Stocks Falling into Final Hour on Bear Stearns Comments

BOTTOM LINE: The Portfolio is lower into the final hour as losses in my Computer longs and Biotech longs are more than offsetting gains in my commodity shorts and emerging market shorts. I added to my (EEM) short and to my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 50% net long. The overall tone of the market is very negative today as the advance/decline line is substantially lower, every sector is lower and volume is above average. My intraday gauge of investor angst is at a very elevated level. The major averages and breadth are pushing lower on comments from Bear Stearns (BSC) on a conference call. I didn't think they said anything we didn't already know, but the market's reaction to them was severe. Bank of America is defending BSC, saying its valuation is at a 12-year low and that the decline in the shares is overdone. Trading in the broad market has a sloppy, panicky feel to it again. The CBOE total put/call ratio soared to a very elevated 1.76. It has been higher only nine other times in the last decade. The last time it was this high was March 15, a day after the market had already bottomed. Moreover, the 10-day moving average of the CBOE total put/call is a very elevated 1.25. It has only exceeded this level once in history, which was during the March decline. Only time will tell, but I sense that the market has once again priced in the worst-case scenario rather than the most realistic one with regards to the U.S. economy and stocks. I expect US stocks to trade mixed-to-lower into the close from current levels on credit fears and worries regarding overseas shares Sunday night/Monday morning.