Stocks Lower into Final Hour on Rising Credit Market Angst

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Medical longs, Internet longs and Alternative Energy longs. I added to my (IWM)/(QQQQ) hedges this morning and added to my (EEM) short, thus leaving the Portfolio 50% net long. The overall tone of the market is very bearish as the advance/decline line is substantially lower, every sector is falling and volume is above average. Investor anxiety is very high. Today’s overall market action is very bearish. The VIX is rising 11.0% to a high 27.5. The ISE Sentiment Index is a very low 79.0 and the total put/call is a high 1.28 again today. Finally, the NYSE Arms is a high 1.73. The 10-year swap spread is rising another 3.3 basis points today to 89.63 basis points over Treasuries. It is now at the highest level since July 2001. Moreover, the TED spread is rising again to an elevated 160 basis points. Credit market angst is rising further and remains extraordinarily elevated. Until credit markets begin to stabilize, equities will likely remain under pressure. However, given how oversold the major indices are getting, low valuations, more stimuli is on the horizon and how high bearish sentiment is, I suspect the slightest positive catalyst could send stocks soaring. Nikkei futures indicate a -400 open in Japan and DAX futures indicate a -18 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as Fed rate cut speculation offsets rising credit market angst.