Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Financial Sector Pessimism, Global Growth Fears, Technical Selling

Broad Market Tone:

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

Equity Investor Angst:

• VIX 32.16 +7.06%
  
• ISE Sentiment Index 82.0 +18.84%
  
• Total Put/Call 1.22 +31.18%
  
• NYSE Arms 1.69 +295.26%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 128.0 -.91%
  
• European Financial Sector CDS Index 260.12 +6.92%
  
• Western Europe Sovereign Debt CDS Index 348.0 +2.16%
  
• Emerging Market CDS Index 305.10 +1.28%
  
• 2-Year Swap Spread 47.0 +2 bps
  
• TED Spread 46.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 181.0 -1 bp
  
• China Import Iron Ore Spot $138.30/Metric Tonne +.44%
  
• Citi US Economic Surprise Index 36.50 +2.2 points
  
• 10-Year TIPS Spread 2.06 -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -63 open in Japan
• DAX Futures: Indicating -52 open in Germany

Portfolio:

• Slightly Higher: On gains in my Index hedges and Emerging Markets shorts.
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short and then covered some
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 fails again near its 200-day moving average on rising Eurozone debt angst, rising global growth worries, technical selling, profit-taking, more shorting and financial sector pessimism. On the positive side, Internet, Computer Service, Gaming and Airline shares are holding up well, falling less than -.5%. "Growth" stocks are outperforming "value". Copper is rising +.7%, gold is falling -.33%, oil is down -.68% and the UBS-Bloomberg Ag Spot Index is down -.56%. Major Asian equity indices rose 1-2% overnight. The Saudi sovereign cds is falling -3.71% to 113.71 bps. On the negative side, Alt Energy, Paper, Bank, Insurance, Homebuilding, REIT, I-Bank and Steel shares are under pressure, falling more than -1.75%. Lumber is falling -.87%. India shares fell another -.43% overnight despite gains in the rest of Asia and are now down -16.5% ytd. Major European equity indices fell 1-2% today. The France sovereign cds is surging +6.5% to 213.83 bps, the Spain sovereign cds is rising +8.6% to 456.17 bps, the Belgium sovereign cds is rising +5.9% to 322.33 bps, the UK sovereign cds is gaining +3.02% to 92.0 bps, the Italy sovereign cds is gaining +3.54% to 559.33 bps and the Germany sovereign cds is rising +2.8% to 93.83 bps. The TED spread continues to trend higher and is near the highest since June 2010. The 2-Year Swap spread is rising to the highest since June 2010 today. The FRA/OIS Spread is now at the highest since June 2010. The 2yr Euro Swap Spread is rising today to the highest since Nov. 2008. The 3M Euro Basis Swap is falling -1.97 bps to -112.97 bps. The Libor-OIS spread is still at the widest since July 2009, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -27.93% since February 16th and -23.59% since Sept. 7th. Volume is poor. Given the ongoing deterioration in gauges of Eurozone debt health, the big jump in some gauges of stock market bullish sentiment and the recent equity rally, investors seem a bit complacent again. Either some new positive catalyst emerges from Europe very soon or stocks are likely range-bound at best. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, rising global growth worries, profit-taking, more shorting, financial sector pessimism and technical selling.