Stocks Soaring into Final Hour on Easing Economic Fear, Technical Buying, Short-Covering, Less Financial Sector Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Financial longs, Retail longs, Medical longs and Technology longs. I covered all my (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is above average. Investor anxiety is above average. Today’s overall market action is very bullish. The VIX is falling .76% and is very high at 35.08. The ISE Sentiment Index is slightly above average at 164.0 and the total put/call is slightly below average at .75. Finally, the NYSE Arms has been running very low most of the day, hitting .29 at its intraday trough, and is currently .40. The Euro Financial Sector Credit Default Swap Index is rising .92% today to 146.0 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 falling 2.88% to 159.90 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 4.11% to 83 basis points. The TED spread is now down 380 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 2.18% to 58.50 basis points. The Libor-OIS spread is falling .06% to 79 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 3 basis points to 1.43%, which is down 121 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 .18%, which is up 3 basis points today. The heavily-shorted (XLF) is soaring 7.2% today ahead of the bank stress test results later in the week. The Transportation Index is jumping 6.1% and looks headed to its 200-day moving average in short order. The S&P 500 is breaking through the 875-880 level of technical resistance. Many large funds that are short or underexposed to US stocks had pointed to this level as an area that would prove daunting to penetrate. I suspect this will result in further short-covering and vanilla buying later this week as portfolio managers scramble with the S&P 500 heading into positive territory for the year. One of my longs, (DISCA), is surging 9% today after its earnings report, to a 10-month high. I still think the shares have significant upside from current levels over the intermediate-term. Nikkei futures indicate an +333 open in Japan and DAX futures indicate an +1 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, short-covering, easing financial sector pessimism, technical buying, investment manager performance anxiety and diminishing credit market angst.