Stocks Lower into Final Hour on Rising Oil, Global Growth Concerns, Financial Sector Worries

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Gaming longs, Alternative Energy 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 very negative as the advance/decline line is substantially lower, every sector is declining and volume is heavy. Investor anxiety is high. Today’s overall market action is very bearish. The VIX is rising 8.1% and remains above average at 23.32. The ISE Sentiment Index is depressed at 78.0 and the total put/call is very high at 1.22. Finally, the NYSE Arms has been running very high most of the day and is currently 1.74. The Euro Financial Sector Credit Default Swap Index is rising 7.8% today to 85.9 basis points. This is up from a low of 52.66 on May 5^th, but still down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is rising 5.5% today to 120.4. The TED spread is rising 6.9% today to .96 basis points. On the positive side, the Regional Bank Index(KRX) is trading like it is washed out. (STI) just affirmed its first quarter credit and capital outlook and said it didn’t plan on cutting the dividend or issuing additional shares. The stock is surging 10% from session lows. Despite the rise in oil today, the 10-year TIPS spread, a good gauge of inflation expectations, is down 3 basis points to 2.47%. This is also down 12 basis points in 9 days. Investor angst is reaching very elevated levels again, which is always a necessary component to a tradable bottom, which could materialize at any moment. The parabolic rise in short interest, combined with recent stock declines, should give the many bears itchy trigger fingers to take some profits, as well. However, I still think it will take a meaningful reversal lower in commodities before the broad US market can mount a sustainable rally. One of my longs, (ILMN) continues to trade very well and is seeing a 663% spike in call option activity today. Nikkei futures indicate a -140 open in Japan and DAX futures indicate an +44 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting and short-covering.