Stocks Slightly Lower into Final Hour on Terrorism/Iran Worries, Profit-Taking, More Shorting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs, Biotech longs, Defense longs and Retail longs. I added to my (HGSI) long and was stopped out of a trading long 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 very light. Investor anxiety is high. Today’s overall market action is neutral. The VIX is rising +3.24% and is high at 20.10. The ISE Sentiment Index is below average at 109.0 and the total put/call is slightly below average at .78. Finally, the NYSE Arms has been running very high most of the day, hitting 1.51 at its intraday peak, and is currently 1.40. The Euro Financial Sector Credit Default Swap Index is falling -.03% to 66.07 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 -.30% to 82.15 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling -1 basis point to 20 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 falling -2.24% to 35.19 basis points. The Libor-OIS spread is unch. at 8 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +3 basis points to 2.39%, which is down -26 basis points since July 7th. The 3-month T-Bill is yielding .05%, which is up +1 basis point today. Market leaders are substantially outperforming again today. REIT, Computer Service, Telecom, Hospital and Education shares are especially strong, rising .50%+. Despite escalating terrorism/Iran worries, stocks are holding on to recent gains. The NYSE Arms is very high again on light index volume, which shows how little conviction the bears have right now, in my opinion. It is noteworthy that oil is just mildly higher and gold is flat today despite these concerns and a lower US dollar. (GOOG) continues to position itself for a strong 2010 and I would still be a buyer of the shares around current levels as I continue to expect significant upside appreciation. I am still long these previously mentioned stocks: (AAPL), (GOOG), (CREE), (DISCA), (QSII), (ISRG), (HGSI) and (ASEI). On the negative side, cyclicals are seeing some profit-taking today and (XLF) is a bit heavy. Nikkei futures indicate an +25 open in Japan and DAX futures indicate an +3 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, technical buying and seasonal strength.