Stocks Most;ly Lower into Final Hour on More Shorting, Financial Sector Pessimism, Rising Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Technology longs and Medical longs. I added (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is above average. Investor anxiety is above average. Today’s overall market action is mildly bullish. The VIX is falling 3.65% and is very high at 31.64. The ISE Sentiment Index is below average at 121.0 and the total put/call is about average at .86. Finally, the NYSE Arms has been running high most of the day, hitting 2.16 at its intraday peak, and is currently 1.78. The Euro Financial Sector Credit Default Swap Index is rising 1.28% today to 122.33 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 2.53% to 151.68 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 4.56% to 73 basis points. The TED spread is now down 390 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 3.76% to 44.75 basis points. The Libor-OIS spread is rising 4.11% to 71 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 1.53%, which is down 111 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is up two basis points today. The major averages are rallying from morning lows this afternoon, however bank and tech shares remain somewhat “heavy.” Nikkei futures indicate an +92 open in Japan and DAX futures indicate an +45 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, rising financial sector pessimism and higher energy prices.