Stocks Slightly Higher into Final Hour on Less Economic Fear, Short-Covering, Technical Buying, Earnings Optimisim

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Biotech longs and Financial longs. I added to my (CREE) and (ISRG) longs this morning and took profits in another long, 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 above average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is falling -3.21% and is high at 20.23. The ISE Sentiment Index is slightly below average at 132.0 and the total put/call is slightly above average at .89. Finally, the NYSE Arms has been running around average most of the day, hitting 1.06 at its intraday peak, and is currently .95. The Euro Financial Sector Credit Default Swap Index is rising +.10% today to 64.0 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 +1.24% to 97.62 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is rising +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 -3.41% to 35.44 basis points. The Libor-OIS spread is unch. at 12 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is unch. at 2.0%, which is down 65 basis points since July 7th. The 3-month T-Bill is yielding .06%, which is down -1 basis point today. Cyclical shares are outperforming today with the MS Cyclical Index rising another 1.2%. Oil Service, Coal, Alt Energy, Energy, Gold, Steel, Disk Drive, Homebuilding and Gaming shares are especially strong, rising 1.75%+. Copper is breaking higher from the trading range it has been in since July. Oil continues to trade well on US dollar weakness. The Baltic Dry Index is +7.03% over the last five days. The CMBS Super Senior AAA 10-year Treasury Spread is dropping another -7.2% this week to the lowest level since the week of Oct. 3^rd, 2008, which is a major positive. One of my longs, (ISRG), is falling -5.6% today on worries over net new unit installs and general med tech weakness on healthcare reform concerns. I think the reaction is overdone and still see tremendous upside for the shares from current levels over the long-term. Nikkei futures indicate an +70 open in Japan and DAX futures indicate an +1 open in Germany tomorrow. I expect US stocks to trade mixed into the close from current levels as short-covering, investment manager performance anxiety, diminishing economic fear, technical buying and earnings optimism offset higher energy prices, higher long-term rates and healthcare reform worries.