Stocks Lower into Final Hour on Weakness in Europe and Profit-taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Biotech longs and Retail longs. I added (IWM) and (QQQQ) hedges this morning and covered them into afternoon weakness, thus leaving the Portfolio 100% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is declining and volume is above average. Today’s losses aren’t too bad considering Europe’s 1.75-2.0% declines. As well, many market leading stocks are holding very well and the Broker/Dealer Index is higher on the day at session highs. My intraday gauge of investor angst is quite elevated considering the major averages are down just around .75%. Given how quickly and sharply levels of investor angst have risen, I suspect the recent 2-day healthy pullback has just about run its course. Investors seemed to like the Fed’s Hoenig’s comments ,within the last 30 minutes, that a 5.25% fed funds rate allows the economy to grow and inflation to slow. He said the current rate is modestly restrictive, that he is hopeful inflation will slow and that US growth should bounce-back toward 3% trend. I expect US stocks to trade modestly higher into the close from current levels on buyout speculation, lower long-term rates, weakening gas futures and short-covering.