Stocks Mixed into Final Hour as Plunging Commodity Prices Offset Global Growth Concerns

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Gaming longs, Retail longs, Software 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 slightly positive as the advance/decline line is mildly higher, sector performance is mostly positive and volume is about average. Investor anxiety is high. Today’s overall market action is mildly bearish. The VIX is rising 3.4% and is still above-average at 21.33. The ISE Sentiment Index is very low at 92.0 and the total put/call is above average at .97. Finally, the NYSE Arms has been running high most of the day, hitting a peak of 1.26, and is currently 1.03. The Euro Financial Sector Credit Default Swap Index is falling 1.48% today to 89.17 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 -1.01% to 141.48 basis points. The TED spread is rising 3.07% to 1.13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is plunging 9 basis points to 2.05%, which is down 58 basis points in about seven weeks and at the lowest level since November 2003. I suspect the market made its lows for the day just now, however I plan to add hedges into the close on any further meaningful deterioration in the broad market. I still think the decline in commodities, rise in the US dollar and rise in financials is leaving many hedges funds under severe stress, resulting in reduced risk appetite across the board. Nikkei futures indicate an +111 open in Japan and DAX futures indicate a -25 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, falling commodity prices, less financial sector pessimism and bargain-hunting.