Stocks Dropping Substantially into Final Hour on Rising Global Debt Angst, Sharp Euro Decline, Rising Financial Sector Pessimism, Technical Selling

Broad Market Tone:

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

Equity Investor Angst:

• VIX 44.92 +4.54%
  
• ISE Sentiment Index 78.0 -19.59%
  
• Total Put/Call 1.28 +3.23%
  
• NYSE Arms 2.80 -30.21%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 145.28 +3.10%
  
• European Financial Sector CDS Index 269.43 +5.95%
  
• Western Europe Sovereign Debt CDS Index 346.0 +1.22%
  
• Emerging Market CDS Index 386.49 +4.62%
  
• 2-Year Swap Spread 36.0 +4 bps
  
• TED Spread 37.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.
  
• Yield Curve 155.0 -10 bps
  
• China Import Iron Ore Spot $171.30/Metric Tonne -.15%
  
• Citi US Economic Surprise Index -23.30 +6.2 points
  
• 10-Year TIPS Spread 1.74 -2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating -110 open in Japan
• DAX Futures: Indicating -77 open in Germany

Portfolio:

• Slightly Lower: On losses in my Biotech and Medical sector longs
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, and then covered some
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 falls below significant technical support with volume on rising global debt angst, rising financial sector pessimism, margin selling, a large euro currency decline, global growth worries and more shorting. On the positive side, Computer Services shares are holding up relatively well, declining less than -1.0%. The UBS-Bloomberg Ag Spot Index is dropping -.5%, lumber is jumping +3.69% and oil is falling -2.2%. On the negative side, Coal, Alt Energy, Oil Tanker, Ag, Steel, Paper, Disk Drive, Networking, Bank, I-Banking, Medical, Biotech, Hospital, HMO, Homebuilding, REIT, Gaming, Education and Airline shares are under severe pressure, falling more than -4.0%. Cyclical and Small-Cap shares are substantially underperforming. (XLF) has traded very poorly throughout the day. The 10-year yield is falling too much again, declining -14 bps to 1.78%. Copper is dropping -1.71% and gold is rising +1.6%. Rice is still close to its multi-year high, rising +26.0% in about 12 weeks. The Germany sovereign cds is gaining +5.0% to 117.83 bps, the France sovereign cds is rising +2.23% to 191.50 bps, the Russia sovereign cds is jumping +3.01% to 318.67 bps, the Belgium sovereign cds is rising +4.9% to 272.83 bps, the UK sovereign cds is gaining +2.4% to 96.67 bps, the China sovereign cds is rising +3.6% to 197.09 bps and the Brazil sovereign cds is rising +4.47% to 207.50 bps. The Eurozone Investment Grade CDS Index is jumping +5.23% to 196.97 bps, which is a new record high. The Western Europe Sovereign CDS Index and the European Financial Sector CDS Index are still near their records. The 3-Month Euro Basis Swap is falling -4.43 bps to -109.30 bps. The Asia-Pacific Sovereign CDS Index is soaring another +12.94% today to a new record 192.17 bps. The China sovereign cds is now at the highest level since March 2009. The China Development Bank Corp cds is still near the highest since March 2009. As well, the China Blended Corporate Spread Index, which has been moving higher in a parabolic fashion, is making another new multi-year high, rising +66.0 bps to 978.0 bps. The Hang Seng, which continues to trade very poorly, plunged another -4.4% overnight, leaving it down -27.0% ytd at the lowest level since May 2009. Major European stock indices fell another 1-2% today. Brazilian equities are under pressure again, falling -2.4% today and are now down -26.2% ytd. Various global credit angst gauges continue to trend higher, telegraphing intense global recession fears, which remains a large negative. It appears as though quarter-end window-dressing/short-covering did in fact prop stocks up to an extent last week. The fact that the market didn't acknowledge better US economic data today is also a large negative. Stocks are getting technically oversold again, however until Europe/Asia stabilize, investors are likely to increasingly anticipate another downturn in US economic activity over the intermediate-term. I expect US stocks to trade mixed-to-lower into the close from current levels rising global debt angst, a rapidly falling euro, rising financial sector pessimism, global growth fears, more shorting and margin selling.