Stocks Higher into Final Hour on Short-Covering, Technical Buying, Seasonal Strength, Stable Long-Term Rates

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs, Biotech longs, Retail longs and Financial 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 below average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling -5.59% and is high at 20.95. The ISE Sentiment Index is slightly below average at 138.0 and the total put/call is below average at .66. Finally, the NYSE Arms has been running low most of the day, hitting .19 at its intraday trough, and is currently .70. The Euro Financial Sector Credit Default Swap Index is falling -1.63% to 71.15 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 -2.49% to 100.67 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling -2 basis points to 24 basis points. The TED spread is now down 440 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling -.39% to 31.81 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 +2 basis points to 2.21%, which is down -44 basis points since July 7th. The 3-month T-Bill is yielding .02%, which is up +2 basis points today. Small-caps are outperforming today. As well, many market leading stocks are substantially outperforming the broad market. I am seeing some key stocks break higher out of their recent trading ranges, hitting 52-week highs. HMO, Airline, Bank, Gold, Oil Service and Telecom stocks are especially strong, rising 1.75%+. (XLF) has been a market performer most of the day, however the strength in shares of (STI) is noteworthy considering investor concerns there. On the negative side, buyers evaporated again as the S&P 500 moved back above strong technical resistance around 1,100. I am seeing some hedge fund commodity favorites reverse to session lows. As well, volume has been below average throughout the day. I suspect (HPQ) will report a slight beat after the close today, which could help the bulls gain more traction tomorrow. HPQ’s short interest ratio is at 2.26, at the high-end of its 3-year range. Moreover, its put/call open interest ratio is .78, which is at the higher end of its recent range. Nikkei futures indicate an +78 open in Japan and DAX futures indicate a -13 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, diminishing healthcare reform worries, stable long-term rates, technical buying, investment manager performance anxiety and seasonal strength.