Thursday, December 27, 2007

Stocks Lower into Final Hour on Pakistan News, Profit-taking and More Economic Pessimism

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semi longs, Software longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is negative today as the advance/decline line is substantially lower, almost every sector is declining and volume is light. Investor anxiety is above average again. Today’s overall market action is bearish. The NYSE Arms is a very high 1.62, the VIX is surging 7% back to 20 and the total put/call is an above-average .97. Cyclicals and small-caps are under the most pressure today on another spike in economic pessimism and profit-taking after recent gains. As well, the 10-year yield is falling 8 basis points. The broad market appears to be tracking the (XLF) closely again today. Given recent gains and today’s news, weakness isn’t too surprising. With such light volume, elevated levels of investor pessimism and high NYSE Arms reading it wouldn’t take too much buying to boost the averages into the close. I am also seeing positive action today among some growth stock leaders such as (MA), (AMZN), (BIDU), (AAPL) and (DECK). I expect US stocks to trade modestly higher into the close from current levels on diminishing credit market angst, seasonal strength, bargain-hunting and short-covering.

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