Stocks Mostly Lower into Final Hour on Dollar Weakness, Profit-Taking

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs and Gaming longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly bearish as the advance/decline line is slightly lower, most sectors are declining and volume is above average. Investor anxiety is slightly above average. Today’s overall market action is mildly bearish. The VIX is rising 1.7% and remains above average at 20.6. The ISE Sentiment Index is around average at 155.0 and the total put/call is below average at .82. Finally, the NYSE Arms has been running high most of the day and is currently 1.22. Fed fund futures currently imply a 78.7% chance for no rate cut and a 20.6% chance for a 25 basis point cut at the June 25 meeting. Investors initial negative reaction to today’s 25 basis point fed funds rate cut and less-hawkish-than-expected FOMC commentary seems overdone to me. The Fed did and said what was necessary to prepare the markets for an end to the long string of rate cuts, which should help strengthen the US dollar further and pressure commodities over the coming weeks. I suspect comments from Fed speakers over the next two months will become increasingly more hawkish as the June meeting approaches. Nikkei futures indicate an +51 open in Japan and DAX futures indicate an +13 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and less economic pessimism.