Stocks Mostly Higher into Final Hour on Diminishing Credit Market Angst, Less Financial Sector Pessimism

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Internet longs, Medical longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is neutral as the advance/decline line is slightly higher, sector performance is mostly negative and volume is about average. Investor anxiety is above-average. Today’s overall market action is neutral given recent gains. The VIX is falling .79% and is still above-average at 23.85. The ISE Sentiment Index is depressed at 87.0 and the total put/call is around average at .89. Finally, the NYSE Arms has been running high most of the day and is currently 1.42. The Euro Financial Sector Credit Default Swap Index is falling another 2.55% today to 82.78 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is -2.5% today at 133.88 basis points. The TED spread is rising 2.95% to 1.37. The 10-year TIPS spread, a good gauge of inflation expectations, has dropped 23 basis points in 10 days to 2.41%. Financials continue to trade pretty well given recent historic gains. The (XLF) is .48% higher on the day. Oil is $2.79 higher on the day, but given recent weakness and the hurricane approaching TX this rise is rather muted. Moreover, the S&P Goldman Ag Spot Price Index is falling another 2.1% today right to its 200-day moving-average. The last time this index broke down through this technical level in a convincing way was June 2004. Corporate insider stock activity remains at very bullish levels. If the crowded stock market bear camp is unable to gain any downside traction soon, I expect to see another short-covering induced surge higher fairly soon. Nikkei futures indicate a +337 open in Japan and DAX futures indicate an +17 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, diminishing credit market angst and less financial sector pessimism.