Stocks Mostly Lower into Final Hour on Profit-Taking, Higher Energy Prices

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses 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 about average. Investor anxiety is high. Today’s overall market action is neutral. The VIX is falling -4.68% and is high at 21.79. The ISE Sentiment Index is slightly above average at 163.0 and the total put/call is slightly below average at .71. Finally, the NYSE Arms has been running above average most of the day, hitting 1.43 at its intraday peak, and is currently 1.13. The Euro Financial Sector Credit Default Swap Index is rising +.78% today to 65.17 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 +.03% to 96.75 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is up +1 basis point to 23 basis points. The TED spread is now down 441 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +5.78% to 38.88 basis points. The Libor-OIS spread is down -1 basis point to 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +4 basis points to 1.99%, which is down 66 basis points since July 7th. The 3-month T-Bill is yielding .05%, which is down 2 basis points today. Energy, Steel, Drug, Hospital, Construction and Software shares are especially strong today, rising 1.0%+. The decline in gold is noteworthy, considering more dollar weakness. It appears as though some large speculators are switching into oil. Most tech shares are relatively weak ahead of key reports from (GOOG) and (IBM) after the close. (GOOG)’s short interest ratio is currently 1.46, up from 1.13 in July. Its open interest put/call ratio is .93, up from .80 in August. I suspect (GOOG) will slightly exceed estimates. However, any kneejerk selling in the shares will likely be relatively mild and short-lived ahead of several significant positive catalysts over the next year. Nikkei futures indicate an +102 open in Japan and DAX futures indicate an +27 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering, takeover speculation, investment manager performance anxiety and earnings optimism.