Wednesday, June 18, 2008

Stocks Lower into Final Hour on Rise in Oil, Bank Worries

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Computer longs and Gaming longs. I covered all my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 100% net long. The tone of the market is negative as the advance/decline line is substantially lower, most sectors are declining and volume is below average. Investor anxiety is above average. Today’s overall market action is mildly bearish. The VIX is rising 2.8% and remains above average at 21.7. The ISE Sentiment Index is below average at 118.0 and the total put/call is high at 1.10. Finally, the NYSE Arms has been running high most of the day and is currently 1.31. The Euro Financial Sector Credit Default Swap Index is rising 6.7% today to 76.46 basis points. This is up from a low of 52.66 on May 5th, but still down from 129.46 basis points on March 20th. The North American Investment Grade Credit Default Swap Index is rising 2.4% today to 108.37. The TED spread is rising 5.4% today to .88 basis points. On the positive side, the NYSE Arms hit a very high 2.24 this morning. Investor pessimism is reaching very high levels once again. However, it seems the bears may be running low on firepower. The (XLF) has trimmed losses meaningfully as the I-Banks trade 1.3% higher on the day. A number of leading growth stocks are actually higher today, despite losses in the headline averages and the rise in oil. Nikkei futures indicate a -92 open in Japan and DAX futures indicate an +11 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting and short-covering.

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