Stocks Mostly Higher into Final Hour on Bargain Hunting, Diminishing Credit Angst, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Biotech longs, Internet longs, Retail longs and Alternative Energy longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly bullish as the advance/decline line is higher, sector performance is mostly positive and volume is below average. Investor anxiety is slightly above average, despite today’s gains. Today’s overall market action is very bullish considering recent gains, the employment report and the rise in energy prices. The VIX is falling 4.2%, but remains above average at 22.2. The ISE Sentiment Index is a below average 140.0 and the total put/call is high at 1.17. Finally, the NYSE Arms has been running above average most of the day and is currently 1.12. Nikkei futures indicate an +127 open in Japan and DAX futures indicate an +74 open in Germany on Monday. Despite the weaker employment report today, the North American Investment Grade Credit Default Swap Index is dropping another 10.5 basis points today. This index has plunged 47% since March 10^th. Credit default swaps had been the source of much angst, implying corporate default rates much higher than the fundamentals suggested. This is a huge positive. The 10-year TIPS spread, a good gauge of inflation expectations, is falling another 5 basis points today to 2.29%. This is down from 2.68% on March 13^th. Growth stocks are substantially outperforming value stocks, with leaders especially strong. With more signs that global growth is slowing, I suspect investors are warming to these stocks again as valuations are extraordinarily compelling at current levels. I expect US stocks to trade modestly higher into the close from current levels on short-covering, diminishing credit market angst and bargain-hunting.