Stocks Rising into Final Hour on Diminishing Credit Market Angst, Less Economic Pessimism, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Technology longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is bullish as the advance/decline line is substantially higher, most sectors are rising and volume is about average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 2.43% and is very high at 38.13. The ISE Sentiment Index is below average at 123.0 and the total put/call is below average at .77. Finally, the NYSE Arms has been running above average most of the day, hitting 1.21 at its intraday peak, and is currently 1.10. The Euro Financial Sector Credit Default Swap Index is falling 7.97% today to 97.48 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 1.04% to 198.58 basis points. The TED spread is down 4.40% to 128 basis points. The TED spread is now down 338 basis points in about three months. The 2-year swap spread is plunging 14.78% to 67.75 basis points. The Libor-OIS spread is rising .57% to 123 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 12 basis points to .25%, which is down 236 basis points in about six 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 is yielding .13%, which is up 5 basis points today. The broad market is performing better again today than the major averages suggest. Market leading stocks are especially strong again with many posting 3-5% gains. As well, despite more weak economic data, the most economically sensitive shares are top-performers again. Homebuilders, reits, i-banks, techs and energy shares are all posting 4%+ gains. The US dollar continues to trade very well. It is a positive to see t-bill yields moving higher, as well. (BAC) just said it expects final 08 results to be below estimates, but the stock is still 2% higher on the day, which is a big positive. The positive ramifications of the ongoing plunge in mortgage rates remains underappreciated, in my opinion. Nikkei futures indicate an +185 open in Japan and DAX futures indicate an +38 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, diminishing credit market angst, less economic pessimism, seasonal strength, less forced selling and short-covering.