Stocks Lower into the Final Hour on Healthy Profit-taking, Lingering Sub-prime Worries

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Semi longs and I-Banking longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very negative today as the advance/decline line is substantially lower, most sectors are declining and volume is above average. Yesterday afternoon, a fellow RealMoney Silver contributor said that he was considering building his long airline position in a meaningful way. I have to say that I am considering an airline long as well. This group is always despised, and, while not historically good long-term investments, they make excellent trading vehicles at times. I sense one of those times is fast approaching. Oil has moved up to $75 per barrel, stories of horrific waits on runways fill the airwaves, and analysts have recently turned more negative on the group. However, the Airline Index has been trending higher since mid-June, ignoring this news. According to my data, large speculative oil traders have never been this net long crude in history. This was the case last year when I wrote my post "17 Reasons for Energy Prices Peak" on Street Insight, with oil above $70 per barrel and right before it plunged $28 per barrel in less than six months, which sent the broad market and airlines flying. In my opinion, the fundamentals for oil are even worse this year, and its recent spike higher is solely a function of the mania for the commodity by funds trying to make up for recent relatively poor performance. The average commodity fund fell around 7% last year and is just marginally higher year-to-date. While a downside catalyst for oil could occur, I suspect crude will begin another meaningful decline anyway as the peak in hurricane season approaches over the next six weeks. My favorite airlines to consider for a long trade are Delta Air Lines (DAL), AMR Corporation (AMR) and Continental Airlines (CAL). I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower long-term rates and bargain-hunting.