Stocks Sharply Lower into Final Hour on Credit Fears and Emerging Market Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my I-Banking longs and Retail longs. I added to my (GS) long and took some profits in my (TLT) long today, thus leaving the Portfolio 75% net long. The tone of the market is very negative today as the advance/decline line is substantially lower, every sector is declining and volume is heavy. My intraday gauge of investor angst is at an elevated level. This gauge is now close to the levels seen during the lows in March. The VIX is jumping 26%. The NYSE Arms is an above-average 1.21. The CBOE total put/call is a high 1.51. The ISE Sentiment Index is plunging 17%, to a depressed 94.0. Given how large short interest is, how well many stocks have done this year, losses over the last few days and the potential for a positive catalyst to materialize tonight or tomorrow before the open, I suspect we could see some significant short-covering into the final hour. Deep cyclicals are getting hit the hardest, and growth stocks are substantially outperforming value stocks again. Tech shares are holding up relatively well, notwithstanding losses in the major averages. I continue to believe that we are just in the very early stages of a multiyear period of outperformance by the “growth” style over the “value” style. With the DJIA down 320, I am still seeing many growth stocks up or just slightly lower. Leading growth stocks are dramatically outperforming the market. Moreover, year-to-date outperformance of growth over value is becoming very large. I think this big story is barley mentioned due to the fact that there are very few true growth managers left after seven years of underperformance by the style. Take a look at Apple (AAPL), Google (GOOG), Intuitive Surgical (ISRG), Synchronoss Technologies (SNCR), Baidu (BIDU), Nvidia (NVDA), Illumina (ILMN), Celgene (CELG), EMC Corporation (EMC), F5 Networks (FFIV), Crocs (CROX), Riverbed Technology (RVBD), Qualcomm (QCOM), Garmin (GRMN), Research In Motion (RIMM), First Solar (FSLR), Omniture (OMTR), Psychiatric Solutions (PSYS), Cabot Microelectronics (CCMP), MEMC Electronic Materials (WFR), AU Optronics (AUO), Amazon (AMZN), etc. A significant change is under way. These types of stocks will lead the market for years, in my opinion. Apple (AAPL) is surging another 7% today after crushing third-quarter estimates and providing conservative fourth-quarter guidance. As I have said many times over the last few months, I believe the "halo effect" is accelerating at a much faster pace than analysts had expected. I had forecast a 50% gain for AAPL shares at the beginning of the year, however, given recent developments, $180 now looks likely before year-end. The stock remains my second largest long position. I expect US stocks to trade higher into the close from current levels on bargain-hunting, lower long-term rates, lower energy prices and short-covering.