Here’s my take on the markets today, January 16th, 2012. If you’d like to read more of my articles, click here.
Credit gauges are mostly deteriorating today. The France sovereign cds is falling -1.0% to 86.6 bps and the Italian/German 10Y Yld Spread is down -2.3% to 264.68 bps. However, the 3M EUR/USD Cross-Currency Basis Swap is down -4.9% to -18.3 bps. The 3M Euribor-OIS Spread is up +5.6% to 11.4 bps. The European Investment Grade CDS Index is up +1.6% to 136.43 bps(+10.2% in 5 days). The US sovereign cds is jumping +6.9% to 43.83 bps(+10.8% in 5 days). The Germany sovereign cds is up +1.9% to 41.5 bps. The Spain sovereign cds is up +2.3% to 257.25 bps. The UK sovereign cds is up +5.3% to 45.4 bps. The Asia-Pacific Sovereign CDS Index is rising +3.5% to 88.9 bps(+10.0% in 5 days). The China sovereign cds is up +3.1% to 68.2 bps(+11.0% in 5 days). The China Development Bank Corp cds is gaining another +1.9% to 109.27 bps(+18.0% in 5 days). The Japan sovereign cds is gaining +8.1% to 83.82 bps(+13.5% in 5 days). The divergence between Asian equities and credit remains noteworthy.
Major Asian indices were mostly lower overnight, led down by a -2.6% decline in Japan. Major European indices are slightly lower, led down by a -.7% decline in Italy. The European Bank/Financial Services Index is falling -.4%. Brazil is down -.3%.
The euro is pulling back -.15%. Oil is gaining +.5% and copper is down -.7%. The China benchmark Iron-Ore Spot Index is dropping -4.9% today(-8.3% in 5 days). Gold is up +.2%. Lumber is -.2% and is looking a bit toppy. The UBS-Bloomberg Ag Spot Index is gaining +.2%. The 10Y T-Note continues to trades too well, with the yield falling -1 bps to 1.82%.
The weekly MBA Home Purchase Apps Index jumped +12.9% and is back to the high end of the range it has been trapped in since May 2010.
The major averages continue to consolidate recent gains in a healthy fashion despite numerous potential downside catalysts. Semi, Oil Service and Airline shares are outperforming today, while Steel, Defense, Alt Energy, Gaming and Biotech shares are weak. Apple Inc.(AAPL) held its long-term uptrend and is surging today on volume. While I remain concerned about the broad market with so much investor complacency, Apple has likely seen a peak in its relative weakness versus the market. Long AAPL. I covered some of my index trading hedges this morning and I am positioned 75% net long.
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