Stocks Lower into Final Hour on North Korea Worries, Euro Drop, Technical Selling, Rising Economic Pessimism

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 31.76 +6.97%
  
• ISE Sentiment Index 92.0 -9.80%
  
• Total Put/Call 1.30 +23.81%
  
• NYSE Arms 1.81 +444.85%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 118.58 bps +.86%
  
• European Financial Sector CDS Index 149.64 bps -.60%
  
• Western Europe Sovereign Debt CDS Index 136.0 bps -5.56%
  
• Emerging Market CDS Index 277.95 bps +1.13%
  
• 2-Year Swap Spread 46.0 +4 bps
  
• TED Spread 39.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .15% -1 bp
  
• Yield Curve 251.0 +3 bps
  
• China Import Iron Ore Spot $142.70/Metric Tonne +1.54%
  
• Citi US Economic Surprise Index +21.70 -8.6 points
  
• 10-Year TIPS Spread 2.03% -5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -17 open in Japan
• DAX Futures: Indicating -7 open in Germany

Portfolio:

• Slightly Higher: On gains in my Medical, Technology and Retail long positions
  
• Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and and then covered some of them
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 cuts losses into the close after a mid-day swoon despite more euro weakness and worries over North Korea. On the positive side, HMO, Utility, Education, Road&Rail, Drug, Software and Defense stocks are slightly higher on the day. The Spain sovereign cds is falling -7.3% to 217.63 bps, despite the Fitch downgrade of Spain's debt. The Japan sovereign cds is also down -6.1% to 89.0 bps. Several key investor angst gauges are spiking again, which is also a large positive. On the negative side, Airline, Tobacco, Insurance, I-Banking, Bank, Networking, Disk Drive, Internet, Oil Service, Energy, Oil Tanker and Alt Energy shares are especially weak, falling 1.5%+. Cyclicals are underperforming. One of my longs, (AAPL), continues to trade very well. I still view the shares as very compelling around current levels and the stock should continue to substantially outperform the broad market over the longer-term. Month-end profit-taking by short-sellers and long bargain hunters are likely putting a floor under stocks ahead of a holiday weekend. The next 7-10 days will be critical in determining whether or not the correction has run its course or another bear market has begun. I expect US stocks to trade mixed-to-lower into the close from current levels on North Korea worries, Euro Drop, Technical Selling, Rising Economic Concerns and China Bubble Fears.