Stocks Slightly Lower into Final Hour on Another Jump in Oil and Financial Sector Angst

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Computer longs, Software longs, Alternative Energy longs and Emerging Market shorts. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is mildly bearish as the advance/decline line is lower, sector performance is mixed and volume is below average. Investor anxiety is above-average. Today’s overall market action is neutral. The VIX is rising 2.7% and remains above average at 24.1. The ISE Sentiment Index is a low 111.0 and the total put/call is an above-average 1.02. Finally, the NYSE Arms has been running above-average most of the day and is currently 1.11. Considering the news today in the financial sector and the rise in oil, the broad market is holding up better than I would have expected. The (XLF) is at session lows, down 2.7%, and has declined for five straight days ahead of key earnings reports. Given how much bad news is already priced into the financials, I would expect the (XLF) to hold the $24-24.25 level. Growth stocks are outperforming value stocks, with many market leaders actually higher on the day. Moreover, the food, airline, road & rail, retail, hospital, computer service, networking, oil service, energy, utility and defense sectors are all higher for the day. Recent market action indicates to me that the bears are running low on firepower. I still expect stocks to recoup much of last week’s losses later this week. Nikkei futures indicate an +60 open in Japan and DAX futures indicate an +70 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close on short-covering and bargain hunting.