Stocks Slightly Lower into Final Hour on Healthy Consolidation of Recent Outsized Gains

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Gaming longs, Biotech longs and Financial longs. 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 slightly higher, most sectors are rising and volume is about average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling 1.37% and is very high at 25.21. The ISE Sentiment Index is around average at 150.0 and the total put/call is slightly below average at .76. Finally, the NYSE Arms has been running around average most of the day, hitting 1.68 at its intraday peak, and is currently .80. The Euro Financial Sector Credit Default Swap Index is rising 2.79% today to 76.35 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 .38% to 111.87 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 2.10% to 30 basis points. The TED spread is now down 436 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 3.5% to 40.69 basis points. The Libor-OIS spread is falling 4.15% to 26 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 1 basis point to 1.88%, which is down 76 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is unch. today. US stocks are experiencing another healthy consolidation after recent outsized gains today. However, REITs(IYR) and Airlines are sharply outperforming, jumping 4.7%+. This is the best percentage up day for (IYR) in several months, which is a large broad market positive. Paper, networking, education, homebuilding, bank and insurance shares are also posting meaningful gains. Retail and energy stocks are underperforming today. Nikkei futures indicate an +70 open in Japan and DAX futures indicate an +11 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, diminishing commercial real estate pessimism, technical buying and more earnings optimism.