Stocks Lower into Final Hour on Another Spike in Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Biotech longs and Alternative Energy longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is below average. Investor anxiety is high again. Today’s overall market action is just mildly bearish. The VIX is rising 2.2% today and remains relatively high at 23.2. The ISE Sentiment Index is a low 92.0 and the total put/call is a high 1.25 again today. Finally, the NYSE Arms has been running slightly above-average most of the day. Again, considering today’s economic data, recent stock gains, the rise in oil and fall in the US dollar, today’s action isn’t bad. There continues to be a strong bid under many market leading stocks, which is a big positive. This is much healthier, in my opinion, than a market being led by the most heavily shorted stocks with fundamental problems. Moreover, growth stocks have begun to significantly outperform value again, likely as a result of the recent drop in long-term rates and very cheap valuations. I suspect with oil solidly above $100 and interest rates falling, alternative energy stocks will begin outperforming again pretty soon. I still see substantial upside for my (AMSC) long, which is breaking back above its 50-day moving-average today. (AAPL) is trading near session highs, rising 6.3%. I continue to believe the stock, as well as (GOOG), has made a major bottom for the year. Nikkei futures indicate a -225 open in Japan and DAX futures indicate an +48 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short covering, lower long-term rates and bargain hunting.