Stocks Lower into Final Hour on Lingering Macro Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs and Retail longs. I added to my (IWM) and (QQQQ) hedges 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 lower and volume is above average. The ABX subprime indices are holding onto yesterday's gains today. They are stable. As well, the August Case-Schiller Housing futures continue to inch higher. They now forecast an average home price of $217,400 in August, up from projections of $211,000 6 months ago. The average 30-year mortgage rate is now 6.18%, down 16 basis points in 4 weeks. The AAII percentage of bulls plunged to 36.63% this week from 53.85% the prior week. This reading is now below average levels. The AAII percentage of bears soared to 39.60% this week from 22.31% the prior week. This reading is above average levels. The 10-week moving average of the percentage of bears is currently 31.4%, an above-average level. The 10-week moving average of the percentage of bears peaked at 43.0% at the major bear market low during 2002. Moreover, the 50-week moving average of the percentage of bears is currently 36.8%, a very high level seen during only two other periods since tracking began in the 1980s. Those periods were October 1990-July 1991 and March-May 2003, both being near major market bottoms. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain-hunting.