Stocks Sharply Lower into Final Hour on Global Growth Worries, Financial Sector Pessimism

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Medical longs, Computer longs and Internet longs. I added to my (IWM)/(QQQQ) hedges and to my (EEM) short today, 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 elevated. Today’s overall market action is very bearish. The VIX is rising 7.89% and is very elevated at 66.30. The ISE Sentiment Index is depressed at 59.0 and the total put/call is high at 1.13. Finally, the NYSE Arms has been running very high most of the day, hitting 2.63 at its intraday peak, and is currently 1.60. The Euro Financial Sector Credit Default Swap Index is rising 3.35% today to 109.66 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 up 5.8% to 201.0 basis points. The TED spread is rising 13.2% to 198 basis points. The TED spread is now down 266 basis points in just over four weeks. The 2-year swap spread is falling .12% to 104.63 basis points. The Libor-OIS spread is falling 3.42% to 164 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 6 basis points to .89%, which is down 173 basis points in just over four months and at the lowest level since January 1999. I am seeing panicky type action again in a number of stocks. Action in the financial sector is a large negative. Tomorrow’s grilling of hedge fund managers will dominate the airwaves and likely be another negative for sentiment in the very near-term. I plan to maintain my current positions into the close with an eye towards lifting some hedges tomorrow. Nikkei futures indicate a -480 open in Japan and DAX futures indicate a -1 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on global growth concerns, forced selling, more shorting and financial sector pessimism.