Stocks Slightly Higher into Final Hour on Healthcare Reform Troubles, Tech Sector Optimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech longs, Medical longs and Commodity/Emerging Market shorts. I covered all my (IWM)/(QQQQ) hedges this morning and then added them back this afternoon, thus leaving the Portfolio 75% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, most sectors are rising and volume is heavy. Investor anxiety is very high. Today’s overall market action is mildly bullish. The VIX is falling 4.77% and is very high at 31.12. The ISE Sentiment Index is low at 101.0 and the total put/call is very high at 1.14. Finally, the NYSE Arms has been running very high most of the day, hitting 2.56 at its intraday peak, and is currently 1.55. The Euro Financial Sector Credit Default Swap Index is rising 5.42% today to 115.0 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 6.22% to 142.51 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 1.15% to 44 basis points. The TED spread is now down 420 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 3.59% to 43.31 basis points. The Libor-OIS spread is falling 4.04% to 38 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 6 basis points to 1.77%, which is down 87 basis points since July 7th. The 3-month T-Bill is yielding .16%, which is unch. today. The most economically sensitive stocks are underperforming substantially again today. Breadth has been relatively poor throughout the day. Market-leading stocks are mostly weaker. Healthcare-related stocks are substantially outperforming on the hopes of scaled-back government reform. The total put/call hit an extraordinarily elevated 1.41 this morning, the highest level since Dec. 15^th, which is also a positive. “Growth” stocks are substantially outperforming “value” stocks again. Tomorrow’s economic data could surprise on the downside. Nikkei futures indicate a -30 open in Japan and DAX futures indicate an +14 open in Germany tomorrow. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, profit-taking, rising economic worries, china trade barrier concerns, rising credit market angst and greater financial sector pessimism.