Stocks Slightly Higher into Final Hour on Less Financial Sector Pessimism, Diminishing Economic Fear, Short-Covering, Earnings Optimism

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 mixed as the advance/decline line is about even, sector performance is mixed and volume is light. Investor anxiety is high. Today’s overall market action is neutral. The VIX is rising .95% and is high at 23.34. The ISE Sentiment Index is above average at 170.0 and the total put/call is around average at .81. Finally, the NYSE Arms has been running below average most of the day, hitting .44 at its intraday trough, and is currently .64. The Euro Financial Sector Credit Default Swap Index is falling -.45% today to 70.33 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 -.46% to 101.90 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 22 basis points. The TED spread is now down 443 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is -1.34% to 36.75 basis points. The Libor-OIS spread is up +1 basis point to 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is unch. at 1.86%, which is down 81 basis points since July 7th. The 3-month T-Bill is yielding .06%, which is unch. today. Energy-related, semi and HMO shares are especially strong today, rising 1.0%+. The bears were unable, once again, to gain any meaningful traction on afternoon profit-taking. (XLF) has traded well throughout the day. Overall, today’s action should be viewed as a healthy light volume consolidation. Nikkei futures indicate an +114 open in Japan and DAX futures indicate a -16 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, investment manager performance anxiety and earnings optimism.