Stocks Substantially Lower into Final Hour on More Shorting, Tax Hike Worries, Regulatory Concerns, Economic Fear

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: About Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 27.10 +7.76%
  
• ISE Sentiment Index 89.0 -11.0%
  
• Total Put/Call 1.07 +22.09%
  
• NYSE Arms 4.50 +357.52%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 110.61 bps +.28%
  
• European Financial Sector CDS Index 126.20 bps +2.16%
  
• Western Europe Sovereign Debt CDS Index 132.66 bps -.72%
  
• Emerging Market CDS Index 245.94 bps +1.94%
  
• 2-Year Swap Spread 25.0 -2 bps
  
• TED Spread 38.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 235.0 -3 bps
  
• China Import Iron Ore Spot $117.80/Metric Tonne +.08%
  
• Citi US Economic Surprise Index -33.50 -5.0 points
  
• 10-Year TIPS Spread 1.72% -8 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -182 open in Japan
• DAX Futures: Indicating -13 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades substantially lower to session lows despite euro strength, cds stability and some positive news in key stocks. On the positive side, Education, Ag, Utility and Telecom stocks are holding up relatively well. The 2-year swap spread is falling to the lowest level since early May. Overall, credit default swap indices are seeing relatively muted action given the decline in equities. Equity investor angst is surging, which is also a positive. On the negative side, Bank, Internet, Road & Rail, Gaming, REIT, Homebuilding, Construction, Networking, Gold and Coal shares are under significant pressure, falling more than -3.5%. Small-cap and cyclical shares are underperforming. (XLF)/(IYR) have seen heavy selling throughout the day. The 10-year yield continues to fall too much, declining another -6 basis points to session lows. Shanghai copper inventories are rising another +4.01% today and are up +30.88% over the last 5 days. There are some signs that this is just a pullback after recent gains, however the action in bank shares is very troubling. I will closely monitor Asian trading and Europe's open on Monday before deciding to further shift market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, rising economic fear, increasing financial sector pessimism, tax hike worries and regulatory concerns.