Stocks Slightly Lower into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Rising Energy Prices,

Broad Market Tone:

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

Equity Investor Angst:

• VIX 30.69 +6.98%
  
• ISE Sentiment Index 92.0 -20.69%
  
• Total Put/Call .96 +7.87%
  
• NYSE Arms 3.63 +366.57%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 124.77 +2.07%
  
• European Financial Sector CDS Index 280.17 +9.90%
  
• Western Europe Sovereign Debt CDS Index 359.83 +6.56%
  
• Emerging Market CDS Index 297.96 +5.98%
  
• 2-Year Swap Spread 42.0 unch.
  
• TED Spread 54.0 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -116.50 -7.5 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 175.0 -3 bps
  
• China Import Iron Ore Spot $139.40/Metric Tonne unch.
  
• Citi US Economic Surprise Index 76.10 +1.2 points
  
• 10-Year TIPS Spread 1.98 -7 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -114 open in Japan
• DAX Futures: Indicating -31 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bearish, as the S&P 500 turns down again near its 200-day moving average on rising Eurozone debt angst, rising global growth fears, profit-taking, financial sector pessimism and high energy prices. On the positive side, Restaurant, Drug, Food and Computer Service shares are holding up well, falling less than -1.0%. Lumber is rising +.43%, gold is falling -1.94% and oil is falling -2.4%. On the negative side, Coal, Alt Energy, Oil Tanker, Energy, Oil Service, Ag, Steel, Networking, Bank, I-Bank, Airline, Gaming, Homebuilding, Insurance, Hospital and Medical shares are under significant pressure, falling more than -3.0%. (XLF) has traded very poorly throughout the day. Cyclical and small-cap shares are also underperforming. Copper is falling -1.74% and the UBS-Bloomberg Ag Spot Index is rising +1.07%. The 10-Year Yield is falling to session lows, dropping -6 bps to 1.97%. The Germany sovereign cds is jumping +10.64% to 104.0 bps, the Spain sovereign cds is soaring +15.07% to 429.83 bps, the France sovereign cds is jumping +11.8% to 213.33 bps, the Italy sovereign cds is gaining +13.75% to 522.0 bps, the Russia sovereign cds is gaining +7.2% to 253.67 bps, the Belgium sovereign cds is gaining +12.5% to 323.17 bps and the UK sovereign cds is gaining +5.96% to 98.17 bps. Moreover, the European Investment Grade CDS Index is jumping +5.32% to 167.45 bps. The TED spread continues to trend higher and is at the highest since June 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is falling -6.64% to -116.50 bps. The Libor-OIS spread is very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. China Iron Ore Spot has plunged -27.4% since February 16th and -23.0% since Sept. 7th. The Citigroup Asia Economic Surprise Index is hovering right at its lowest since April 2009, falling -2.3 points today to -18.7. Last night, India said Industrial Output for October fell -7.0%, the first contraction since June 2009. India’s Sensex fell -2.3% and is down -19.6% ytd. Italian shares led Europe lower today, falling -4.3%, and are down -25.7% ytd. The AAII % Bulls rose to 38.57 this week, while the % Bears fell to 34.76%. As I have been saying for several days, investors seem complacent right now with respect to the high-stakes situation in Europe and the overall macro backdrop. So far, investors are disappointed with European officials’ latest debt crisis responses. This article from The Telegraph summarizes the real European debt crisis problem that is not being addressed. While I anticipate that more grand debt crisis can-kicking "solutions" will come out tomorrow, I suspect any ensuing equity rally will be less robust and sustainable than many expect due to excess bullish sentiment and the ongoing deterioration in the global economy. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, financial sector pessimism, rising global growth fears, profit-taking, more shorting, high energy prices and technical selling.

Stocks Slightly Lower into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Rising Energy Prices, Technical Selling

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Falling
  
• Volume: Light
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 34.09 +.32%
  
• ISE Sentiment Index 72.0 unch.
  
• Total Put/Call 1.12 -5.88%
  
• NYSE Arms 1.05 -68.62%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 144.76 -.68%
  
• European Financial Sector CDS Index 339.04 +6.36%
  
• Western Europe Sovereign Debt CDS Index 376.08 +2.16%
  
• Emerging Market CDS Index 347.11 n/a
  
• 2-Year Swap Spread 55.0 +3 bps
  
• TED Spread 50.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.
  
