Here’s my take on the markets today, November 19th, 2012. If you’d like to read more of my articles, click here.
Credit gauges are mostly improving today. The Libor-OIS Spread is falling -5.7% to 16.5 bps. The 3M EUR/USD Cross-Currency Basis Swap is rising +4.1% to -28.9 bps. The 2Y Swap Spread is falling -8.5% to 13.0 bps(+10.1% in 5 days). The European Investment Grade CDS Index is falling -4.4% to 131.7 bps. The European Financial Sector CDS Index is down -6.1% to 175.5 bps. The Germany sovereign cds is down -3.9% to 31.1 bps. The Spain sovereign cds is falling -2.8% to 341.81 bps. The Italy sovereign cds is down -4.0% to 296.83 bps. The Portugal sovereign cds is down -2.9% to 622.66 bps. The Brazil sovereign cds is down -3.35% to 104.46 bps. The Israel sovereign cds is falling -2.4% to 156.38 bps(+6.2% in 5 days). However, the Western Europe Sovereign CDS Index is gaining +2.0% to 121.31 bps. The Spain 10Y Yld is rising +.44% to 5.90%. The Ireland sovereign cds is rising +.7% to 197.83 bps. The China Blended Corporate Spread Index is rising +.25% to 404.0 bps.
Major Asian indices were mostly higher overnight led by a +1.4% gain in Japan(+5.5% in 5 days). The Shanghai Comp was flat and continues to trade poorly(-3.0% in 5 days). Major European indices are rising today, led higher by a +3.0% gain in Italy. The Bloomberg European Bank/Financial Services Index is jumping +3.5%. Brazil is gaining +1.9%.
The euro is gaining +.5% today and is bumping up against its downward sloping 200-day. Oil(+2.4%) and copper(+2.2%) are higher, as well. Lumber is gaining +1.7% and continues to consolidate recent gains in a healthy fashion. China’s benchmark Iron-Ore Spot Index is unch. today, but is still -32.2% lower since 9/7/11. The UBS-Bloomberg Ag Spot Index is gaining +1.6%. Gold is gaining +1.3% and is back near its 50-day moving average. The 10Y T-Note continues to trade too well, with the yield rising just +3 bps today to 1.61%.
While stocks were very oversold and due for a bounce, today’s US fiscal cliff solution hopes seem overdone. I expect the recent stock bounce to last a bit longer, however equity weakness will likely resurface shortly after Thanksgiving as US fiscal cliff political rhetoric takes on a decisively more combative tone leading up to a can-kicking or disappointingly small deal. Moreover, while European leaders may have applied another Greek band-aid, the big picture in the region continues to deteriorate.
Breadth is healthy today, but there is a lack of big volume/gainers given a +1.7% S&P 500 gain. Market-leader Apple Inc.(AAPL) is surging +6.0% today, building on Friday’s key reversal. While a market-related pullback in the shares is likely over the coming weeks, a full retest of Friday’s low is unlikely at this point. Long AAPL. Commodity, Financial, Gaming and Retail shares are outperforming, while Utility, Drug and Eduction stocks are lagging today. I covered some more of my index trading hedges this morning and I am positioned 75% net long.