BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs, Computer longs and Medical longs. I added to my (IWM)/(QQQQ) hedges this morning and then covered them this afternoon, 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 elevated. Today’s overall market action is very bearish. The VIX is falling 1.02% and is historically elevated at 51.61. The ISE Sentiment Index is low at 87.0 and the total put/call is above-average at 1.06. Finally, the NYSE Arms has been running high most of the day, hitting 2.35 at its intraday peak, and is currently 1.81. The Euro Financial Sector Credit Default Swap Index is falling 9.3% today to 116.67 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 falling 3.8% to 171.24 basis points. The TED spread is falling 7.97% to 3.52 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down another 14 basis points to 1.17%, which is down 146 basis points in about three months and at the lowest level since April 1999.I said yesterday that there are particularly troublesome signs in Europe and the ECB is way behind the curve.I think much of today’s US stock sell-off is related to the ECB’s inaction.I still believe a significant coordinated global central bank response is likely over the coming days.On the positive side, gauges of credit market angst are much improved today, which is necessary for a sustainable stock market bottom.Nikkei futures indicate a -340 open in Japan and DAX futures indicate a -56 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, financial sector pessimism and global growth worries.
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