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

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Financial longs, Biotech longs and Retail 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, almost every sector is rising and volume is slightly above average. Investor anxiety is high. Today’s overall market action is very bullish. The VIX is falling -1.70% and is high at 22.59. The ISE Sentiment Index is above average at 183.0 and the total put/call is slightly below average at .71. Finally, the NYSE Arms has been running low most of the day, hitting .33 at its intraday trough, and is currently .42. The Euro Financial Sector Credit Default Swap Index is falling -6.26% today to 64.67 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 -4.24% to 96.72 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 442 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is +.68% to 37.0 basis points. The Libor-OIS spread is up 1 basis point to 14 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +9 basis points to 1.95%, which is down 70 basis points since July 7th. The 3-month T-Bill is yielding .07%, which is up 1 basis point today. Economically-sensitive shares are sharply outperforming again, with the MS Cyclical Index jumping another 3.2%. Airline, Road & Rail, I-Banking, Steel, REIT and Banking shares are especially strong, surging 2.75%+. It is a big positive to see the large decline in the CDS Indices confirm today’s move higher. (XLF) has been a market leader throughout the day and is breaking out on above-average volume, which is another large positive. Overall, investor sentiment remains VERY subdued considering how far the major averages have come, which is also a major positive. A convincing close above 10,000 over the next few days will likely lead to further short-covering, technical buying and performance chasing over the coming weeks after a brief pause. Nikkei futures indicate an +150 open in Japan and DAX futures indicate an +1 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 and earnings optimism.