Stocks Lower into Final Hour on Higher Energy Prices, Financial Sector Worries

BOTTOM LINE: The Portfolio is about even into the final hour as losses in my Alternative Energy longs and Computer longs are being offset by gains in my Software longs, Medical longs and Emerging Market shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is slightly bearish as the advance/decline line is mildly 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 falling .5%, but remains above average at 19.4. The ISE Sentiment Index is below average at 123.0 and the total put/call is slightly above average at .96. Finally, the NYSE Arms has been running very high most of the day and is currently 1.51. Considering the rise in oil and financial sector news, today’s action isn’t too bad. The bears seem to be running low on firepower again. I think a reversal lower in oil is all that stands in the bulls way of another meaningful market surge higher. Moreover, the TED spread is falling another 6 basis points today to 100.0 basis points, which is the lowest since February 25^th and down from 204.0 on March 19^th, which is a significant positive. The 30-day asset backed commercial paper yield is down 8 basis points to 2.63%, the lowest since February 2005. The US dollar-based Libor rate is also falling another 3 basis points to 2.68%, down from 2.93% on April 23rd. Nikkei futures indicate a +5 open in Japan and DAX futures indicate a +46 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, and bargain hunting.