Stocks Mixed into Final Hour as Rising Oil, Credit Angst Offset Bargain-Hunting and Short-Covering

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Computer longs, Alternative Energy longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is slightly lower, sector performance is mixed and volume is light. Investor anxiety is above average. Today’s overall market action is neutral. The VIX is falling 3.2% and is still above-average at 20.59. The ISE Sentiment Index is low at 101.0 and the total put/call is above-average at 1.03. Finally, the NYSE Arms has been running around average most of the day and is currently .93. The Euro Financial Sector Credit Default Swap Index is rising .15% today to 88.33 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 1.96% today to 144.35 basis points. The TED spread is rising 9.11% to 1.11. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 3 basis points to 2.19%, which is still the lowest since October 14, 2003 and down 44 basis points in about six weeks. Again today, many financial pundits are proclaiming that “oil demand is still very strong,” despite the fact that OECD demand is set for the biggest fall in 25 years and non-OECD demand growth is plunging. As well, Goldman Sachs saying today that a rising US dollar doesn’t impact oil is a ridiculous statement, in my opinion. It appears as though the people that have helped inflate the current US negativity bubble are trying their very hardest to keep it inflated. So far, they aren't having as much success as prior attempts. Considering the action in (FNM)/(FRE) and rise in oil, the (XLF)’s mild rise is a big positive. As well, a couple of months ago the broad market would have likely been down badly on this news. Given the recent drop in market volume and rise in angst, it appears to me that many traders are breaking the rule of “never short a dull market.” Recent broad market action continues to indicate more of a consolidating of recent gains rather than a topping before another move lower, in my opinion. It is also a big positive that the US dollar is able to rally today given the news. On the negative side, gauges of credit angst continue to rise and the tech sector was unable to rally today on (HPQ)’s positive report. Nikkei futures indicate an +29 open in Japan and DAX futures indicate an +4 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering and bargain-hunting.