Stocks Sharply Lower into Final Hour on Surge in Commodity Prices, Global Growth Concerns

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Alternative Energy longs, Computer longs and Gaming longs. I added to my (IWM/QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 50% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is falling and volume is above average. Investor anxiety is high. Today’s overall market action is very bearish. The VIX is rising 11.7% and remains above average at 23.60. The ISE Sentiment Index is low at 99.0 and the total put/call is high at 1.11. Finally, the NYSE Arms has been running very high most of the day and is currently 2.02. The Euro Financial Sector Credit Default Swap Index is rising 8.03% today to 93.93 basis points. This index is still up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. However, the North American Investment Grade Credit Default Swap Index is falling 4.2% today to 125.42, which is a positive. The TED spread is rising 6.3% to 1.08. Given record short interest, recent steep stock declines, high investor angst, quarter-end on Monday and the market’s technically oversold state, I suspect a very sharp rally will materialize sometime soon. However, the average Friday has seen the S&P 500 decline -.6% on avg. so far this year and emerging markets are likely to be weak tonight. Thus, a meaningful rally won’t likely materialize until late tomorrow or Monday. Nikkei futures indicate a -270 open in Japan and DAX futures indicate an +15 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain-hunting.