Morning Note: Concentrate (well, please don’t!)

Asian stocks traded mixed last night, with 7 of the 16 markets we track closing in the red. China saw another strong rally on blatant and, for now, unrelenting state intervention. I illustrated yesterday how ugly such shenanigans tend to play out before all’s said and done.

With only two exceptions (and just barely), Denmark and Norway, European equities are taking a hit this morning. U.S. stocks, on the other hand, are in rally mode; Dow’s up 114, the S&P 500 and the Nasdaq Composite are up .5% and 1.0% respectively, and the Russell 2000 is up .5% as well. 

The VIX (S&P 500 volatility) — having rallied in yesterday’s session (after opening lower) — sits at a historically risky (for stocks) 28.95, although it’s down 1.7% so far this morning. VXN, like yesterday, opened higher, however as I type it’s down 1.1% (that’s a better look for stocks than this time yesterday morning).

Oil’s flat, gold’s up $14, silver’s up a huge 2.3%, copper’s up .75% and ag is trading mixed this morning. (FYI, or newest addition — base metals ETF — is up 2.1% this morning)…

The dollar’s down, providing a nice tailwind for most commodities…

Nick posted this (click to enlarge) this morning in our inner-office research chatroom:

That’s my grandson Zac in the pic by the way, ain’t he adorable!! Oh, sorry, back to business.

That’s this morning’s “heat map”, the big blocks capture the names of today’s biggest movers. Which, by the way, captures what’s largely been going on during the latest rally in stocks. Which, also, by the way, is anything but representative of a healthy bull market. The concentration among those actors is at a record 40% for the Nasdaq, and nearly a fourth for the S&P 500. Historically, such concentration has NEVER ended well…

One clue is the 10% decline in the S&P 500 equal weight index (all stocks equal in influence) over just the past month:

By the way, it’s down .1% as I type this morning, while the Nasdaq is still nicely in the green…

Earnings season kicks off next week. There seems to be a bit of optimism (interestingly) around bank earnings. At first blush, given conditions, and interest rates, that’s counter-intuitive. If indeed banks surprise to the upside, it’ll virtually have to be about trading revenue and, as I’ve recently learned, the billions in fees they grabbed by underwriting those small business stimulus loans. Although a few, if not all, of the bigs say they’re donating those to charity…

Lots more to come…

Have a great day!


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