Stocks Reversing Sharply Lower into Final Hour on Rising Economic Fear, China Hard-Landing Worries, Tax Hike Concerns

Broad Market Tone:

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

Equity Investor Angst:

• VIX 33.78 -1.03%
  
• ISE Sentiment Index 107.0 +27.38%
  
• Total Put/Call 1.02 -5.56%
  
• NYSE Arms 1.46 -74.50%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 119.47 bps -1.08%
  
• European Financial Sector CDS Index 149.84 bps -3.84%
  
• Western Europe Sovereign Debt CDS Index 163.50 bps +1.55%
  
• Emerging Market CDS Index 268.19 bps -.55%
  
• 2-Year Swap Spread 36.0 +1 bp
  
• TED Spread 36.0 -3 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .17% +3 bps
  
• Yield Curve 233.0 -2 bps
  
• China Import Iron Ore Spot $138.90/Metric Tonne -.36%
  
• Citi US Economic Surprise Index -35.90 +.5 point
  
• 10-Year TIPS Spread 1.85% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -100 open in Japan
• DAX Futures: Indicating -60 open in Germany

Portfolio:

• Slightly Higher: On gains in my Medical/Retail long positions and ETF hedges
  
• Disclosed Trades: None
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades near session lows despite a bounce in the euro, end-of-the-quarter and the market's oversold state. On the positive side, Airline and Oil service stocks are relatively strong, rising .5%+. The S&P GSCI Ag Spot Index is jumping 3.6%, its best showing in many months. Spain sovereign cds is falling -8.4% to 251.63 bps, despite Moody's negative comments. The Greece sovereign cds is falling -8.8% to 910.88 bps and the Portugal sovereign cds is dropping -5.3% to 311.38 bps. The On the negative side, Gaming, Oil Tanker, Computer, Bank, HMO, Networking and Semi shares are under meaningful pressure, falling 1.5%+. Despite the decline in some country-specific sovereign cds, the Western Europe Sovereign CDS Index is moving very close to a new record high. Moreover, the US Municipal CDS Index is jumping another +5.0% to a record 266.3 bps, which is another large negative. The 10-year yield continues to fall too much and is rolling back over to session lows. The market is oversold short-term, but the overall technical action is very poor. Some leading stocks, that had been holding up relatively well, are breaking convincingly below their 50-day moving averages today. Economic data tomorrow will likely continue the recent trend of disappointments. I expect US stocks to trade mixed-to-lower into the close from current levels on rising sovereign debt angst, China hard-landing concerns, increasing economic fear, tax hike worries, regulatory fears and oil spill concerns.