Stocks Mostly Higher into Final Hour on Less Financial Sector Pessimism, Diminishing Economic Fear, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Technology longs and Biotechnology longs. I covered all of my (IWM)/(QQQQ) hedges 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 neutral. The VIX is falling 1.96% and is very high at 36.94. The ISE Sentiment Index is about average at 142.0 and the total put/call is slightly above average at .93. Finally, the NYSE Arms has been running high most of the day, hitting 1.78 at its intraday peak, and is currently 1.15. The Euro Financial Sector Credit Default Swap Index is rising 2.48% today to 151.0 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 2.30% to 180.61 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 1.13% to 98 basis points. The TED spread is now down 365 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is down 3.90% to 55.50 basis points. The Libor-OIS spread is falling .96% to 92 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 1 basis point to 1.32%, which is down 132 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 .14%, which is down 1 basis point today. The Bloomberg Professional Global Confidence Index jumped to 21.2 in April to an 11-month high. I suspect some of the many hedge funds that appeared to be positioned net short or market neutral in March, based on their performances, will cover shorts this month. Huge gains in REITs, Homebuilders and some Banks today are a big positive. I suspect the weakness in tech shares today is mainly a function of healthy profit-taking before another push higher. The US dollar has traded very well of late considering the improvement in global equities. The Citi US Economic Surprise Index is now up to +14.60 versus a -73.60 reading in the eurozone. I suspect China will “find a way” to beat their 6.3% 1Q GDP estimate, released tonight, which could help boost cyclical shares tomorrow. Nikkei futures indicate an +153 open in Japan and DAX futures indicate an +30 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, less economic fear and less financial sector pessimism.