Stocks Lower into Final Hour on Tax Hike Worries, Rising Economic Pessimism, Commercial Real Estate Concerns

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs, Defense longs and Commodity/Emerging Market shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is mildly negative as the advance/decline line is mildly lower, most sectors are declining and volume is below average. Investor anxiety is high. Today’s overall market action is mildly bearish. The VIX is falling 1.21% and is high at 29.41. The ISE Sentiment Index is low at 102.0 and the total put/call is above average at .96. Finally, the NYSE Arms has been running very high most of the day, hitting 2.40 at its intraday peak, and is currently 1.87. The Euro Financial Sector Credit Default Swap Index is rising 2.62% today to 112.0 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 .62% to 145.0 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 1.54% to 34 basis points. The TED spread is now down 432 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 4.06% to 38.44 basis points. The Libor-OIS spread is rising 1.62% to 31 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 4 basis points to 1.51%, which is down 113 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is down 1 basis point today. (XLF) is trading heavy today and is near session lows. (JPM) has been especially weak. As well, healthcare shares area a drag on continuing worries over government reform. The S&P 500 has been rangebound for three days after its recent decline, which is a negative. Moreover, the market’s internal action remains a concern. On the positive side, volume is anemic today and the NYSE Arms has been very high. As well, market leading tech stocks have traded well throughout the day. Finally, given today's weak consumer confidence report and emerging markets weakness, today's broad market action isn't too bad. Nikkei futures indicate a -32 open in Japan and DAX futures indicate an +10 open in Germany on Monday. I expect US stocks to trade mixed into the close from current levels as bargain-hunting, tech sector optimism, lower energy prices and lower long-term rates offset commercial real estate worries, tax hike concerns, rising economic pessimism and more shorting.