Stocks Cutting Losses into Final Hour on Rebound in Financials, Lower Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour as losses in my Internet longs, Medical longs and Gaming longs more than offset gains in my Computer longs, Software longs and Commodity shorts. I added to my (IWM)/(QQQQ) hedges and added to my (EEM) short this morning then covered those trades, thus leaving the Portfolio 75% net long. The overall tone of the market is bearish as the advance/decline line is lower, most sectors are declining and volume is above-average. Investor anxiety is high. Today’s overall market action is very bullish given the news and action in overseas markets. The VIX hit a very high 35.6. The ISE Sentiment Index hit a depressed 70.0 and the total put/call hit an elevated 1.71 today. Finally, the NYSE Arms has been around average most of the day. The 10-year swap spread is falling to 63.25 basis points over Treasuries, down from a high of 92.75 seven days ago. After hitting 193 basis points this morning, the TED spread is now 158 basis points. Nikkei futures indicate an +123 open in Japan and DAX futures indicate an +100 open in Germany tomorrow. I expect US stocks to trade modestly lower into the close from current levels on financial sector and economic worries.