Stocks Lower into Final Hour on Profit-taking, Earnings Jitters, Lingering Subprime Concerns

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, Computer longs, Medical longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is negative today as the advance/decline line is substantially lower, most sectors are declining and volume is heavy. My intraday gauge of investor angst is elevated, which is a positive. Cyclicals and small-caps are especially weak today. However, several sectors are hanging tough, including computer hardware, disk drives, oil service, defense and medical stocks. As well, an unusual number of stocks on my monitor pages are higher given headline losses. The 10-year yield is plunging another 6 basis points to, 4.95%. As I said when the 10-year yield was soaring in June, I still think the yield will fall to at least 4.75% later this quarter as inflation expectations diminish further. This will eventually be perceived as a large positive, especially for growth stocks. Google (GOOG) reported a slight disappointment after the close yesterday. I still think that the company is doing all the right things to become a monopoly in its fast-growing market and laying the groundwork to dominate many other Internet markets. I added a bit to my long yesterday in after-hours at around $511 and still expect it to easily surpass $600 before year-end. Intuitive Surgical (ISRG), on the other hand, is soaring 32% on a stellar report. I also think this is another example of a short squeeze. Short interest in the shares and the put/call open interest ratio are near records. As I said when ISRG was correcting last year down around $90, I still think the company has the potential to be one of the best growth stocks over the next decade. I remain long the shares. The NYSE reported yesterday after the close that short interest on the exchange surged another 3.9%, building on its recent parabolic rise and making another record high. I continue to believe this is unsustainable, and I will post more details on it next week. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower long-term rates, falling energy prices and bargain-hunting.