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Gary Smith’s Market Take

Here’s my take on the markets today, April 20, 2012. If you’d like to read more of my articles, click here.

Credit gauges are mostly deteriorating again today. The Libor-OIS Spread is rising +1.4% to 33.16 bps. The 2Y Euro Swap Spread is rising +1.6% to 91.63 bps. The European Financial Sector CDS Index is rising +.78% to 256.95 bps. The Germany sovereign cds is gaining +4.7% to 86.66 bps(+26% in 6 days). The Spain sovereign cds is gaining +1.1% to 503.0 bps. The Italy sovereign cds is gaining +1.4% to 462.37 bps. The China sovereign cds is rising +1.6% to 112.89 bps and the Japan sovereign cds is up +2.4% to 95.0 bps. The recent surge in the Germany cds is likely resulting in a further rise in angst amongst many Germans regarding their back-door euro rescues. Overall, deteriorating credit gauges remain a large red flag for equity investors.

Major Asian indices were mostly lower overnight, led down by a -1.5% decline in Taiwan. Major European indices are rising around +.75%, led by a +1.6% gain in Spain. However, Spanish equities are still -3.2% lower on the week and down -18.1% ytd. The Bloomberg European Bank/Financial Services Index is rising +.95%.

Small-caps are relatively strong today, while emerging markets are not participating. Semis/Disk Drives are under notable pressure, despite the jump in (MSFT). Market leader (AAPL) continues to trade in an erratic fashion. Long AAPL. As well, financials are underperforming, which is always a concern. Copper and the euro are bouncing, but the 10Y T-Note is maintaining recent gains.

I doubt the results of the French election over the weekend will result in near-term market weakness. However, a Hollande victory will likely be viewed as a large market negative over the intermediate-term as the debt crisis intensifies. I have not traded today and I am still positioned 50% net long.

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