• Yield Curve 169.0 +2 bps
  
• China Import Iron Ore Spot $140.40/Metric Tonne -.50%
  
• Citi US Economic Surprise Index 41.10 n/a
  
• 10-Year TIPS Spread 1.94 +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -10 open in Japan
• DAX Futures: Indicating -17 open in Germany

Portfolio:

• Slightly Higher: On gains in my tech/retail sector longs and emerging markets shorts
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 gives up morning gains on rising Eurozone debt angst, rising global growth fears and rising energy prices. On the positive side, Defense, Homebuilding, REIT, Food and Tobacco shares are especially strong, rising more than +.5%. (XLF) has outperformed throughout the day. Copper is rising +.29%, gold is down -.67% and the UBS-Bloomberg Ag Spot Index is declining -.41%. The 10-Year Yield is rising +8 bps to 1.96%. Major European equity indices rose .5-1% today. On the negative side, Alt Energy, Oil Tanker, Ag, Steel, Drug, Biotech, Disk Drive, Coal, Internet, Hospital, Construction and Computer shares are under pressure, falling more than -1.0%. Small-cap shares are underperforming again. Oil is rising +.20% and lumber is falling -.85%. Major Asian equity indices fell 1-1.5% overnight. The Hang Seng continues to trade very poorly, falling another -1.4%, and is now down -23.2% ytd. The Germany sovereign cds is soaring +9.0% to 121.0 bps, the France sovereign cds is climbing +1.81% to 252.17 bps, the Spain sovereign cds is gaining +2.19% to 490.83 bps, the Italy sovereign cds is climbing +.76% to 557.87 bps, the UK sovereign cds is gaining +2.13% to 104.0 bps, the Ireland sovereign cds is gaining +2.55% to 777.67 bps, the Russia sovereign cds is gaining +4.06% to 300.10 bps and the Belgium sovereign cds is gaining +3.85% to 410.83 bps. The France and Belgium sovereign cds are making new all-time highs again and the Spain, Hungary, Italy sovereign cds are very close to their recent record highs. The Germany sovereign cds is testing its Oct. 4th multi-year high and the UK sovereign cds is making a new multi-year high. The TED spread continues to trend higher and is at the highest since June 2010. The 2-Year Swap spread is at the highest since May 2010. The FRA/OIS Spread is at the highest since May 2010. The 2yr Euro Swap Spread is near the highest since Nov. 2008. The 3M Euro Basis Swap is down -4.02% to -148.87 bps, which is the worst since October 2008. The Libor-OIS spread is near the widest since July 2009, which is also noteworthy considering the equity bounce off the lows. China Iron Ore Spot has plunged -26.83% since February 16th and -22.43% since Sept. 7th. It appears to me some key European officials are trying to manufacture an even greater crisis to generate the political will necessary for a 'momentous deal'. However, even if the market eventually gets what it wants, more money printing and greater debt for the region, these measures are not a long-term solution for an acute debt crisis, in my opinion. Trading still has a somewhat complacent feel to it as stocks surged off the morning lows again, accompanied by light volume, despite the ongoing significant deterioration in European credit gauges. I still think the risk in equities remains substantial unless a positive catalyst emerges from Europe very soon. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, rising global growth fears, more shorting, rising energy prices and technical selling.

Bear Radar

Style Underperformer:

• Large-Cap Growth (+.55%)

Sector Underperformers:

• 1) Drugs -.40% 2) Agriculture -.30% 3) Biotech -.10%

Stocks Falling on Unusual Volume:

• NVS, TEF, CH and SFL
  

Stocks With Unusual Put Option Activity:

• 1) GGB 2) GDXJ 3) SFSF 4) XLK 5) FXI
  

Stocks With Most Negative News Mentions:

• 1) CVX 2) CF 3) NFLX 4) PBR 5) GPS
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Mid-Cap Value (+.74%)

Sector Outperformers:

• 1) Homebuilders +2.19% 2) Airlines +1.88% 3) I-Banks +1.85%

Stocks Rising on Unusual Volume:

• TTM, MBT, PERY, PTI, KEP and CGV
  

Stocks With Unusual Call Option Activity:

• 1) SYMC 2) COCO 3) IAU 4) ITUB 5) KO
  

Stocks With Most Positive News Mentions:

• 1) RTN 2) LYB 3) DE 4) PFE 5) ANGO
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Bear Radar

Style Underperformer:

• Small-Cap Growth (-2.65%)

Sector Underperformers:

• 1) Steel -4.35% 2) Coal -3.20% 3) Networking -3.15%

Stocks Falling on Unusual Volume:

• IOC, SU, IMO, C, DMND, AWAY, SHPGY, QCOM, GIFI, AMCX, SWKS, NATR, AMZN, PID, SNN, RFG, IWW, SFL, PTI, IJT, BCA, ISH, PEJ, SMG, LEN, EWT, CSC, FPO, AMCX, FAS, LNKD, LNG, RCL, FIO, P, RATE and GRPN
  

Stocks With Unusual Put Option Activity:

• 1) STI 2) DTV 3) MTG 4) KRE 5) MDT
  

Stocks With Most Negative News Mentions:

• 1) LUFK 2) BIG 3) JNY 4) QCOM 5) DMND
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Large-Cap Value (-1.80%)

Sector Outperformers:

• 1) Education -.40% 2) Utilities -1.32% 3) Drugs -1.40%

Stocks Rising on Unusual Volume:

• TIVO and DE
  

Stocks With Unusual Call Option Activity:

• 1) FSIN 2) JNK 3) LULU 4) MDT 5) BSX
  

Stocks With Most Positive News Mentions:

• 1) MDT 2) S 3) TIF 4) BA 5) FWST
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume