BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Gaming longs and Medical longs. I took profits in some of my emerging market/commodity shorts, covered some of my (IWM)/(QQQQ) hedges and was stopped out of some of my longs, thus leaving the Portfolio 75% net long. The tone of the market is very negative as the advance/decline line is substantially lower, every sector is falling and volume is heavy. Investor anxiety is very elevated. Today’s overall market action is very bearish. The VIX is rising 20.2% and is historically elevated at 54.69. The ISE Sentiment Index is low at 99.0 and the total put/call is very high at 1.53. Finally, the NYSE Arms has been running very high most of the day, hitting 6.02 at its intraday peak, and is currently 1.69. The Euro Financial Sector Credit Default Swap Index is rising 5.03% today to 129.0 basis points. This index is up from a low of 52.66 on May 5th, but down from 157.81 on Sept. 16th. The North American Investment Grade Credit Default Swap Index is rising 3.8% to 186.0 basis points. The TED spread is falling 1.8% to 3.81 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down another 14 basis points to 1.31%, which is down 132 basis points in about three months and at the lowest level since December 2001, when deflation was the concern.I said late last week that the US rescue plan was a large positive longer-term, but that a significant global response was necessary to reverse the ongoing credit markets freeze.There are particularly troublesome signs in Europe and the ECB is way behind the curve.France called for an emergency G8 meeting this afternoon, so hopefully more effort from the region is forthcoming.Nikkei futures indicate a -300 open in Japan and DAX futures indicate an +43 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and diminishing inflation expectations.
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