Stocks Lower into Final Hour on Global Growth Worries, Rising Credit Market Angst, More Shorting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Biotech longs and Medical longs. I added to my (IWM)/(QQQQ) hedges and added to my (EEM)/commodity shorts this morning and then added to my (IWM)/(QQQQ) hedges this afternoon, thus leaving the Portfolio 50% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is declining and volume is heavy. Investor anxiety is very elevated. Today’s overall market action is very bearish. The VIX is rising 8.52% and is hitting a new record high of 62.69. The ISE Sentiment Index is below average at 121.0 and the total put/call is very high at 1.32. Finally, the NYSE Arms has been running high most of the day, hitting 2.08 a few minutes ago. The Euro Financial Sector Credit Default Swap Index is rising .04% today to 108.67 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is rising 5.22% to 187.10 basis points. The TED spread is rising 8.1% to 4.23 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 7 basis points to 1.05%, which is down 158 basis points in about three months and at the lowest level since January 1999. The action in (MS) is weighing heavily on the (XLF) and (GM)/(F) are also a huge broad market negative. As well, gauges of credit market angst are surging again. Today’s action will likely lead to further serious losses in Asia tonight, which could pressure US stocks further on the open tomorrow. I wouldn’t be surprised to see more coordinated global central bank action by Monday at the latest. The AAII % Bulls fell to 31.47% this week, while the % Bears rose to 60.84%. The % Bears is now at the third highest level on record and the highest since October 1990. Nikkei futures indicate a -557 open in Japan and DAX futures indicate a -137 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, global growth worries, rising credit market angst, forced selling and financial sector pessimism.