Friday, January 06, 2012

Stocks Lower into Final Hour on Global Growth Fears, Rising Eurozone Debt Angst, High Energy Prices, Profit-Taking

Broad Market Tone:

  • Advance/Decline Line: About Even
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 20.63 -3.95%
  • ISE Sentiment Index 102.0 -26.09%
  • Total Put/Call .94 +16.05%
  • NYSE Arms 1.36 +19.66%
Credit Investor Angst:
  • North American Investment Grade CDS Index 119.51 -1.46%
  • European Financial Sector CDS Index 276.33 +2.33%
  • Western Europe Sovereign Debt CDS Index 386.06 +1.17%
  • Emerging Market CDS Index 312.43 +.22%
  • 2-Year Swap Spread 43.0 -2 bps
  • TED Spread 57.0 unch
  • 3-Month EUR/USD Cross-Currency Basis Swap -98.0 +11 bps
Economic Gauges:
  • 3-Month T-Bill Yield .01% unch.
  • Yield Curve 170.0 -4 bps
  • China Import Iron Ore Spot $140.0/Metric Tonne +.07%
  • Citi US Economic Surprise Index 91.90 +18.5 points
  • 10-Year TIPS Spread 2.09 -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating -30 open in Japan
  • DAX Futures: Indicating -3 open in Germany
  • Slightly Higher: On gains in my Tech/Medical/Biotech sector longs and emerging markets shorts
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 trades slightly lower on rising Eurozone debt angst, financial sector pessimism, global growth fears, technical resistance and high energy prices. On the positive side, Computer Hardware, Biotech, Hospital, HMO and Education shares are especially strong, rising more than +1.0%. Cyclical shares are relatively strong again. Copper is rising +.31%, Gold is down -.37% and the UBS-Bloomberg Ag Spot Index is falling -.20%. The Citi US Economic Surprise Index is now at the highest level since March of last year. The Hungary sovereign cds is falling -6.13% to 693.33 bps. On the negative side, Coal, Oil Tanker, Computer Service, Telecom and Gaming shares are under pressure, falling more than -1.0%. (XLF) has underperformed throughout the day. Lumber is falling -1.4%. Major Asian indices fell around -1.0% overnight. However, the Shanghai Composite, which has been the weakest, reversed opening losses and finished +.7%. Major European indices fell around -.75% on the day. The Bloomberg Europe Bank/Financial Services Index fell -.82%(-2.69% ytd). (XLF) has diverged notably from this index, rising +3.1% ytd. Commercial Paper Outstanding SA fell -3.1% this week and is testing its decade low hit in early Jan. of last year, which is noteworthy considering the recent upturn in US economic data. Moreover, the 10Y Yield is falling -4 bps to 1.96%, despite today’s better jobs report, and remains stuck near Sept./Oct. levels. The France sovereign cds is jumping +3.22% to 242.67 bps, the Italy sovereign cds is rising +1.23% to 534.50 bps, the Spain sovereign cds is rising +.23% to 450.50 bps(up +14.2% in 5 days) and the Portugal sovereign cds is rising +1.12% to 1,117.33 bps. The Italian/German 10Y Spread is rising +.91% to 527.48 bps(near highest since Dec. 1995). The Western Europe Sovereign CDS Index is very near its Dec. 15 all-time high. The TED spread continues to trend higher and is very near the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is very near the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is rising +7.24% to -101.14 bps, which is back to early-Nov. levels. The Libor-OIS spread is very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. Overall, European credit gauges are still performing very poorly given that the European debt crisis “can-kicking” solution is supposedly at hand, which remains a large red flag. China Iron Ore Spot has plunged -22.6% since Sept. 7th of last year. The divergence between (XLF) and the Bloomberg European Bank/Financial Services Index is becoming unsustainable, in my opinion. Credit gauges in Europe must calm very soon or US equity weakness is likely, notwithstanding recently improving US economic data. For a sustainable equity advance from current levels, I would still expect to see meaningful European credit gauge improvement, subsiding hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, financial sector pessimism, global growth fears, high energy prices, technical resistance, profit-taking and more shorting.

1 comment:

theyenguy said...

The spigots of investment liquidity, carry trade lending and central bank easing have been turned off; and former flows are now running toxic. Insolvent sovereigns and insolvent banks cannot support investment expansion or economic growth. Fiat currencies are dying. The seigniorage of fiat money is being replaced by the seigniorage of diktat, as evidenced by the rise in power of the EU ECB IMF Troika, as well as by the appointment of technocratic government in Greece and Italy. Fiat money is being replace by the currency of diktat. The global investment, economic and political tectonic plates have shifted, and an authoritarian tsunami is on the way; political capital is replacing investment capital.

US Federal Reserve policies, specifically the credit liquidity policies of ZIRP, QE1, QE2, and Dollar FX Liquidity Swaps, have finally caused currency devaluation worldwide. Bernankeism has upset the normal dynamics of sovereign debt. His central bank credit liquidity policies have closed the 40 year chapter of human history known as Neoliberalism. The Milton Friedman, Free To Choose, Banker Regime, where democracy and inflationism ruled, is finished, done and over. Currencies are no longer floating; they are sinking. The age of destructionism has commenced, and with it, the currency of diktat is coming into use.

The Beast Regime of Neoauthoritarianism is rising out of the death rattle of fiat money. This behemoth of statism and regional global governance is a monster, having seven heads, that is rising to occupy in all of mankind’s institutions, and ten horns, that is going to rule in all of the world’s ten regions. Regional global governance is rising out of the failure of fiat money; it will come to govern mankind through a soon coming credit bust and global financial collapse.