Stocks Lower into Final Hour on Financial Sector Pessimism, Global Growth Concerns, Higher Commodity Prices

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Software longs, Alternative Energy longs, Medical longs and Emerging Market/Commodity shorts. 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 negative as the advance/decline line is lower, most sectors are declining and volume is about average. Investor anxiety is above average. Today’s overall market action is bearish. The VIX is rising 5.8% and is still above-average at 21.4. The ISE Sentiment Index is below average at 106.0 and the total put/call is above average at 1.01. Finally, the NYSE Arms has been running above average most of the day and is currently 1.32. The Euro Financial Sector Credit Default Swap Index is unch. today at 83.66 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is rising 2.5% today to 133.95 basis points. The TED spread is falling 1.75% to 1.14. The 10-year TIPS spread, a good gauge of inflation expectations, is falling another 2 basis points to 2.21%, which is the lowest since January 28th and down 42 basis points in about a month. Growth stocks are relatively strong again today. The MS Tech Index is just .6% lower on the day despite the bounce in oil and 5.8% decline in the (XLF). The Semiconductor Index(SOX) is today’s best-performer, rising .4%. (INTC) is leading the way with a 4.0% gain on heavy volume. The stock is rising above its 200-day moving average for the first time since May. The AAII % Bulls fell to 35.6% this week, while the % Bears rose to 42.4%. I would expect to see some more weakness in US stocks tomorrow morning, with a possible rally into the afternoon. Nikkei futures indicate an -30 open in Japan and DAX futures indicate an +13 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on a bounce in commodity prices, global growth worries, financial sector pessimism and more shorting.