Stocks Soaring into Final Hour on Bargain-Hunting, Less Financial Sector Pessimism, Less Political Fear and Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Biotech longs, Semi longs and Retail longs. I added back to my (ISRG) long and took profits in a trading long today, thus leaving the Portfolio 100% net long. The tone of the market is very bullish as the advance/decline line is substantially higher, almost every sector is rising and volume is below average. Investor anxiety is high. Today’s overall market action is very bullish. The VIX is falling 9.05% and is very elevated at 55.4. The ISE Sentiment Index is below average at 127.0 and the total put/call is around average at .85. Finally, the NYSE Arms has been running above average most of the day, hitting 1.19 at its intraday peak, and is currently .80. The Euro Financial Sector Credit Default Swap Index is falling 1.63% today to 112.0 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 down 5.81% to 233.86 basis points. The TED spread is rising 2.19% to 214 basis points. The TED spread is now down 250 basis points in about six weeks. The 2-year swap spread is up 7.71% to 101.25 basis points. The Libor-OIS spread is rising 1.49% to 177 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis points to .33%, which is down 229 basis points in under five months and at the lowest level since Bloomberg record-keeping began in August 1998. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill yield is falling 6 basis points to .04%. Many market-leading stocks are substantially outperforming the major indices again today. Breadth has been very strong all day. Homebuilder, Gaming, Alterative Energy, Semi, Construction, I-Banking and Commodity stocks are posting 6%+ gains again today. There are few signs that any of the massive mountain of capital being parked in the safe haven of government bonds has begun to be redeployed into US stocks. There has never before in US history been this much potential bull firepower available, in my opinion. Even if you believe this is just a bear market rally, I suspect it will last longer and rise further than almost anyone expects. The recent huge decline in mortgages rates, overseas authorities getting with the stimulus program, a more moderate than expected Obama administration and declining odds of a filibuster-proof Democratic majority are all new large positive catalysts, in my opinion. Nikkei futures indicate an +315 open in Japan and DAX futures indicate an +100 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on less financial sector pessimism, diminished forced selling, short-covering, bargain-hunting, technical buying, declining political fear and seasonal strength.