Stocks Sharply Lower into Final Hour on Jump in Energy Prices, Shorting, Profit-taking

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Alternative Energy longs, Computer longs and Software longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is bearish as the advance/decline line is sharply lower, almost every sector is falling and volume is about average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising 6.6% and remains above average at 19.4. The ISE Sentiment Index is a low at 114.0 and the total put/call is slightly above average at .95. Finally, the NYSE Arms has been running high most of the day and is currently 1.59. The rise in oil to another record is a large negative, especially considering the huge US inventory build this week, a sharp rise in the US dollar and Exxon said that it lifted its Force Majeure in Nigeria. The financials ETF(XLF) has a -.9 correlation with the United States Oil Fund(USO). I don’t expect the S&P 500 to break meaningfully above its 200-day moving-average until oil reverses lower. The Shanghai Composite fell 4.1% last night. It is now down 32% for the year and 42% from its October high of last year. On the positive side, the TED spread is falling another 6 basis points today to 107.0 basis points, which is the lowest since February 25^th and down from 204.0 on March 19^th, which is a significant positive. Two of my longs, (PWR) and (WMS), reported earnings that exceeded expectations. Both are up big today and I would be a buyer on any meaningful pullbacks. Nikkei futures indicate a -162 open in Japan and DAX futures indicate a -9 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, record energy prices and profit-taking.