Stocks Lower into Final Hour on Rising Middle East Tensions

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Biotech longs, Internet longs and Retail longs. I added to my (EEM), (IWM) and (QQQQ) shorts and to my (GOOG) and (DNA) longs today, thus leaving the Portfolio 50% net long. The tone of the market is negative as the advance/decline line is substantially lower, most sectors are declining and volume is about average. Last month, I speculated that the Fed would raise one more time at the June meeting and then pause. Since then, economic data have weakened and forward-looking gauges of inflation have decelerated. Given the new developments in the Middle East, I am increasingly confident that the Fed will not hike rates at the Aug, 8 meeting. I expect Bernanke to make dovish comments during his speech next Wednesday to prepare the markets for a pause. I expect US stocks to trade modestly higher into the close from current levels on short-covering.