Stocks Sharply Lower into Final Hour on Financial Sector Panic, Shorting

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Gaming longs, Biotech longs and Software longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 75% net long. The overall tone of the market is very bearish as the advance/decline line is substantially lower, almost every sector is declining and volume is above-average. Investor anxiety is very high. Today’s overall market action is very bearish. The VIX hit a very high 32.9. The ISE Sentiment Index hit a very depressed 48.0 and the total put/call hit a very high 1.46 today. Finally, the NYSE Arms hit an elevated 3.97. The 10-year swap spread is falling to 72.0 basis points over Treasuries, down from a high of 92.75 six days ago. However, the TED spread is rising to 159 basis points. Given how poorly Asia traded overnight, notwithstanding how much those indices were down the prior day and our rebound yesterday afternoon, I wouldn’t be surprised to see meaningful weakness in Asian shares on Monday. However, given today’s stress another positive catalyst may materialize over the weekend. I will monitor the situation on Monday before further shifting market exposure. Nikkei futures indicate a -120 open in Japan and DAX futures indicate a -33 open in Germany on Monday. I expect US stocks to trade modestly lower into the close from current levels on fear and shorting.