Stocks Reversing Lower on Volume into Final Hour on Rising Sovereign Debt Fears, Profit-Taking, More Shorting

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 16.52 +1.79%
  
• ISE Sentiment Index 123.0 -10.87%
  
• Total Put/Call .92 +21.05%
  
• NYSE Arms .91 +19.24%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 86.38 bps +2.06%
  
• European Financial Sector CDS Index 76.84 bps +5.10%
  
• Western Europe Sovereign Debt CDS Index 85.17 bps +2.0%
  
• Emerging Market CDS Index 218.55 bps +2.74%
  
• 2-Year Swap Spread 14.0 bps -2 unch.
  
• TED Spread 13.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .16% unch.
  
• Yield Curve 280.0 bps -3 bps
  
• China Import Iron Ore Spot $161.20/Metric Tonne +.44%
  
• Citi US Economic Surprise Index +43.40 +1.6 points
  
• 10-Year TIPS Spread 2.33% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -47 open in Japan
• DAX Futures: Indicating -21 open in Germany

Portfolio:

• Slightly Lower: On losses in my Medical and Tech long positions
  
• Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short and took some profits in my (ISRG) long
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bearish as stocks trade near session lows, despite lower long-term rates. On the positive side, Gold, Alt Energy, Computer, Semi, I-Bank and Restaurant stocks are higher on the day. The euro continues to trade poorly. On the negative side, Airline, REIT, Homebuilding, HMO, Telecom and Steel shares are under meaningful pressure, falling 2.0%+. (IYR) has been heavy throughout the day. Investor angst remains subdued, which is a big negative. The Greece sovereign cds is surging another 7.9% and the Portugal sovereign cds is jumping 6.8% today. The rise in the euro financial sector cds is also a large negative. The rise in gold, despite US dollar strength is also a broad market negative. I suspect investors are preparing for another spike in European sovereign debt angst. I expect US stocks to trade modestly lower into the close from current levels on profit-taking, technical selling, rising sovereign debt fears and more shorting.