Stocks Mixed into Final Hour as Profit-Taking, More Shorting Offsets Earnings Optimism, Technical Buying and Stable Long-Term Rates

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs, Retail longs, Medical longs and Biotech 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 very high. Today’s overall market action is neutral. The VIX is falling -.39% and is high at 23.06. The ISE Sentiment Index is around average at 151.0 and the total put/call is about average at .83. Finally, the NYSE Arms has been running above average most of the day, hitting 1.32 at its intraday peak, and is currently .83. The Euro Financial Sector Credit Default Swap Index is falling -2.19% today to 66.67 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 +.18% to 98.88 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is down -2 basis points to 21 basis points. The TED spread is now down 443 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is up +1.15% to 32.88 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -2 basis points to 2.21%, which is down 44 basis points since July 7th. The 3-month T-Bill is yielding .06%, which is up +2 basis points today. Market leading stocks are strongly outperforming today. As well, healthcare-related shares are relatively strong today. Medical, HMO and Hospital stocks are all rising .75%+ for the day. (XLF)/(IYR) have underperformed throughout the day, but have moved to session highs in recent trading. Weekly retail sales rose +1.7% this week versus a +.7% gain the prior week and up from a -4.1% decline the week of Sept. 1. This is the best showing for weekly retail sales since the week of Sept. 9^th, 2008, which is a big positive. I expect overall holiday retail sales to exceed expectations. Today’s broad market action is indicative of another healthy consolidation day. Nikkei futures indicate an +70 open in Japan and DAX futures indicate an +16 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, earnings optimism, investment manager performance anxiety, technical buying and stable long-term rates.