Stocks Lower into Final Hour on European Debt Worries, Proft-Taking, Shorting, Technical Selling

Broad Market Tone:

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

Equity Investor Angst:

• VIX 24.06 +6.93%
  
• ISE Sentiment Index 91.0 -30.0%
  
• Total Put/Call .82 +2.50%
  
• NYSE Arms 1.52 +123.94%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 104.73 bps -.22%
  
• European Financial Sector CDS Index 119.05 bps -1.75%
  
• Western Europe Sovereign Debt CDS Index 153.66 bps -.32%
  
• Emerging Market CDS Index 220.43 bps -.31%
  
• 2-Year Swap Spread 19.0 -1 bp
  
• TED Spread 14.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 210.0 +2 bps
  
• China Import Iron Ore Spot $141.10/Metric Tonne unch.
  
• Citi US Economic Surprise Index -4.40 +2.0 points.
  
• 10-Year TIPS Spread 1.80% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -66 open in Japan
• DAX Futures: Indicating +4 open in Germany

Portfolio:

• Slightly Lower: On losses in my Biotech, Tech and Medical long positions
  
• Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and then covered them
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows despite better economic data and buyout speculation. On the positive side, Disk Drive, REIT and Gaming shares are higher on the day. (IYR) has traded well throughout the day. On the negative side, Coal, Alt Energy, Oil Service, Gold, HMO, Education, Semi, Paper, Steel, Defense and Airline shares are under meaningful pressure, falling more than 2.0%. Small-cap and cyclical shares are underperforming today. The S&P GSCI Ag Spot Index, which led the recent stock rally, is declining another -.64% today. Lumber is falling -2.27%, which puts it below its 50-day moving average. Copper is also falling -.72%. Despite better economic data of late and recent declines, the 10-year yield is falling another -3 bps to 2.48%. The Portugal sovereign cds is rising +2.1% to 406.50 bps and the Spain sovereign cds is rising +.9% to 228.83 bps. This is the first day in quite some time that the market is reacting negatively to negative news out of Europe. The euro's weakness today is noteworthy given the negative news the currency has been ignoring. (MSFT) is weighing on the Naz today on comments from Goldman. Unless this company makes some major changes in direction, the stock will likely head significantly lower over the longer-term as competition mounts. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, profit-taking, rising sovereign debt angst, technical selling and China worries.