Stocks Mixed into Final Hour as Less Financial Sector Pessimism Offsets Global Growth Concerns

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Biotech longs and Medical longs. I covered all my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, 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 very heavy. Investor anxiety is very elevated. Today’s overall market action is bullish. The VIX is rising 1.32% and is historically elevated at 54.39. The ISE Sentiment Index is low at 102.0 and the total put/call is high at 1.23. Finally, the NYSE Arms has been running low most of the day, after hitting 3.68 at its morning peak, and is currently .35. The Euro Financial Sector Credit Default Swap Index is falling 6.44% today to 109.0 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 2.6% to 179.70 basis points. The TED spread is rising 8.9% to 3.87 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down another 19 basis points to .98%, which is down 165 basis points in about three months and at the lowest level since January 1999. I said last week that we needed to see a significant global central bank response to the current crisis and we got that today. I am surprised by the market’s muted upside reaction thus far. However, given that the ban on short-selling financials expires tonight and ongoing forced hedge fund selling, a delayed more vigorous upside reaction is likely. Nikkei futures indicate an +227 open in Japan and DAX futures indicate an +137 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting and global growth worries.