Stocks Slightly Higher into Final Hour Despite Financial Sector Weakness and Record Oil

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Alternative Energy longs, Computer longs, Biotech longs, Gaming longs and Software longs. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is neutral as the advance/decline line is about even, sector performance is mixed and volume is about average. Investor anxiety is slightly above average. Today’s overall market action is neutral. The VIX is falling 1.1%, but remains above average at 19.5. The ISE Sentiment Index is a below average 138.0 and the total put/call is about average at .90. Finally, the NYSE Arms has been running above average most of the day and is currently 1.30. The rise in oil to another record remains a large negative. The financials ETF(XLF) has a -.9 correlation with the United States Oil Fund(USO) and is dropping another 1.7% today. I still don’t expect the S&P 500 to break meaningfully above its 200-day moving-average until oil reverses lower. This will likely come on another US dollar surge and evidence of slowing overseas demand. On the positive side, the fact that financials are down as much as they are and oil is hitting another record, yet the major averages are hanging in is impressive. The 10-year swap spread is falling to 58.75 basis points over Treasuries, which is at the low end of its trading range. One of my longs, American Superconductor(AMSC), reported strong results this morning and boosted guidance. The stock is soaring 28.3% to $31.62, which is near its all time high of $32.74 hit in December of last year. I have been long the stock since $12/share and still see tremendous upside in the shares from current levels. I will use any meaningful weakness as a buying opportunity. Nikkei futures indicate a -33 open in Japan and DAX futures indicate a +15 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.