Stocks Higher into Final Hour on Less Economic Pessimism, Lower Long-Term Rates, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs, Financial longs, Retail longs, Biotech longs and Defense 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, almost every sector is rising and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is very bullish. The VIX is falling -1.77% and is high at 21.05. The ISE Sentiment Index is below average at 125.0 and the total put/call is above average at .89. Finally, the NYSE Arms has been running above average most of the day, hitting 1.48 at its intraday peak, and is currently 1.07. The Euro Financial Sector Credit Default Swap Index is falling -2.37% today to 65.0 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 falling -2.74% to 96.32 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling 1 basis point to 22 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling -5.12% to 37.06 basis points. The Libor-OIS spread is down -1 basis point to 11 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 6 basis points to 2.04%, which is down 61 basis points since July 7th. The 3-month T-Bill is yielding .06%, which is unch. today. Economically-sensitive shares are outperforming again today, with the MS Cyclical Index jumping 2.1%. REIT, Hospital, Steel and Coal shares are especially strong, rising 2%+. Copper is on the verge of a technical breakout. On the negative side, Banks and Homebuilders are notably weak. One of my longs, (AAPL), reports after the close today. I suspect the shares may initially weaken after the report. However, I expect any weakness to be relatively mild and short-lived. I wouldn’t be surprised to see the stock higher by the end of trading tomorrow. I still see significant upside in the shares long-term. With the DJIA poised to close convincingly above 10,000, I expect further near-term gains, after a brief pause, on short-covering, technical buying, momentum chasing, performance anxiety, earnings optimism, less financial sector pessimism and better economic data. Nikkei futures indicate an +119 open in Japan and DAX futures indicate an unch. 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, takeover speculation, investment manager performance anxiety, lower long-term rates and earnings optimism.