Stocks Lower into Final Hour on Overseas Weakness, Credit Fears

BOTTOM LINE: The Portfolio is about even into the final hour as losses in my Medical longs and Biotech longs are being offset by gains in my Retail longs, Computer longs, Commodity shorts and Emerging Market shorts. I covered some of my (IWM)/(QQQQ) hedges and took some profits in my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is very negative today as the advance/decline line is substantially lower, sector performance is mostly negative and volume is very heavy. My intraday gauge of investor angst is at an elevated level. It is important to keep perspective in times like this. As the permabears continue to mock the bulls and dismiss their methodologies, the S&P 500 is still about 95% higher over the last five years and has only experienced a 6% pullback, which doesn't even qualify as a correction. The mentality that somehow the fearleaders have been proven right after predicting a recession and stock collapse literally dozens of times over the last five years is further evidence of their extreme complacency, in my opinion. I continue to see little evidence in leading indicators I follow of the current financial event turning into an economic event of consequence. It is important to remember that every pullback since the 2002 lows was a function of investors pricing in the worst case scenario rather than the most realistic scenario, which is symptomatic of the current U.S. negativity bubble. Recent market action is just further evidence of the irrational pessimism that has engulfed U.S. stocks since the major bear market lows five years ago, in my opinion. Oil is falling $1.75 barrel, reversing sharply from morning highs. I think many macro funds have been "hiding" in oil as evidenced by the fact that large crude oil speculators have never been more net long oil futures in history. It appears as though speculators are using the potential double-top in oil as a cue to sell. Apple (AAPL) has rebounded almost 6 points from morning lows around the 50-day moving-average. I suspect today's lows marked another bottom in the shares. I still think $180 is likely before year-end. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, more economic optimism and short-covering.