Stocks Sharply Lower into Final Hour on Global Growth Worries, Foced Selling and More Shorting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs, Computer longs and Internet longs. I added to my (IWM)/(QQQQ) hedges and added to my (EEM) short this morning, thus leaving the Portfolio 50% net long. The tone of the market is very bearish as the advance/decline line is substantially lower, every sector is falling and volume is about average. Investor anxiety is very elevated. Today’s overall market action is very bearish. The VIX is rising 16.57% and is very elevated at 63.44. The ISE Sentiment Index is low at 107.0 and the total put/call is very high at 1.30. Finally, the NYSE Arms has been running very high most of the day, hitting 4.09 at its intraday peak, and is currently 3.35. The Euro Financial Sector Credit Default Swap Index is rising 10.76% today to 106.33 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 3.59% to 191.58 basis points. The TED spread is falling another 1.77% to 208 basis points. The TED spread is now down 256 basis points in about four weeks. The 2-year swap spread is rising 2.39% to 107.25 basis points. The Libor-OIS spread is rising .29% to 184 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 3 basis points to .91%, which is down 171 basis points in about four months and at the lowest level since January 1999. The most economically sensitive companies are getting hit the hardest again today. Tomorrow’s jobs report should come in around estimates of -200K, however I suspect the market is pricing in something worse. Thus, I would expect to see US stocks rise into the afternoon after any initial weakness on the report. I plan to cover some of my hedges into the close today. For the second day in a row the NYSE Arms is very high with mediocre volume. As well, the total put/call is very high. These are positives. Oil continues to trade very poorly and will likely finish next week in the 50s, notwithstanding any significant stock rally. Nikkei futures indicate a -529 open in Japan and DAX futures indicate a -85 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, forced selling and global growth worries.