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

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs, Biotech longs and Retail longs. I covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, 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 about average. Investor anxiety is high. Today’s overall market action is very bullish. The VIX is falling -9.47% and is high at 22.25. The ISE Sentiment Index is slightly above average at 150.0 and the total put/call is slightly above average at .87. Finally, the NYSE Arms has been running around average most of the day, hitting 1.01 at its intraday peak, and is currently .66. The Euro Financial Sector Credit Default Swap Index is falling -5.29% to 74.98 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 -3.17% to 102.90 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 444 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +2.81% to 34.31 basis points. The Libor-OIS spread is unch. at 11 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +7 basis points to 2.18%, which is down -47 basis points since July 7th. The 3-month T-Bill is yielding .04%, which is unch. today. Many market leading stocks are substantially outperforming the broad market. The MS Cyclical Index is jumping +2.3%. As well, Airline, HMO, Homebuilding, Disk Drive, Semi, Steel, Gold, Ag, Alt Energy and Oil Tanker stocks are all 2.5%+ higher on the day. Weekly retail sales rose +2.6% this week, which is the best showing since Aug. 5^th, 2008 and up from a +2.1% increase the prior week. CDS Indices are lower across the board, which is a big positive. The Asia Ex Japan High Yield CDS Index is plunging -22.0% today to 472.5 basis points. On the negative side, the Bank Index(BKX) has been relatively heavy throughout the day and market volume is only around average. I suspect many shorts are feeling trapped again after recent downside catalysts and ensuing market reversal higher, which should lead to another meaningful surge on a break above recent highs. Nikkei futures indicate an +40 open in Japan and DAX futures indicate an +1 open in Germany on tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, technical buying, less economic fear, investment manager performance angst and seasonal strength.