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

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is slightly higher, sector performance is mixed and volume is below average. Investor anxiety is high. Today’s overall market action is neutral. The VIX is falling 8.4% and is very elevated at 54.85. The ISE Sentiment Index is below average at 133.0 and the total put/call is above average at .96. Finally, the NYSE Arms has been running high most of the day, hitting 1.47 at its intraday peak, and is currently 1.36. The Euro Financial Sector Credit Default Swap Index is falling .72% today to 92.67 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 1.0% to 198.0 basis points. The TED spread is falling another 8.6% to 242 basis points. The TED spread is now down 222 basis points in about three weeks. The 2-year swap spread is up 4.79% to 125.75 basis points. The Libor-OIS spread is falling 6.47% to 223 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 5 basis points to .86%, which is down 177 basis points in about four months and at the lowest level since January 1999. The market’s consolidating, low volatility, action today is a large positive after last week’s gains. The (XLF) trades well despite more weakness in shares of (GS). Oil trades very poorly considering recent stock gains and the pullback in the US dollar. I still expect another substantial move higher in US stocks to begin no later than Wednesday. One of my longs, (ISRG), is 6% higher today. I still see substantial upside in these shares from current levels over the intermediate/long-term. Nikkei futures indicate an +483 open in Japan and DAX futures indicate a -8 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, less credit market angst, lower energy prices and bargain-hunting.