Stocks Slightly Lower into Final Hour on Profit-taking, Record Energy Prices

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Alternative Energy longs, Networking longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly bearish as the advance/decline line is slightly lower, sector performance is mixed and volume is above average. Investor anxiety is slightly above average. Today’s overall market action is mildly bullish. The VIX is rising 1.4% and remains above average at 16.5. The ISE Sentiment Index is below average at 121.0 and the total put/call is about average at .91. Finally, the NYSE Arms has been running above average most of the day and is currently 1.15. Given this morning’s mostly disappointing economic data, recent market gains, dollar weakness and oil’s surge to record levels, today’s market performance is more impressive. I continue to believe recent market action indicates the many bears are running low on firepower and should be very concerned. Market leading stocks are relatively strong again. A number of technology and commodity stocks are breaking out of recent ranges. The S&P 500 is very close to breaking above its 200-day moving average at 1,428. I still think a reversal lower in oil will result in a convincing break above this level, which could come as early as next week. The European Financial Sector Credit Default Swap Index is falling another 1.33 basis points to 57.04 basis points, which is down from a high of 131.41 on March 21^st. The TED spread is also falling 3 basis points today to .86, which is down from 2.40 in August of last year. (ISRG) is breaking free of its recent trading range and bumping up against its 50-day moving average. I suspect the stock will break above this level next week and test its all-time highs during 4Q. Nikkei futures indicate a +110 open in Japan and DAX futures indicate a +84 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and diminishing credit market angst.