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

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs, Software longs and Gaming longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is declining and volume is above average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising 2% today and remains high at 25.4. The ISE Sentiment Index is a very low 84.0 and the total put/call is an above-average .99 today. Tech stocks are under pressure on worries that PC growth is slowing after Goldman made negative comments on the industry and removed (INTC) from its Conviction Buy list. However, Goldman maintained its Buy rating on the stock. I think these worries are overdone at this point as most of these stocks’ valuations already reflect a significant slowdown. Today's tech sector weakness is likely more the result of profit-taking after recent sharp gains in many tech stocks. Retailers and airlines are under pressure from the jump in oil. Oil continues to move back near recent highs on massive investment fund speculation, despite a firmer dollar, decelerating global demand and record global production. Moody’s downgraded FGIC’s financial strength to A3 from Aaa. Moody’s still has (ABK) and (MBI) under review. However, they did say that in contrast to XL Capital Assurance and FGIC, MBIA and Ambac are better positioned from a capitalization and business franchise perspective. This may imply a downgrade is not forthcoming. (MBI)/(ABK) are soaring 10% and 17%, respectively. The AAII % Bulls fell to 33.3% this week, while the % Bears fell to 41.9%. Investor sentiment remains at historically depressed levels, which bodes very well for outsized gains over the intermediate-term. Nikkei futures indicate a down -106 open in Japan and DAX futures indicate an up +23 open in Germany. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, less economic pessimism and short-covering.