Stocks Lower into Final Hour on Shorting, Economic Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Internet longs, Biotech longs and Medical 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 negative as the advance/decline line is lower, most sectors are falling and volume is about average. Investor anxiety is just slightly above average. Today’s overall market action is bearish. The VIX is rising 4% today to a high 25.4. The ISE Sentiment Index is a below average 96.0 and the total put/call is a slightly above-average .92 today. Energy and financial stocks are under the most pressure today. Energy investor T. Boone Pickens said this morning that he is short oil and natural gas and the EIA reported gasoline inventories are now at 14-year highs, which also contributed to a $2/bbl decline in oil. Vietnam(VNINDEX), which I cautioned was in a bubble last year, fell another 4.6% last night despite strength in the rest of Asia. This index is now down 39.3% from its highs in March of last year. On the positive side, Hewlett Packard(HPQ) said today that it isn’t even seeing the traditional seasonal slowdown in Europe. Tech stocks, while lower, are significantly outperforming the broad market. Semis and Disk Drives are especially firm. Disk drive maker Western Digital(WDC) hit the highest level since November 1997 today. The 10-year swap spread, which had been climbing, has reversed 10 basis points lower over the last 2 days. As well, the 10-year TIPS spread has reversed 8 basis points lower since yesterday. Nikkei futures indicate a -150 open in Japan and DAX futures indicate a -28 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting and rising economic worries.