Stocks Slightly Higher into Final Hour on Less Economic Fear, Diminishing Homebuilder Pessimism, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Technology longs, Financial longs and Commodity shorts. 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 higher, most sectors are rising and volume is about average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is falling 1.80% and is high at 23.44. The ISE Sentiment Index is below average at 114.0 and the total put/call is above average at 1.0. Finally, the NYSE Arms has been running around average most of the day, hitting 1.78 at its intraday peak, and is currently .90. The Euro Financial Sector Credit Default Swap Index is dropping another 4.4% today to 87.33 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 1.53% to 123.94 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling .07% to 32 basis points. The TED spread is now down 434 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling .15% to 42.94 basis points. The Libor-OIS spread is rising .24% to 31 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis points to 1.81%, which is down 83 basis points since July 7th. The 3-month T-Bill is yielding .18%, which is unch. today. Today appears to be another healthy consolidation day after recent outsized market gains. The Euro Financial Sector Credit Default Swap Index is continuing its recent plunge, which remains a big positive. As well, the US sovereign debt credit default swap index is dropping another 5.6% to the lowest level since early May. Despite negative news from (WFC), (BK) and (MS), (XLF) is holding up very well, which bodes well for further gains. Small-cap and cyclical shares are outperforming again today with the transportation stocks rising another .9%. Moreover, Semi, Education, Gaming, Restaurant, Homebuilding and Disk Drive stocks are all posting meaningful gains. Finally, investor angst has been relatively high all day with the total put/call opening at a very high 1.32 this morning, which is a big positive and bodes well for further near-term gains. Nikkei futures indicate an +83 open in Japan and DAX futures indicate a -12 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, investment manager performance anxiety, less economic fear and earnings optimism.