Stocks Slightly Higher into Final Hour on Less Financial Sector Pessimism, Declining Economic Fear, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs and Financial 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 heavy. Investor anxiety is high. Today’s overall market action is mildly bullish. The VIX is falling 3.66% and is high at 23.16. The ISE Sentiment Index is around average at 162.0 and the total put/call is slightly below average at .75. Finally, the NYSE Arms has been running below average most of the day, hitting .47 at its intraday trough, and is currently .73. The Euro Financial Sector Credit Default Swap Index is falling 5.16% today to 68.67 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 4.96% to 90.75 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is down 1 basis point to 19 basis points. The TED spread is now down 444 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling .85% to 36.50 basis points. The Libor-OIS spread is down 1 basis point to 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 1.82%, which is down 85 basis points since July 7th. The 3-month T-Bill is yielding .10%, which is up 1 basis point today. The most economically sensitive shares are outperforming substantially today, with the MS Cyclical Index rising 1.6%. REIT, I-Banking, Bank, Steel, Gold, Oil Service, Coal and Oil Tanker shares are especially strong, rising 2%+. Healthcare-related, education and airline stocks are under pressure today. Another meangingful decline in credit default swap indices is a large positive. The Euro Financial Sector CDS Index is dropping to the lowest level since June 18^th of last year. The 2GB U-DIMM DDR2 667 MHz DRAM price has risen 7.27% over the last five days and is at the highest level since Oct. of last year. The US dollar is dropping again today, however I suspect we are nearing another tradable low in the currency over the next few days as shorts cover and some bargain-hunters materialize. The Shanghai Composite fell another 2.3% last night, finishing at session lows, and looks poised for further losses over the coming weeks. Nikkei futures indicate an +80 open in Japan and DAX futures indicate an +7 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on diminishing economic fear, short-covering, less financial sector pessimism, lower long-term rates, technical buying and investment manager performance anxiety.