Stocks Reversing Lower into Final Hour on Tech Sector Pessimism, China Bubble Worries, US Political Concerns, Euro Sovereign Debt Fears

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Technology longs and Medical longs. I added to my (IWM)/(QQQQ) hedges and to my (EEM) short this morning, took some profits in a few longs and sold all of my (QSII) long, thus leaving the Portfolio 50% net long. The tone of the market is very negative as the advance/decline line is substantially lower, most sectors are declining and volume is heavy. Investor anxiety is very high. Today’s overall market action is very bearish. The VIX is rising +3.83% and is above-average at 24.61. The ISE Sentiment Index is below average at 125.0 and the total put/call is above average at .94. Finally, the NYSE Arms has been running above average most of the day, hitting 1.25 at its intraday peak, and is currently 1.12. The Euro Financial Sector Credit Default Swap Index is rising +2.79% to 81.54 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 -.59% to 94.78 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 18 basis points. The TED spread is now down 445 basis points since its all-time high of 463 basis points on October 10^th, 2008. The 2-year swap spread is rising +.53% to 26.75 basis points. The Libor-OIS spread is unch. at 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +1 basis point to 2.33%, which is down -32 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .06%, which is unch. today. Cyclical stocks are underperforming again today. Tech shares are under significant pressure. Education, Disk Drive, Computer, Gold, Coal, Wireless, Semi and Software shares are especially weak, falling 2.5%+. I am still getting technical buy signals on the Euro Financial Sector CDS Index, which is a large negative. China Iron Ore prices fell -4.18% this week and copper is breaking down technically. On the positive side, Paper, Retail, Biotech, Homebuilding, Hospital and Telecom shares are just slightly lower or even higher on the day. (AAPL) has broken the psychologically important $200 level. Given today’s positive economic data and positive earnings reports, the market’s reaction is even more negative than the major averages suggest. As well, given the declines in many market leading stocks, investor angst gauges are registering too much complacency. I will wait to see Asia's reaction to our market on Monday before further shifting market exposure. Nikkei futures indicate a -18 open in Japan and DAX futures indicate a -58 open in Germany on Monday. I expect US stocks to trade mixed-to-lower into the close from current levels on tech sector pessimism, more shorting, euro sovereign debt fears, china bubble worries, technical selling and US political concerns.