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

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Defense longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is about even, sector performance is mostly negative and volume is very light. Investor anxiety is very high. Today’s overall market action is neutral. The VIX is falling -.25% and is above average at 19.88. The ISE Sentiment Index is very low at 66.0 and the total put/call is above average at .91. Finally, the NYSE Arms has been running very high most of the day, hitting 1.64 at its intraday peak, and is currently 1.49. The Euro Financial Sector Credit Default Swap Index is falling -1.36% to 65.13 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 rising +.40% to 82.48 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is falling -4 basis points to 16 basis points. The TED spread is now down 449 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling -15.7% to 29.31 basis points. The Libor-OIS spread is unch. at 8 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +1 basis point to 2.40%, which is down -25 basis points since July 7th. The 3-month T-Bill is yielding .09%, which is up +4 basis points today. Software, Medical Equipment and Defense stocks are outperforming today. Gauges of investor angst are very high today given a flat market, which is a positive. The ISE Sentiment Index is showing a spike in retail option trader bearishness. The 2-Yr swap spread has moved back down to the lower end of its 8-month trading range, which is also a positive. The number of coal vessels waiting to load at Australia's Newcastle port has reached a two-year high of 60, amid growing winter demand from northeast Asia and falling stocks. It is also a big positive to see long-term rates falling despite additional supply. Despite Iran worries and a better consumer confidence reading, oil is flat on the day. Gold continues to trade poorly. On the negative side, cyclicals are seeing some profit-taking again today and (IYR) is a bit heavy. Nikkei futures indicate an +100 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, less economic fear, technical buying, lower long-term rates and seasonal strength.