Stocks Lower into Final Hour on Profit-taking, Bounce in Oil

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Software longs and Semi longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative today as the advance/decline line is lower, sector performance is mostly negative and volume is around average. Investor anxiety is slightly above average. Today’s overall market action is mildly bearish. Given recent gains, a mild down day on only average volume isn’t too surprising. Insider activity remains exceptionally bullish. According to Bloomberg, LTD($12,815,920), PBY($5,655,972), MMR($5,636,862), EPB($4,504,000), EQY($3,266,476), SUSS($2,926,300), UTR($2,795,094), PRVT($2,194,250), BKD($2,189,058), ORNG($1,848,582), DDS($1,751,940), PCX($1,683,562), RES($1,617,140), FBP($1,514,434), FL($1,427,243), EXBX($1,377,000), CAH($1,149,970), MCHX($1,117,000), IRC($1,102,561) and WRI($1,042,784) are companies with significant insider buying over the last week. The investment grade credit default swap index is down 9.2% over the last week, while the speculative grade credit default swap index is 5.1% lower over that period, which is a big positive. As well, the JPMorgan Emerging Market Bond Index is 1.3% higher over the last week and the Bear Stearns High Yield Index is 1.1% higher over that period. Fed fund futures now imply a 40% chance of a 50 basis point rate cut and a 60% chance for a 25 basis point cut at the upcoming meeting. I expect US stocks to trade mixed into the close from current levels as profit-taking offsets short-covering.