Stocks Lower into Final Hour on Rise in Oil, Tech Share Weakness

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs and Computer longs. I added to my (IWM)/(QQQQ) hedges and took some profits in a few technically extended longs today, thus leaving the Portfolio 50% net long. The overall tone of the market is negative today as the advance/decline line is lower, most sectors are falling and volume is heavy. The dollar-based three-month LIBOR rate continues to plunge. It is down another 5 basis points today and has declined 72 basis points from its Sept. 7 high. It is also at the lowest level since March 2006. VMware (VMW) is jumping 10% today. While I'm not long the stock, I think its crazy that over 30% of the float is short. The days of shorts throwing darts at any stock with a "high valuation" and hitting a bull's-eye are long gone, in my opinion. The AAII percentage of bulls plunged to 31.25% this week from 41.96% the prior week. This reading is now approaching depressed levels. The AAII percentage of bears soared to 48.21% this week from 35.71% the prior week. This reading is now approaching elevated levels. Moreover, the 10-week moving average of the percentage of bears is currently at 36.8%, a high level. The 10-week moving average of the percentage of bears peaked at 43.0% at the major bear market low during 2002. The 50-week moving average of the percentage of bears is currently 37.0%, an elevated level seen during only two other periods since tracking began in the 1980s. Those periods were October 1990 to July 1991 and March 2003 to May 2003, both of which were near major stock market bottoms. The extreme readings in the 50-week moving average of the percentage of bears during those periods peaked at 41.6% on Jan. 31, 1991, and 38.1% on April 10, 2003. We are currently still close to eclipsing the peak in long-term bearish sentiment during the 2000 to 2003 market meltdown, which I find astonishing given that the S&P 500 is 105% higher from the October 2002 major bear market lows and recently made new record highs. Moreover, U.S. stock mutual funds have seen outflows for most of the past five years; domestic ETFs have just recently seen improved inflows; there has been an explosion in low correlation/negative correlation U.S. stock fund strategies; the quantity of research that caters to these funds has soared; the U.S. dollar is seen to have no bottom; U.S. equities are arguably the most hated securities by global portfolio managers; permabear pundits are more popular than ever; there have been huge spikes in gauges of investor anxiety over the last couple of years on relatively mild market pullbacks; a fairly large chunk of the public generally hates U.S. stocks and says it won't ever invest in them again; public short-selling continues to explode higher; short interest on the major exchanges has rocketed higher this year; S&P 500 index futures traders remain positioned near historically short levels; the mainstream press obsesses with what is wrong and what could go wrong; investors seem to always price in the worst case scenario immediately rather than the most likely scenario; money-market funds are at record levels; and long-term investors are denigrated, while day-trading is championed as a crash is always seen as just around the corner. I contend there has never been a time in U.S. history when more market participants actually wanted a stock crash or recession for both political and financial gain, which has helped to produce the current U.S. "negativity bubble." I still believe that overall investor sentiment regarding U.S. stocks has never been worse in history with the market near record highs, which bodes very well for further outsized gains. I expect US stocks to trade mixed into the close from current levels as bargain-hunting and rising fed rate cut odds offset the rise in energy prices and earnings worries.