Stocks Reversing Morning Gains into Final Hour on Rising Sovereign Debt Angst, Increasing Energy Sector Pessimism, Technical Selling, More Shorting

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 27.89 -3.13%
  
• ISE Sentiment Index 81.0 -13.83%
  
• Total Put/Call 1.07 +.94%
  
• NYSE Arms 1.09 -13.91%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 120.65 bps -4.36%
  
• European Financial Sector CDS Index 153.64 bps -.85%
  
• Western Europe Sovereign Debt CDS Index 138.50 bps +8.91%
  
• Emerging Market CDS Index 274.83 bps -3.86%
  
• 2-Year Swap Spread 38.0 -1 bp
  
• TED Spread 49.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .05% -2 bps
  
• Yield Curve 253.0 +4 bps
  
• China Import Iron Ore Spot $143.10/Metric Tonne unch.
  
• Citi US Economic Surprise Index -13.60 +.6 point
  
• 10-Year TIPS Spread 2.0% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +41 open in Japan
• DAX Futures: Indicating -35 open in Germany

Portfolio:

• Higher: On gains in my Technology, Retail and Biotech long positions
  
• Disclosed Trades: Added (IWM)/(QQQQ) hedges and added to my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite a mid-day swoon after the S&P 500 failed again at its 200-day moving average. On the positive side, Gaming, Construction, Hospital, Disk Drive, Oil Tanker, Coal and Alt Energy stocks are especially strong, rising 1.0%+. Cyclical and small-cap shares are outperforming again. Copper is rising another +2.82% today. Oil is just slightly higher today despite the rise in the euro, rise in global stocks, less economic fear out of Europe and supply concerns. On the negative side, Education, I-Banking, Gold and Oil Service shares are under mild pressure, falling .50%+. The TED spread continues to grind to new 52-week highs, which remains a big negative. As well, the yield on 3-Month Treasuries continues to slide back towards zero. The Greece sovereign cds is rising +3.8% to 792.61 bps today. Despite the recent rise in the euro and stocks, the European Investment Grade CDS Index is just -17 bps off its high of three days ago, which is also a red flag. Moreover, the Asia Ex-Japan High-Yield CDS Index has soared +27.9% to 591.66 bps over the last week. The S&P 500's 200-day moving average has provided tough resistance again. I will wait and see if the average can penetrate this level convincingly before getting more aggressive on the long side again. I expect US stocks to trade modestly lower into the close from current levels on technical selling, tax hike worries, energy sector pessimism, profit-taking, more shorting and rising sovereign debt angst.