Stocks Lower into Final Hour on Global Growth Concerns, Financial Sector Worries

BOTTOM LINE: The Portfolio is mixed into the final hour as gains in my Computer longs, (TLT) long, commodities shorts and emerging market shorts offset losses in my Semi longs, Software longs and Retail longs. I added to my (EEM) short and added (IWM)/(QQQQ) hedges 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, most sectors are falling and volume is about average. Investor anxiety is high again. The 10-year yield is plunging 18 basis points on worries over slowing global growth. I see little evidence of a meaningful global growth slowdown, however a continuation of the recent weakness in global equity markets could provide the catalyst for one. The 10-year swap rate is trading at 73.4 basis points over Treasuries, down 3.1 basis points today and down 14.1 basis points over the last three days, which is a big positive. Fed funds futures imply a 96% chance for another 25-basis-point cut at the upcoming December meeting. With several Fed speakers this week, I suspect we will have a much better idea over the next few days whether or not they are on the same page with traders. The AAII percentage of bulls dropped to 25.6% last week from 33.0% the prior week. This reading is now at depressed levels. The AAII percentage of bears rose to 52.7% last week from 51.4% the prior week. This reading is still at elevated levels. The AAII Bull Ratio 4-week Average is a depressed .42. It has only been lower during 6 other periods the last ten years. Moreover, the 10-week moving average of the percentage of bears is currently at 39.1%, 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 37.6%, 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. I find this astonishing, notwithstanding the recent pullback, given that the S&P 500 is 97.6% higher from the October 2002 major bear market lows and just 7.7% off a record high. It is also noteworthy that as pessimism grows ever thicker, corporate insider activity remains very bullish. Prior to the 2000 economic downturn, insiders were bailing in droves. Sales rose 8.3 percent on "Black Friday" compared with the same day a year ago, according to the National Retail Sales Estimate from ShopperTrak. Moreover, online retail spending on “Black Friday” soared 22% over last year. I expect US stocks to trade mixed-to-lower into the close from current levels on financial sector concerns and global economic worries.