Stocks Slightly Higher into Final Hour on Lower Energy Prices, Less Economic Pessimism, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Defense longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is below average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling 1.90% and is high at 25.81. The ISE Sentiment Index is low at 93.0 and the total put/call is slightly below average at .79. Finally, the NYSE Arms has been running about average most of the day, hitting 1.13 at its intraday peak, and is currently 1.0. The Euro Financial Sector Credit Default Swap Index is falling 3.14% today to 108.98 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 3.05% to 139.99 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising 1.12% to 34 basis points. The TED spread is now down 432 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling 4.01% to 44.88 basis points. The Libor-OIS spread is rising 1.52% to 32 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 10 basis points to 1.63%, which is down 101 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is unch. today. Today’s overall action bodes well for further near-term US stock gains. Small-cap and cyclical shares are outperforming today. Gaming, Road & Rail, Education, Homebuilding, Hospital, Semi, Oil Service, Airline and Defense stocks are posting meaningful gains. (XLF) appears to be consolidating yesterday’s sharp gains in an orderly fashion and is holding slightly above its 200-day moving average for the first time in a long time. The Euro Financial Sector CDS Index remains subdued, which is also a big positive. Oil remains “heavy” despite a number of potential positive catalysts, which is a negative for the commodity. Nikkei futures indicate an +114 open in Japan and DAX futures indicate an +3 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, lower energy prices, short-covering and less economic pessimism.