. The 3M EUR/USD Cross-Currency Basis Swap is still near the worst since November 2008. The Libor-OIS spread is the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. China Iron Ore Spot has plunged -27.2% since February 16th and -22.9% since Sept. 7th. The Shanghai Composite made a new post-RRR cut low overnight, falling -.31%, and is right near its October 24th low. (EEM) is falling -1.0% today despite the sharp reversal higher in US stocks this afternoon. Volume remains poor and leadership is of fairly low-quality again. Breadth is also lacking. The S&P 500 is back to its 200-day moving average and near the high-end of its recent range. Overall, considering how many times Europe has disappointed the market with its debt crisis solution deadlines over the last couple of years, investors seem complacent ahead of the Dec. 9 summit. Rumors today out of the Eurozone suggest their kick-the-can debt crisis "solution" will include the creation of even more debt. As I have said before, this will likely boost markets short-term, but this part of the "solution" will prove disastrous longer-term. I expect US stocks to trade mixed-to-higher into the close from current levels on a bounce in the Euro, short-covering, technical buying, investor performance angst and seasonality.

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