Gary Smith’s Market Take

May 31, 2024 By Leave a Comment
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Here’s my take on the markets today, May 31, 2012. If you’d like to read more of my articles, click here.

Credit gauges are deteriorating again today. The Libor-OIS Spread is rising +.66% to 30.7 bps. The 3M EUR/USD Cross-Currency Basis Swap is falling -1.5% to 51.6 bps. The TED Spread is gaining +1.3% to 40.6 bps(+8.2% in 5 days). The European Investment Grade CDS Index is gaining +1.6% to 180.1 bps. The European Financial Sector CDS Index is gaining +.74% to 301.08 bps. The France sovereign cds is rising +.92% to 216.62 bps. The Spain sovereign cds is rising +2.22% to 600.87 bps(+10.0% in 5 days to another all-time high). The Italy sovereign cds is rising +2.4% to 562.60 bps(+7.5% in 5 days). The Portugal sovereign cds is rising +2.0% to 1,188.58 bps. The Emerging Markets Sovereign CDS Index is gaining +1.9% to 352.33 bps(+9.1% in 5 days). The Russia sovereign cds is jumping +4.5% to 267.34 bps(+8.2% in 5 days). The Brazil sovereign cds is rising +2.4% to 169.95 bps.

Major Asian indices were mostly lower overnight, led down by a -1.0% decline in Japan. Major European indices are falling around -.75%, led down by a -1.0% decline in Spain. Spain is now down -7.4% in 5 days and down -29.3% ytd. As well, Russia is plunging another -2.7% and is down -10.2% ytd(-27.3% since March 15th). The Bloomberg European Bank/Financial Services Index is down -.02% today and down -3.5% over the last 5 days.

Once again, US stocks are seeing a vigorous bounce after an opening swoon. Favorable Greek polling data are helping. The Banks and Transports are leading the morning rally off the lows. Most investor sentiment gauges are registering healthy levels of bearishness given the deteriorating macro backdrop. However, market action is still indicating a level of complacency, in my opinion. One of my longs, (TFM), is hitting another record today after its recent strong earnings report. The stock is extended short-term, but should continue to outperform over the intermediate-term. I added (QCOM) long for a trade this morning. I suspect we could see further month-end short-covering/bargain hunting in equities into the afternoon. While tomorrow’s jobs report will likely miss estimates, I don’t expect it to have a meaningfully negative impact on stocks. I covered some of my index trading hedges and I am positioned 75% net long.

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Filed Under: All-Star Originals, Economy, Euro Zone, Financials, International, Markets, Russia, Stocks, Tech, Technical Analysis
About Gary D. Smith

Gary Douglas Smith actively trades his portfolio as well as the portfolios of family members. In addition, Mr. Smith maintains Between the Hedges, an investment-oriented blog. Previously, he was founder and managing member of Olympus Capital Management, an alternative investment firm. Olympus consisted of a long/short diversified hedge fund and a long/short technology sector hedge fund. Prior to the formation of Olympus, he spent five years as Vice-President of Research and Portfolio Manager for an independent money management firm. Mr. Smith has been engaged for the past 23 years in the analysis and selection of equity and other investments. His expertise is in long/short U.S. equity investing across all market sectors with an emphasis on technology stocks. He uses a top-down investment approach, investing in securities at a reasonable price relative to their growth prospects. As well, technical analysis plays a role in the timing of his investment decisions. He received his undergraduate degree from the University of Tennessee and subsequently received an MBA, with a concentration in finance, from Vanderbilt University’s Owen School.

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