Friday, November 09, 2007

Stocks Lower into Final Hour Despite Gains in Financial Shares

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Software longs, Internet longs and Computer longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative today as the advance/decline line is lower, most sectors are falling and volume is heavy. Investor anxiety is above-average. Money market funds reported net inflows soared by $63.1 billion, bringing assets in the sector to $2.97 trillion. According to, the odds of a U.S. recession next year are down to 41.7% vs. 58.9% in September. Copper is falling another 2% today and has been moving almost straight down for a month. The metal remains at extremely speculative levels due to the explosion in hedge and commodity funds, and its decline does not indicate a recession is forthcoming, in my opinion. Fed fund futures now imply a 96% chance for another 25-basis-point cut at the December meeting vs. 90% yesterday and 68% one week ago. The S&P 500 is back near session highs, boosted by the financials heading into positive territory. The (XLF), which is the second most-heavily shorted security on the AMEX, is now 1.4% higher on the day. There are rumors that HUD may make a statement that would benefit (CFC), and the stock is surging 5.5% to session highs. Nasdaq breadth is -700, which isn't bad at all considering the 35-point loss in the index. I expect the bears to try and bring us back down over the next 20 minutes. If they are unable to gain traction, we should see some broad market short-covering into the close. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting and short-covering.

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