Thursday, June 17, 2010

Euro Gains On Successful Spain Debt Offering

The market is lower in early trading, mostly due to some soft economic data that came out this morning. Initial jobless claims were worse than expected, and the Philly Fed Index really plunged. The Philly index fell to 8.0 (well below 20.0 consensus) from last month's 21.4.

The euro is bouncing today after news that Spain had a successful debt offering. This has helped spreads tighten in Greece, Portugal, Italy, etc. The strong euro is weighing on the dollar, which might be boosting gold today (currently higher to $1244).

The weak economic news is pushing bond yields lower too. The 10-yr yield is down a lot, back below 3.20%.

Asian markets were mixed to lower overnight; and the VIX is slightly higher to 26.25.

Among the sector ETFs, only consumer staples (+0.22%) are bucking the weakness; materials (-1.16%) are down the most, followed by energy. Homebuilders (XHB, -2.86%) are down the most among the sub-sectors, after TOL said that they were seeing a slowdown in housing. Tech is hanging in fairly well so far also, with AAPL hitting a new all-time high earlier.

Trading comment: The market still seems a bit bifurcated, with leading growth stocks making good headway, but other sectors (like financials) acting heavy and languishing. So we continue to hold those leading growth stocks, but also look to continue to use market rallies to pare back exposure to marginal names or sectors that are losing relative strength.

Sentiment is a bit mixed in here. The ISEE call/put ratio has been very low recently, reflecting high pessimism, but today's AAII survey showed considerably more bulls than bears, reversing a 3-week trend. Also, the markets are back in overbought territory in the short-term.

long AAPL, GLD


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