Stocks Soaring into Final Hour on Less Economic Fear, Falling Credit Marke Angst, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs, Defense longs and Retail longs. I have not traded today, 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 heavy. Investor anxiety is high. Today’s overall market action is very bullish. The VIX is rising 2.21% and is very high at 29.56. The ISE Sentiment Index is below average at 107.0 and the total put/call is slightly below average at .77. Finally, the NYSE Arms has been running very high most of the day, hitting 2.41 at its intraday peak, and is currently .80. The Euro Financial Sector Credit Default Swap Index is falling 3.14% today to 113.67 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 plunging 7.18% to 129.20 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 6.91% to 56 basis points. The TED spread is now down 407 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is jumping 19.81% to 47.0 basis points. The Libor-OIS spread is falling 2.90% to 44 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 11 basis points to 1.95%, which is down 69 basis points since July 7th. The 3-month T-Bill is yielding .09%, which is down 4 basis points today. Today’s stock gains are even more impressive considering the relative weakness in financials, likely related to the 24 point rise in the 10-year yield. It is noteworthy that several gauges of investor angst are rising today, despite sharp gains in the major averages as the S&P 500 breaks above its 200-day moving average on volume. US stocks are getting a bit extended short-term, however technical buying on today’s S&P 500 breakout and short-covering could lift us a bit further before a meaningful pullback occurs. Pending Home Sales for April, released tomorrow, could surprise on the upside. Nikkei futures indicate an +143 open in Japan and DAX futures indicate a -15 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, declining credit market angst, investment manager performance anxiety, technical buying and less economic fear.