Stocks Reversing Higher into Final Hour on Bargain Hunting, Short-Covering, Lower Energy Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs and Financial longs. I covered all of my (IWM)/(QQQQ) hedges, added to some existing longs and covered some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is about even, most sectors are rising and volume is about average. Investor anxiety is very high. Today’s overall market action is bullish. The VIX is falling -3.63% and is high at 22.83. The ISE Sentiment Index is about average at 144.0 and the total put/call is high at .97. Finally, the NYSE Arms has been running high most of the day, hitting 1.36 at its intraday peak, and is currently .92. The Euro Financial Sector Credit Default Swap Index is rising +7.9% to 72.74 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 declining -.14% to 97.73 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is down -1 basis point to 23 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 falling -7.54% to 35.25 basis points. The Libor-OIS spread is unch. at 11 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -1 basis point to 2.12%, which is down -53 basis points since July 7th. The 3-month T-Bill is yielding .02%, which is unch. today. Tech stocks are outperforming today with the MS Tech Index rising +.7%. Market leaders are also outperforming for the second day in a row. Coal, Steel, Gold, Education, Wireless, Computer and Oil Service shares are all relatively strong, rising .75%+. Lack of buyers, as opposed to significant selling, had pulled the major averages off recent highs. The bullish action in key stocks today may indicate buyers are starting to materialize. Commodities trade very poorly despite US dollar weakness today. One of my longs, (AAPL), is jumping +3.5% today on rising optimism for their new tablet and comments from Piper Jaffray that there is a 70% chance the iPhone will come to Verizon next year. AAPL shares have likely bottomed after their recent pullback. Nikkei futures indicate a -69 open in Japan and DAX futures indicate an +14 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short covering, bargain hunting, lower energy prices, less financial sector pessimism, diminishing emerging market debt angst and seasonal strength.