Stocks Falling on Volume into Final Hour on Goldman Sachs Fraud Charges, Profit-Taking, Rising Sovereign Debt Worries, Increasing Economic Pessimism

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Almost Every Sector Falling
  
• Volume: Heavy
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 17.96 +13.03%
  
• ISE Sentiment Index 102.0 -44.86%
  
• Total Put/Call .87 +22.54%
  
• NYSE Arms 2.42 +88.68%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 84.46 bps +3.23%
  
• European Financial Sector CDS Index 78.90 bps +5.43%
  
• Western Europe Sovereign Debt CDS Index 91.33 bps +3.98%
  
• Emerging Market CDS Index 209.50 bps +2.70%
  
• 2-Year Swap Spread 16.0 bps +2 bps
  
• TED Spread 16.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 282.0 bps unch.
  
• China Import Iron Ore Spot $178.10/Metric Tonne +1.37%
  
• Citi US Economic Surprise Index +28.0 -6.4 points
  
• 10-Year TIPS Spread 2.33% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -187 open in Japan
• DAX Futures: Indicating +22 open in Germany

Portfolio:

• Lower: On losses in my Medical, Financial and Tech long positions
  
• Disclosed Trades: Took profits in select longs, added (IWM)/(QQQQ) hedges and added to my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is very bearish as stocks trade meaningfully lower on good volume with key market leaders under significant pressure. On the positive side, Education, HMO and Computer Service stocks are outperforming, just posting modest losses or slight gains. Consumer shares are outperforming. The 10-year yield is falling another -7 basis points to session lows. Oil is falling -2.3% on worries over the ramifications of the (GS) charges, European sovereign debt worries and a very poor consumer confidence reading. On the negative side, I-Bank, Bank, Internet, Coal, Airline, Steel, Gold and Oil Service shares are especially weak, falling 2.5%+. (XLF) has been heavy throughout most of the day, falling -3.45%. The Portugal sovereign cds is rising another +6.6%. The Greece 10-year/bund spread is surging +6.9% to 427 basis points. Shanghai copper inventories are hitting another new high, rising +6.02% today. They have risen +43.55% in the last five days, going parabolic. Investor angst gauges are still registering some near-term complacency. The AAII % Bulls jumped to 48.48 this week, while the % Bears fell to 29.7, which is a negative. The large decline in the Consumer Confidence Index is a major negative, considering the recent rise in stocks and positive economic headlines. The (GS) news presents new uncertainty into the market and could have much larger negative ramifications than investors currently perceive. Moreover, there is quite a bit of bad news today that has nothing to do with (GS). Given this news, I am very surprised the market is holding up as well as it is. I expect US stocks to trade mixed-to-lower into the close from current levels on rising financial sector pessimism, more shorting, profit-taking, eurozone sovereign debt worries and increasing economic pessimism.