Stocks Soaring into Final Hour on Less Economic Fear, Diminishing Financial Sector Pessimism, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Defense longs, Biotech longs, Financial longs and Medical 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 above average. Investor anxiety is very high. Today’s overall market action is very bullish. The VIX is rising 2.88% and is high at 25.74. The ISE Sentiment Index is low at 107.0 and the total put/call is slightly below average at .77. Finally, the NYSE Arms has been running low most of the day, hitting .43 at its intraday trough, and is currently .43. The Euro Financial Sector Credit Default Swap Index is plunging 7.51% today to 100.83 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 5.4% to 132.45 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising .18% 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 1.34% to 46.13 basis points. The Libor-OIS spread is falling .75% to 31 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 12 basis points to 1.75%, which is down 89 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is unch. today. Economically sensitive shares are substantially outperforming today, with the MS Cyclical Index jumping 5.2%. (XLF) is breaking convincingly above its 200-day moving average for the first time in over 2 years. The Euro Financial Sector CDS Index is plunging to the lower end of the trading range it has been in since mid-May and looks poised to break down, which is also a big positive. Despite the weakness in trucking stocks, the Transports are poised to close above the 200-day moving average for the first time since Sept. of last year. China’s GDP report, the Philly Fed Index, Initial Jobless Claims and the Housing Market Index will be market movers tomorrow. We are getting extended short-term, however I suspect stocks can build on recent gains after a brief pause. Nikkei futures indicate an +330 open in Japan and DAX futures indicate an +14 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, short-covering, investment manager performance anxiety, diminishing financial sector pessimism and less economic pessimism.