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Gary Smith’s Market Take

Here’s my take on the markets today, April 9th, 2013. If you’d like to read more of my articles, click here.

Credit gauges are mixed today. The 3M EUR/USD Cross-Currency Basis Swap is rising +3.0% to -16.42 bps. The 2Y Swap Spread is down -2.8% to 14.59 bps. The European Investment Grade CDS Index is down -1.0% to 114.69 bps. The Emerging Markets CDS Index is down -1.7% to 236.35 bps. The China sovereign cds is down -2.0% to 72.0 bps. The South Korea sovereign cds is down -2.3% to 85.9 bps. The Brazil sovereign cds is down -2.4% to 122.75 bps. However, the Libor-OIS Spread is gaining +1.1% to 14.9 bps. The European Financial Sector CDS Index is rising +.3% to 168.60 bps. The UK sovereign cds is gaining +1.3% to 44.9 bps. The Japan sovereign cds is up +2.0% to 72.9 bps.

MarketTakePicMajor Asian indices were mixed overnight as a +1.4% gain in Australia was offset by a -1.2% decline in India. India is now down -4.3% in 5 days and down -6.2% ytd. The Nikkei was flat, but is now up +26.9% ytd(p/e now 26.7). Major European indices are mostly higher, led by a +1.3% gain in Italy. The Bloomberg European Bank/Financial Services Index is +1.3%(-3.3% last 5 days). Brazil is bouncing +1.8%, but still trades very poorly(-8.0% ytd).

The euro is bouncing +.69% and is close to its downward-sloping 50-day. Oil is reversing +.6% higher. Copper is bouncing +2.1%, after recent losses, but still trades poorly. The China benchmark Iron-Ore Spot Index is gaining +1.1%. Gold is rising +.8%, but still trades poorly. Lumber is reversing -.8% lower and is still below its 50-day. The UBS-Bloomberg Ag Spot Index is +.6%, but still trades very poorly. The 10Y T-Note still trades too well, with the yield flat at 1.75%.

The major averages are surging again as central banks continue to force institutions further out on the risk spectrum despite a deteriorating macro backdrop. Beaten up commodity stocks are leading the way on diminished China inflation fears and rising hopes for an ECB rate cut after a dismal German export data report. The plunging yen and Cyprus turmoil likely further weighed on German exports in March.

Coal, Alt Energy, Gold & Silver, Steel, Software, and HMO stocks are very strong today, while Hospital, Homebuilding, Retail, Restaurant and Airline shares are all lower on the day. The Transports, in general, are not participating in today’s equity advance. Even though the market has taken on an “it can only go up” feel, I suspect equity weakness is in the offing as earnings start rolling in over the coming weeks. I am still positioned 75% net long, but plan to add to my index hedges into the close today.

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