Monday, December 17, 2007

Stocks Sharply Lower into Final Hour on Overseas Losses and Profit-taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Computer longs, Internet longs and Medical longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is very negative today as the advance/decline line is substantially lower, most sectors are falling and volume is below average. Investor anxiety is above average again. Today’s overall market action is bearish. Long-biased hedge funds have, in general, had very good years. I suspect that many of those funds are now locking in gains. This is likely the main reason for the severe underperformance today in this year’s biggest winners. The TED spread, which has been the source of much angst of late, is falling 15 basis points today to 195 basis points. It has declined 26 basis points in five days, which is a big positive. As well, the 30-day asset backed commercial paper yield is falling 18 basis points today to 5.79%. This is down 37 basis points in five days, which is also a big positive. I still expect stocks to finish the week on a positive note. I expect US stocks to trade modestly higher into the close from current levels on falling energy prices, bargain-hunting and short-covering.

No comments: