Stocks Mostly Lower into Final Hour on Economic Worries, More Shorting, 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 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is slightly above average. Investor anxiety is high. Today’s overall market action is mildly bearish. The VIX is rising +1.32% and is high at 24.72. The ISE Sentiment Index is around average at 142.0 and the total put/call is above average at 1.0. Finally, the NYSE Arms has been running above average most of the day, hitting 2.12 at its intraday peak, and is currently 1.06. The Euro Financial Sector Credit Default Swap Index is rising +3.56% today to 63.67 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 +2.33% to 102.03 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is down -1 basis point to 22 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +1.16% to 38.13 basis points. The Libor-OIS spread is unch. at 12 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is unch. at 2.0%, which is down 65 basis points since July 7th. The 3-month T-Bill is yielding .06%, which is up +1 basis point today. Cyclicals are weak again today, falling another -2.1%. As well, many tech stock leaders are substantially underperforming today and the Transports remain under pressure. The US dollar continues to trade well and bonds look higher near-term. On the positive side, Energy, Education, HMO, Drug, Biotech, Medical, Telecom and Computer Service shares are all higher on the day. Given today’s news, the bears had another chance to gain meaningful traction, but have failed thus far. I want to see the market’s reaction to tomorrow’s economic data before further shifting market exposure. Nikkei futures indicate a -22 open in Japan and DAX futures indicate an +1 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on economic worries, more shorting, higher energy prices and profit-taking.