Stocks Rising into Final Hour on Short-Covering, Technical Buying, Less Economic Fear, Seasonal Strength

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech longs, Technology longs, Retail longs, Medical longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is below average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling -4.1% and is above average at 19.65. The ISE Sentiment Index is around average at 153.0 and the total put/call is slightly above average at .88. Finally, the NYSE Arms has been running above average most of the day, hitting 1.32 at its intraday peak, and is currently 1.04. The Euro Financial Sector Credit Default Swap Index is falling -.63% to 67.16 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 -2.03% to 84.23 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling -3 basis points to 18 basis points. The TED spread is now down 447 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising +8.04% to 36.53 basis points. The Libor-OIS spread is unch. at 9 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +3 basis points to 2.37%, which is down -28 basis points since July 7th. The 3-month T-Bill is yielding .07%, which is up +3 basis points today. Small-cap shares are outperforming again today. I am seeing a number of leading small-cap stocks bust out of their trading ranges to new 52-week highs. Airline, Homebuilding, Disk Drive, Paper, Steel and Coal shares are especially strong, rising 1.5%+ today. (XLF) continues to base and (IYR) remains an outperformer. The US dollar continues to trade well and gold remains technically weak. The North Amer. Inv. Grade CDS Index is trading at the lowest level since January 2008, which is a large positive. On the negative side, Chinese stocks continue to trade poorly, with the Shanghai Composite falling 12% over the last 4 months. As well, some sovereign credit default swaps in Europe are continuing their recent upward trend. I still expect the S&P 500 to break convincingly higher out of its recent trading range over the coming days. Nikkei futures indicate an +70 open in Japan and DAX futures indicate an +20 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, buyout speculation, less economic fear, technical buying and seasonal strength.