Stocks Consolidating Recent Gains into Final Hour

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, sector performance is mixed and volume is about average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 3.40% and is very high at 40.61. The ISE Sentiment Index is low at 95.0 and the total put/call is slightly below average at .78. Finally, the NYSE Arms has been running around average most of the day, hitting 1.44 at its intraday peak, and is currently .64. The Euro Financial Sector Credit Default Swap Index is dropping 3.94% today to 162.33 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising .13% to 193.80 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is rising .01% to 96 basis points. The TED spread is now down 367 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is up .7% to 57.0 basis points. The Libor-OIS spread is falling .71% to 95 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 7 basis points to 1.41%, which is down 123 basis points since July 7th. 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 .20%, which is unch. today. Today’s broad market action is another healthy consolidation of recent gains. (IYR) is soaring another 7% today, which is a large positive. One of my longs, (MS), had been a drag on the financial sector, but has reversed 2% higher to session highs. The action in shares of (RIMM) should also be disturbing to the many bears. As of yesterday the short interest ratio in shares of RIMM was at a 7-month high. The VIX is at the lower end of its trading range and appears poised for a technical breakdown, which would be another positive. On the other hand, Gold trades poorly in the face of an imminent launch of North Korea’s rocket and recent dollar weakness. The hedge fund favorite is back to levels seen before the Fed’s quantitative easing announcement. Nikkei futures indicate an +150 open in Japan and DAX futures indicate an +36 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower credit market angst, less economic fear and diminishing financial sector pessimism.