Stocks Falling into Final Hour on Hedge Fund Concerns, Global Growth Worries, Financial Sector Pessimism

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Alternative Energy longs and Computer longs. I added (IWM)/(QQQQ) hedges, added to my (EEM) short, sold my (AMSC)/(PWR) longs and took profits in some of my Commodity/Emerging Market shorts this morning, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, almost every sector is lower and volume is above average. Investor anxiety is high. Today’s overall market action is bearish. The VIX is rising 10.82% and is high at 25.10. The ISE Sentiment Index is very low at 84.0 and the total put/call is high at 1.13. Finally, the NYSE Arms has been running high most of the day, hitting a peak of 1.50, and is currently 1.03. The Euro Financial Sector Credit Default Swap Index is rising 6.03% today to 92.33 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 +2.7% to 143.16 basis points. The TED spread is rising 4.65% to 1.17 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 6 basis points to 1.93%, which is down 69 basis points in just over seven weeks and at the lowest level since August 2003. The Goldman Sachs Hedge Fund VIP Index(49 of the most common hedge fund long positions) is falling another 5% today. However, the selling in the broad market looks a bit more rational today. The commodity/emerging market bubble stocks remain under severe pressure, but are getting extremely oversold and are due for a bounce. I have an unusual number of stocks on my monitor pages that are higher today, given broad market damage. Even Russian stocks, which fell another 7.4% today, are due for a bounce. The BankRate.com average 30-year fixed rate mortgage has plunged 27 basis points in two days to 5.88%, which is a large positive. Nikkei futures indicate a -200 open in Japan and DAX futures indicate a -45 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as lower commodity prices and bargain-hunting offset global growth worries, financial sector pessimism and more shorting.