Stocks Slightly Lower into Final Hour on Profit-Taking, Rising Euro Debt Angst, Surging Commodity Prices

Broad Market Tone:

• Advance/Decline Line: Slightly Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 16.83 +8.93%
  
• ISE Sentiment Index 121.0 -7.63%
  
• Total Put/Call .90 +9.76%
  
• NYSE Arms 1.50 +40.78%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 85.65 +.84%
  
• European Financial Sector CDS Index 160.44 bps +6.14%
  
• Western Europe Sovereign Debt CDS Index 196.83 bps +1.20%
  
• Emerging Market CDS Index 207.0 bps +.35%
  
• 2-Year Swap Spread 26.0 +3 bps
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .13% unch.
  
• Yield Curve 273.0 unch.
  
• China Import Iron Ore Spot $170.70/Metric Tonne -.18%
  
• Citi US Economic Surprise Index +14.30 -3.3 points
  
• 10-Year TIPS Spread 2.32% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -36 open in Japan
• DAX Futures: Indicating +16 open in Germany

Portfolio:

• Slightly Higher: On gains in my Medical, Biotech and Ag long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades just slightly lower despite recent stock gains, Korean peninsula concerns, surging commodity prices and rising eurozone sovereign debt angst. On the positive side, Coal, Ag, Gold, Drug and Education shares are especially strong, rising more than .5%. The S&P GSCI Ag Spot Index is rising another +.5% and is making a new record high. Lumber is also rising +1.2%. The 10-year yield is stable again. The Citi Asia-Pacific Economic Surprise Index is rising +4.1 points to +15.4, which is the best level since Oct. 26th. On the negative side, Airline and Homebuliding shares are under pressure, falling more than 1.0%. The Greece sovereign cds is climbing +5.62% to 1,053.70 bps and the Italy sovereign cds is rising +3.26% to 232.62 bps. The Euro Financial Sector CDS Index remains at the highest level since mid-June and the Western Europe Sovereign CDS Index remains very near its record high set last month, which is also a big negative. The broad market continues to display exceptional resiliency as negatives continue to be ignored. The NYSE Arms has been high throughout the day, yet equity losses are minimal. I still believe the slow grind higher in the major averages to new 52-week highs could result in a short-term spike higher in stocks before any meaningful pullback commences as shorts throw in the towel and underperforming longs come in to finish out the year. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, less economic fear, short-covering, technical buying, buyout speculation and investment manager performance angst.