Stocks Sharply Lower as Investors Flee Most Economically Sensitive Shares

BOTTOM LINE: The Portfolio is slightly lower into the final hour as losses in my Retail longs and Medical longs are being mostly offset by gains in my Internet longs, Semi longs, Energy-related shorts and Base metal shorts. I covered my (QQQQ) and (IWM) shorts and added to my (GOOG), (TLT) and (BRCM) longs today, thus leaving the Portfolio 100% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is heavy. The Morgan Stanley Cyclical Index (CYC) is down 2.3% today, underperforming the broad market. I continue to believe that a rotation out of the most economically sensitive stocks and a spike in investor anxiety will pave the way for a durable bottom in the major averages. The developing implosion in commodities is not forecasting a recession, but is a function of an end to the mania and slowing growth. This bodes very well for the broad market over the intermediate-term. I expect US stocks to trade higher into the close from current levels on short-covering, lower commodity prices and bargain hunting.