Stocks Rising into Final Hour on Falling Credit Market Angst, Short-Covering, Lower Long-Term Rates

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs, Financial 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, most sectors are rising and volume is around average. Investor anxiety is above average. Today’s overall market action is mildly bullish. The VIX is falling 2.68% and is very high at 30.82. The ISE Sentiment Index is above average at 192.0 and the total put/call is slightly below average at .76. Finally, the NYSE Arms has been running above average most of the day, hitting 1.42 at its intraday peak, and is currently 1.16. The Euro Financial Sector Credit Default Swap Index is falling 4.41% today to 115.67 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 falling 4.41% to 139.19 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 1.53% to 53 basis points. The TED spread is now down 410 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 6.47% to 39.75 basis points. The Libor-OIS spread is falling .92% to 46 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is unch. at 1.84%, which is down 80 basis points since July 7th. The 3-month T-Bill is yielding .13%, which is down 1 basis point today. The 10-year yield is down 16 basis points today and down 30 basis points from yesterday’s high of 3.75%, which is a huge positive. As well, the US sovereign debt credit default swap is falling 6.1% today to 45.0 basis points, which is a big positive. The Transportation Index, which found support at its 50-day moving average, is jumping 3.2% today and looks poised to head higher over the short-run. I expect US stocks to build on this week’s gains next week. Nikkei futures indicate a -27 open in Japan and DAX futures indicate an +1 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less financial sector pessimism, declining credit market angst and lower long-term rates.