Stocks Higher into Final Hour on Short-Covering, Diminishing Credit Market Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Medical longs, Biotech longs and Alternative Energy longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is bullish as the advance/decline line is higher, almost every sector is rising and volume is about average. Investor anxiety is above average again. Today’s overall market action is very bullish considering recent gains, today’s economic data and the rise in oil. The VIX is falling 1.2%, but remains high at 25.4. The ISE Sentiment Index is a below average 137.0 and the total put/call is an above-average 1.03. Finally, the NYSE Arms has been above average most of the day and is currently 1.08. The iTraxx European Financial Sector Credit Default Swap Index is falling another 25 basis points to 92 basis points. It has plunged 68 basis points in less than one week. The TED spread is falling another 16 basis points to 138 basis points and has plunged 66 basis points in two days, which is one of the largest 2-day drops on record. The 3-month T-bill yield is rising another 21 basis points today to 1.27%, which is 71 basis points higher in two days. It is also a positive that the 10-year TIPS spread, a good gauge of inflation expectations, is falling another 6 basis points to 2.25%. This spread has declined 43 basis points in about a week. My favorite biotech long, Gilead Sciences(GILD), is making a new all-time high today. The stock is up 11% this year in a poor market environment. I still see substantial upside to the shares from current levels. Nikkei futures indicate an +100 open in Japan and DAX futures indicate an +100 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering and diminishing credit market angst.