Stocks Slightly Higher into Final Hour on Falling Energy Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Alternative Energy longs, Software longs and Medical longs. I added (IWM)/(QQQQ) hedges, added a fertilizer short and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The tone of the market is bullish as the advance/decline line is higher, most sectors are rising and volume is below average. Investor anxiety is slightly below average. Today’s overall market action is mildly bearish. The VIX is falling 4.9%, but remains above average at 17.1. The ISE Sentiment Index is low at 98.0 and the total put/call is below average at .78. Finally, the NYSE Arms has been running below average most of the day and is currently .77. Considering the fall in oil, better inflation reading, financial sector strength, today’s late afternoon weakness is somewhat disappointing. Market leaders are especially weak, which may indicate a short-term pullback is in the offing. On the positive side, the European Financial Sector Credit Default Swap Index is falling 2.0 basis points to 61.09 basis points and the US Dollar continues to trade very well. Nikkei futures indicate a +112 open in Japan and DAX futures indicate a +33 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking and more short selling.