Stocks Mostly Lower into Final Hour on Healthy Profit-taking

BOTTOM LINE: The Portfolio is about even into the final hour as gains in my Software longs, Medical longs and Gaming longs offset losses in my Biotech longs and Alternative Energy longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is slightly bearish as the advance/decline line is lower, most sectors are declining and volume is below average. Investor anxiety is about average. Today’s overall market action is neutral. The VIX is rising 2.0% and remains above average at 21.0. The ISE Sentiment Index is a below average 122.0 and the total put/call is about average at .94. Finally, the NYSE Arms has been running about average most of the day and is currently 1.0. Today’s light volume pullback, after yesterday’s sharp advance, is just what investors need to see further gains. The many US stock market bears continue to display little ability to capitalize on recent potential downside catalysts. Moreover, the reaction of financials to today’s news is a big positive. The (XLF) is near session highs, rising 1.6%. The AAII % Bulls plunged this week to 30.4% from 45.8% the prior week. Moreover, the % Bears surged to 48.7% this week from 37.3% the prior week. This is also bodes well for further broad market gains. Google(GOOG) reports after the close today. I like the set-up. Expectations are low with much negative rhetoric in the financial press regarding its prospects. I continue to believe recent weakness in the stock is almost completely related to near-term issues/general market weakness and the company is paving the way for even greater dominance in the future. If they do disappoint again this quarter and the stock falls, I suspect large investors with longer-term time horizons may step up to the plate. There are few stocks in the world with Google’s massive opportunities, current market dominance and cheap valuation, in my opinion. Nikkei futures indicate an +52 open in Japan and DAX futures indicate an +79 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism and bargain hunting.