Stocks Rising into Final Hour on Bargain-Hunting, Fed Rate Cut and Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Computer longs, Biotech longs, Retail longs and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is above average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is rising .64% and is historically elevated at 67.82. The ISE Sentiment Index is low at 103.0 and the total put/call is below average at .78. Finally, the NYSE Arms has been running high most of the day, hitting 2.02 at its intraday peak, and is currently 1.28. The Euro Financial Sector Credit Default Swap Index is falling 5.25% today to 103.33 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is falling 2.37% to 210.66 basis points. The TED spread is rising 5.1% to 285 basis points. The TED spread is now down 179 basis points in about three weeks. The 2-year swap spread is down 6.0% to 113.25 basis points. The Libor-OIS spread is rising 1.28% to 265 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 5 basis points to .85%, which is down 178 basis points in about four months and at the lowest level since February 1999. Market leading stocks are posting another day of massive gains. While we are getting extended very short-term, I fully expect the DJIA to test 10,000 within the next 10 days. Nikkei futures indicate an +500 open in Japan and DAX futures indicate an +20 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less financial sector pessimism, diminishing forced selling and bargain-hunting.