Stocks Falling into Final Hour on Growing Mideast Unrest, Global Growth Worries, Technical Selling, More Shorting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 21.51 +6.38%
  
• ISE Sentiment Index 60.0 -52.38%
  
• Total Put/Call 1.00 +17.65%
  
• NYSE Arms 1.77 +75.90%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 85.75 +1.40%
  
• European Financial Sector CDS Index 125.33 +5.51%
  
• Western Europe Sovereign Debt CDS Index 180.08 bps +1.84%
  
• Emerging Market CDS Index 214.44 +3.87%
  
• 2-Year Swap Spread 20.0 +2 bps
  
• TED Spread 24.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .07% -2bps
  
• Yield Curve 273.0 -5bps
  
• China Import Iron Ore Spot $170.70/Metric Tonne -.52%
  
• Citi US Economic Surprise Index +74.90 -13.5 points
  
• 10-Year TIPS Spread 2.48% -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -124 open in Japan
• DAX Futures: Indicating -32 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech and Medical longs
  
• Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and added to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 trades significantly lower, breaking down below its 50-day moving average, despite lower food/energy prices and falling long-term rates. On the positive side, Restaurant and Airline shares are higher on the day. The UBS-Bloomberg Ag Spot Index is down -2.23% and oil is down -1.59%. The 10-year yield is dropping -9 bps to 3.37%. On the negative side, Gaming, Construction, Disk Drive, Paper, Steel, Ag, Oil Service, Energy, Oil Tanker, Alt Energy and Coal shares are under significant pressure, falling more than 3.0%. Small-caps are relatively weak. Tech is also underperforming again. Copper is down another -.45% and Lumber is down 2.05%. The UK sovereign cds is rising +3.42% to 59.64 bps, the Russia sovereign cds is rising +4.87% to 132.72 bps, the Hungary sovereign cds is rising +2.04% to 292.47 bps and the Spain sovereign cds is surging +2.04% to 257.80 bps. The European Financial Sector CDS Index is surging again, which is a big negative. Moreover, the US Muni CDS Index is rising +2.88% to 156.35 bps. The avg. US price for a gallon of gas is unch. today at $3.53/gallon. It is up .41/gallon in 21 days. The AAII % Bulls fell to 35.98 this week, while the % Bears fell to 32.32. Oil is trading very poorly given the news out of Saudi. The commodity has likely seen another significant top barring any actual supply disruptions in the kingdom. Oil's surprising weakness may actually being hurting investor psychology today given how many funds are long energy-related securities, combined with growing worries over global economic growth. I expect US stocks to trade mixed-to-lower into the close from current levels on growing Mideast unrest, emerging markets inflation worries, more shorting, tech/commodity sector weakness and technical selling.