Stocks Miex into Final Hour as Global Growth Worries Offset Lower Commodity Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Retail longs, Medical longs and Commodity/Emerging Market shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mixed as the advance/decline line is slightly lower, sector performance is mostly positive and volume is below average. Investor anxiety is above average. Today’s overall market action is neutral. The VIX is falling 2.85% and is still above-average at 19.76. The ISE Sentiment Index is low at 115.0 and the total put/call is above average at .97. Finally, the NYSE Arms has been running below average most of the day and is currently .65. The Euro Financial Sector Credit Default Swap Index is falling 1.07% today to 79.26 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 falling .79% today to 134.21 basis points. The TED spread is rising 2.37% to .98. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis point to 2.19%, which is still the lowest since October 14, 2003 and down 44 basis points in six weeks. Based on a quick scan of many leading hedge funds’ 13Fs yesterday and a Bloomberg story today, my suspicions of a massive overweighting in commodity stocks by these funds were confirmed. This is likely the reason that many leading growth stocks are underperforming today, as these funds cut risk across the board again. Gold is poised to finish the week convincingly below its 65-week moving-average for the first time since its major bull move began in 2001. Nikkei futures indicate a -54 open in Japan and DAX futures indicate an +13 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower commodity prices and less financial sector pessimism.