Stocks Slightly Lower into Final Hour on Healthcare Reform Concerns, Profit-Taking, China Bubble Worries, More Shorting

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is lower, sector performance is mixed and volume is slightly above average. Investor anxiety is high. Today’s overall market action is slightly bearish. The VIX is rising .61% and is high at 24.82. The ISE Sentiment Index is below average at 127.0 and the total put/call is slightly below average at 77. Finally, the NYSE Arms has been running low most of the day, hitting .33 at its intraday trough, and is currently .53. The Euro Financial Sector Credit Default Swap Index is falling 4.11% today to 80.0 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 falling 1.03% to 114.96 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 2.73% to 21 basis points. The TED spread is now down 445 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is unch. at 35.19 basis points. The Libor-OIS spread is falling another 3.19% to 17 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 2 basis points to 1.71%, which is down 95 basis points since July 7th. The 3-month T-Bill is yielding .13%, which is down 1 basis point today. Alt Energy, Financial, Technology, Steel, REIT and Road/Rail shares are substantially outperforming today, rising .75%+. Once again, the bears were unable to gain any real traction after a morning sell-off. Over the last week, the S&P 500 has been in a very tight, but volatile range, which is frustrating both the bulls and the bears. I tend to believe the next tradable move is higher, but the market’s mixed reaction to recent positive news events is a bit troublesome. As well, Chinese shares remain “heavy”. Chinese Iron Ore prices fell 10.71% this week, which is noteworthy. Nikkei futures indicate an +40 open in Japan and DAX futures indicate an +1 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, technical buying, less economic fear, diminishing financial sector pessimism and subdued long-term rates.