Stocks Surging into Final Hour on Less Economic Fear, Short-Covering, Technical Buying, Earnings Optimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Technology longs, Steel longs and Financial 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, 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 .62% and is very high at 26.08. The ISE Sentiment Index is low at 109.0 and the total put/call is slightly below average at .75. Finally, the NYSE Arms has been running above average most of the day, hitting 1.20 at its intraday peak, and is currently 1.15. The Euro Financial Sector Credit Default Swap Index is falling 1.14% today to 74.0 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 .88% to 111.46 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 1.47% 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 13.1% to 39.90 basis points. The Libor-OIS spread is falling 3.41% to 27 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 6 basis points to 1.87%, which is down 77 basis points since July 7th. The 3-month T-Bill is yielding .17%, which is down 1 basis point today. The MS Cyclical Index is soaring another 3.2% today. Road & Rail, Gaming, Hospital, Steel and Oil Service stocks are all surging 3.75%+ today. The NYSE Arms is high again today, given the gains in the major averages, which is a positive for the third day in a row. The US sovereign debt credit default swap is plunging another 13.3% today to 26.0 basis points, which is a new low and a large positive. While US stocks remain technically extended short-term, I continue to believe pullbacks will be relatively mild and short-lived in nature. Nikkei futures indicate an +165 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, technical buying and more earnings optimism.