Flat Market Equals Stocks Breaking Out

After 2 big down days for stocks, the major US indices are slightly higher heading into the lunch hour on Friday. The news out of Europe has been mixed, but with the negative news of the week already baked into stocks, the bulls have found a reason to buy.

Even as the major indices flutter around today there are a handful of stocks that are on the PFG WishList and a few that we own for clients that are breaking out today. Here are some of the leaders that we should be watching.

• Enbridge ($ENB) - Canadian pipeline company that pays a 2.8% dividend.
  
• Susser Holdings ($SUSS) - Operates convenience stores in 4 Southern states.
  
• Philip Morris International ($PM) - Sell tobacco products outside the US and pays a 4.3% dividend.
  
• Kansas City Southern ($KSU) - Operates railways mainly in the Midwest.
• Barrett Business Services ($BBSI) - Offers HR management to small and mid-sized companies and pays a 2.5% dividend.
  

Spain - You are on the Clock

The market took a beating last week when Italian 10-year bonds rose above a 7% yield. Overnight the Spaniards joined the Italians with yields over 10% - hitting a high of 7.15%.

This was short-lived as the ECB stepped in to buy up European bonds and the yield has fallen to 6.95% in the last half hour. The rally in European bonds has helped stocks in the US and on the other side of the pond. European stocks are still down 1%, but they have halved their losses.

US stocks are set for a small decline after being down much more earlier this morning. The Euro has also moved into positive territory after trading near a 6-week low. The action today will be important after investors gave up on stocks yesterday in late trading.

Some ETFs to Watch: Rydes Euro ($FXE), SPDR International Treasury Bond ETF ($BWX), iShares Spain ETF ($EWP), iShares 20+ Year Treasury ETF ($TLT), US Oil ETF ($USO).

Oil and Europe Weigh on the Market

Oil touches $100 per barrel for the first time in since July even as fears from Europe continue to weigh on global stock indices.

Playing the Oil Rush - My suggestion is to look at the price of oil (breaking out) and compare it to the sector, SPDR Energy ETF ($XLE). As oil rallies to new highs, XLE remains approximately 4% below its comparable high. This leads me to look at the Energy stocks as the better play right now. Even if oil falls back into the low $90's it will be high enough for great earnings for the Energy stocks.

Europe and Bond Yields - Yesterday the bond yields on many European countries bonds jump to spreads versus the stable German paper. We all know about Italy going above 7%, but then there is France with their highest spread versus Germany in nearly 2 decades. The newbies to that list include Austria, the Netherlands, and Finland - Spreads are increasing. This shows the true fear amongst the bond traders. Suddenly the US looks more stable every day.

Considering I was just in Finland yesterday, I can tell you firsthand that the economy does not appear too robust at this time. Across the sea in Tallinn, Estonia there was more going on than in the capital of Helsinki. More to come on what insights I came across on my business/research trip to Europe.

Recapping November so Far

We are halfway through the month of November and also at the mid-point of the fourth quarter. Through 2 weeks of November the S&P 500 is up a minimal 0.5% as it has picked up volatility on a daily basis - of course driven by news out of Europe.

Technically the US markets broke out of a very important trading range in October and for the most part it has held the breakout level and confirmed the trend will remain higher. With that being said I am leaning more towards the bullish stance heading into 2012.

The number one task on the to-do list is to build a small list of stocks and ETFs that could be potential buying opportunities in the coming days/weeks. Our WishList is well over 100 this morning and depending on the client we must remove a few from the list to narrow it down to the Top Candidates.

I may share a few of the stocks/ ETFs that we feel are our top candidates in the coming days, but as you can imagine that is what our clients and subscribers pay for.

I will share one stock with you that has been very strong and looks like it is ready for another breakout - Mistras Group ($MG). The company provides technology-generated solutions for the infrastructure that evaluates them. It currently has a PEG ratio of 1.3 and does not pay a dividend.

We do not own any shares of $MG at this time.

Market Recap

There is not much more for me to say in the blog today. If you read the morning and mid-day updates you will see how I feel. The market was clearly moved by Europe and in particular Italy. The next few days will hinge on the news out of the EU.

What makes today even more interesting is where the S&P 500 closed - 1229.59. I told you earlier in the day to watch support between 1230 and 1250 and here we are!! Watch tomorrow closely.

Off to give my thoughts on Fox Business Network - tune in at 5:10 ET for the exclusive interview.

FYI.... A few bright spots to end the day: $SUSS, $BKS, $VRTX, $DPL, $TDS, and $VSEA

Talking Markets on TV this Week

Tonight I will be on the "Willis Report" at 5:10pm ET on the Fox Business Network talking about today's market sell-off and what it means for individual investors.


I will also be on during the 6-8am ET hour of CNN on Friday morning live from London discussing how the markets are setting up for the last day of the week. I will be there speaking at the World MoneyShow if you happen to be in the area.

Mid-Day Update: France Next? and Top Sectors

With three hours of trading left in the session the major indices are down over 2% - and why??

Well today the answer is Italy. Even though the country has a primary budget surplus (balance before interest payments), they just happen to be next in line to get hammered by bond traders. The yield on the Italian 10-year bonds surged through 7%, the level many view as the threshold of how high rates can go without the country running into trouble making payments.

The elephant in the room was Ireland a couple years ago, then Greece, now Italy, and next is….. France!

Yes, the spread between French and German bonds hit 1.47 percentage points today (an all-time high since the Euro began), well higher than the 0.45 spread last year.

The iShares France ETF ($EWQ) is down 5% and the iShares Italy ETF ($EWI) is losing 8%. The related bond ETFs are also falling, the SPDR International Treasury Bond ETF ($BWX) is down 1.4%.

In the US the hardest hit sector is the Metals & Mining ($XME), down 5%. Even though every entire sector ETFs we follow are negative, the best performers are the Utilities ($XLU) and Consumer Staples ($XLP).

The level to watch on the S&P 500 is 1230-1250 range – and yep it is trading right in there now!!