Stocks Falling into Final Hour on Rising Energy Prices, Growing Mideast Unrest, Emerging Market Inflation Fears, More Shorting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 19.97 +7.37%
  
• ISE Sentiment Index 171.0 +47.41%
  
• Total Put/Call .77 -10.47%
  
• NYSE Arms 1.63 +181.04%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 83.49 +.87%
  
• European Financial Sector CDS Index 111.17 +1.61%
  
• Western Europe Sovereign Debt CDS Index 173.17 bps +.19%
  
• Emerging Market CDS Index 213.98 +.41%
  
• 2-Year Swap Spread 21.0 +1 bp
  
• TED Spread 20.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .11% -1 bp
  
• Yield Curve 281.0 +2 bps
  
• China Import Iron Ore Spot $176.60/Metric Tonne -.73%
  
• Citi US Economic Surprise Index +97.50 +11.4 points
  
• 10-Year TIPS Spread 2.49% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating -88 open in Japan
• DAX Futures: Indicating -15 open in Germany

Portfolio:

• Slightly Lower: On losses in my Retail and Medical longs
  
• 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 near session lows, despite yesterday's strong showing, a positive jobs report, gains in Asia overnight and lower long-term rates. On the positive side, Networking and Oil Tanker shares are higher on the day. Small-caps are outperforming again. "Growth" stocks are strongly outperforming "value" shares. The 10-year yield is falling -8 bps to 3.47%. The Israeli sovereign cds is falling -3.45% to 157.37 bps and the US sovereign cds is declining -3.77% to 43.5 bps. The UBS-Bloomberg Ag Spot Index is down -.54%. Lumber is gaining +2.86%. On the negative side, I-Banking, Bank, Airline, Education, Homebuilding, Oil Service and Defense shares are under significant pressure, falling more than 2.0% on the day. Cyclicals are underperforming. (XLF) has been heavy throughout the day. The Portugal sovereign cds is rising another +3.2% to 483.83 bps and the Greece sovereign cds is gaining another +2.05% to 986.95 bps. The avg. US price for a gallon of gas is up another .04/gallon today to $3.47/gallon. It is now up .35/gallon in 17 days. The US dollar continues to trade very poorly. Oil is surging another +3.0% and gold is rising 1.06%. Investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Oil will likely continue to grind higher until the situation in Saudi calms. It is hard to see this happening before next Friday's "day of rage". Stocks will likely remain hostage to oil for quite some time. Any unexpected meaningful reversal lower in oil in the short-term would likely send stocks to new 52-week highs. I expect US stocks to trade mixed-to-lower into the close from current levels on rising energy prices, growing Mideast unrest, emerging market inflation fears, profit-taking, more shorting and technical selling.