Stocks Higher into Final Hour on Less Economic Pessimism, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is mixed into the final hour as gains in my Medical longs and Alternative Energy longs are offsetting losses in my Commodity shorts and Software longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is neutral as the advance/decline line is mixed, sector performance is mixed and volume is heavy. Investor anxiety is above-average. Today’s overall market action is mildly bearish. The VIX is falling 1.25% today, but remains high at 25.2. The ISE Sentiment Index is a very low 85.0 and the total put/call is a high 1.22 again today. Finally, the NYSE Arms is around average at 1.0. The 10-year swap spread is rising another 1.7 basis points today to 80.0 basis points over Treasuries. It is still near levels seen near prior peaks in credit market angst in August and November of last year. Moreover, the TED spread is rising again to an elevated 148 basis points. Considering the (ABK) news, these are negatives. Moreover, the $5 surge in oil makes it less likely we will see a cut before the March 18^th meeting. On the positive side, the bears have been unable to gain downside traction today despite these potential catalysts. Nikkei futures indicate an +43 open in Japan and DAX futures indicate a -37 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as short covering, less economic pessimism and bargain hunting offsets rising credit market angst, falling Fed rate cut odds and higher energy prices.