Wednesday, January 19, 2011

Stocks Dropping into Final Hour on China Inflation Fears, Profit-Taking, More Shorting, Technical Selling


Broad Market Tone:

  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 17.26 +8.76%
  • ISE Sentiment Index 93.0 -48.62%
  • Total Put/Call .79 +9.72%
  • NYSE Arms 2.21 +43.26%
Credit Investor Angst:
  • North American Investment Grade CDS Index 83.11 -.19%
  • European Financial Sector CDS Index 154.35 bps -.79%
  • Western Europe Sovereign Debt CDS Index 190.0 bps -.78%
  • Emerging Market CDS Index 202.86 +2.30%
  • 2-Year Swap Spread 23.0 unch.
  • TED Spread 15.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .15% +1 bp
  • Yield Curve 276.0 -1 bp
  • China Import Iron Ore Spot $182.70/Metric Tonne +.72%
  • Citi US Economic Surprise Index +47.20 -1.0 point
  • 10-Year TIPS Spread 2.36% -2 bps
Overseas Futures:
  • Nikkei Futures: Indicating -102 open in Japan
  • DAX Futures: Indicating -5 open in Germany
Portfolio:
  • Lower: On losses in my Ag, Tech and Biotech long positions
  • Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades to session lows, despite gains overseas, strong earnings reports from (AAPL)/(IBM) and diminishing eurozone sovereign debt angst. On the positive side, Computer Service, Telecom and Restaurant shares are relatively strong, rising on the day. Lumber is rising +2.02%. The 10-year yield is falling -3 bps to 3.33%. The Italy sovereign cds is falling -3.73% to 197.56 bps, the Spain sovereign cds is declining -5.45% to 282.74 bps, the Belgium sovereign cds is falling -5.75% to 193.37 bps and the US sovereign cds is falling -4.32% to 49.98 bps. The Western Europe Sovereign CDS Index is now -28 bps off its record high set on January 11. Moreover, the US Muni CDS Index is dropping -4.67% to 2134.29 bps. On the negative side, Airline, Education, Gaming, Homebuilding, HMO, Hospital, Biotech, I-Banking, Bank, Networking, Disk Drive, Semi, Internet, Steel, Ag, Oil Service, Alt Energy and Coal shares are under significant pressure, falling more than 2.0%. (XLF)/(IYR) have underperformed throughout the day. Small-cap and Cyclical shares have also underperformed today. Weekly retail sales rose +2.7% this week versus a +2.8% rise the prior week and down from a +3.8% gain during the first week of Dec. The Hungary sovereign cds is rising +1.21% to 364.15 bps and the Emerging Markets Sovereign CDS Index is gaining another +.68% to 188.44 bps. Rough Rice futures have surged +9% in five days. China's 7-day Repo Rate is jumping +131 bps today to 4.05% on tightening concerns. This is the first decline for US stocks in awhile on a day with mostly positive news, which could indicate a change of character for the market. Losses are worse than the major averages suggest. January option expiration is on Friday and the DJIA has declined 10 of the last 12 with big losses seen in 2003, 2006 and 2010. I expect US stocks to trade modestly lower into the close from current levels on China inflation fears, profit-taking, technical selling and more shorting.

3 comments:

Anonymous said...

http://seattletimes.nwsource.com/html/businesstechnology/2013971302_boeing19.html?syndication=rss

theyenguy@yahoo.com said...

You write: I expect US stocks to trade modestly lower into the close from current levels on China inflation fears, profit-taking, technical selling and more shorting.

I agree as I wrote in linked article dated 1-18-2011 A Market Top Been May Have Been Achieved As China Shares Fall Lower On Inflation Concerns: China and some Asian shares fell lower as the risk of “inflation destruction” emerged today.

Anonymous said...

http://blogs.wsj.com/deals/2011/01/19/in-the-long-run-apple-will-bow-to-android-reality/