Stocks Mostly Lower into Final on Profit-taking, Earnings Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs, Medical longs and Retail longs. I added to my (ILMN) and (BRCM) longs, put on (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative today as the advance/decline line is substantially lower, most sectors are falling and volume is heavy. I have heard many pundits lately speak as though only a few stocks are rising and insinuate that a significant market decline is imminent as a result. As I have said many times over the last few weeks, I couldn't disagree more. In my opinion, investors have been spoiled over the last few years as they could almost throw darts at any sector and make money. That is a rare scenario, even in bull markets. Much of the 1990s bull run was propelled by just a handful of sectors at any given time. As well, breadth during the 1990s began to deteriorate rapidly in early 1998, however, the S&P 500 rose another 40% through the peak in 2000. The NYSE cumulative advance/decline line is currently just off record highs and still well above the very best levels seen in the 1990s. In my opinion, the major averages can still move much higher from current levels without the amazing breadth we have seen over the last few years. Moreover, breadth in the growth stock universe has been, and continues to be, outstanding. I am finding many growth stocks of all sizes with great prospects selling for reasonable valuations, and investors are still just in the early stages of paying a premium for those companies given the macro backdrop I see. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, rising fed rate cut odds and short-covering.