Stocks Reversing Lower into Final Hour on Rising Sovereign Debt Agnst, Regulatory Fears, US Housing Worries, Profit-Taking

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 23.91 +2.21%
  
• ISE Sentiment Index 122.0 +7.02%
  
• Total Put/Call .90 +4.65%
  
• NYSE Arms .82 -14.28%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 105.82 bps -3.88%
  
• European Financial Sector CDS Index 132.86 bps -1.04%
  
• Western Europe Sovereign Debt CDS Index 133.0 bps +6.26%
  
• Emerging Market CDS Index 251.78 bps -.05%
  
• 2-Year Swap Spread 33.0 -2 bps
  
• TED Spread 43.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .10% +1 bp
  
• Yield Curve 253.0 +2 bps
  
• China Import Iron Ore Spot $144.30/Metric Tonne +.14%
  
• Citi US Economic Surprise Index -15.10 +.7 point
  
• 10-Year TIPS Spread 2.04% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -68 open in Japan
• DAX Futures: Indicating -36 open in Germany

Portfolio:

• Slightly Lower: On losses in my Technology and Retail long positions
  
• Disclosed Trades: Added to my (IWM)/(QQQQ) hedges, added to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows despite large gains in overseas stocks. On the positive side, Coal, Ag and Steel stocks are outperforming, rising .75%+ on the day. Oil is falling slightly, despite the morning rise in the euro, Iran saber-rattling, China's currency move, the ramifications of the oil spill, an upgrade to hurricane season expectations and overseas equity gains. Copper is rising another +1.6%. On the negative side, Airline, Retail, Hospital, Internet and Gold shares are especially weak, falling 1.5%+. The tech sector, which had been a leadership group is also under pressure today, with leaders especially weak. It is a big negative to see Greece sovereign debt angst remain stubbornly high despite Europe's recent actions. The Greece sovereign cds is rising another +4.4% to 853.5 bps. I disagree with the market's initial bullish interpretation of China's overnight yuan move. I think the move was mainly related to Chinese fears of a significant slowdown in export growth related to US job/housing weakness and European austerity measures. With wages rising meaningfully and protectionism rampant in China, the currency move will only make China even less attractive for multi-national manufacturing operations. I also suspect Chinese consumer spending will be much less robust than most analysts expect as a result of recent developments. I expect US stocks to trade modestly lower into the close from current levels on profit taking, regulatory fears, technical selling, rising US housing worries, increasing sovereign debt angst and more shorting.