Stocks Rising into Final Hour on Lower Long-Term Rates, Falling Energy Prices, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Financial longs, Biotech longs, Medical longs and Technology 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, most sectors are rising and volume is slightly above average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling -1.46% and is around average at 17.59. The ISE Sentiment Index is around average at 140.0 and the total put/call is below average at .75. Finally, the NYSE Arms has been running around average most of the day, hitting 1.12 at its intraday peak, and is currently 1.03. The Euro Financial Sector Credit Default Swap Index is falling -1.10% to 58.48 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 +.88% to 81.29 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 21 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10^th, 2008. The 2-year swap spread is falling -1.44% to 25.68 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 -2 basis points to 2.35%, which is down -30 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .05%, which is up +1 basis point today. Small-cap shares are outperforming again today. A number of market leaders are outperforming, as well. Gaming, HMO, Drug, Bank, Computer Service, Software and Oil Service shares are especially strong, rising 1.0%+. (XLF) has improved throughout the day and is now outperforming despite bank tax worries. (INTC), which had been in a trading range for over 4 months, is breaking to a new 52-week high today on volume ahead of tonight’s earnings release. Oil tanker rates have risen another +11.5% and are up 45.0% over the last 5 days. On the negative side, the Western Europe Sovereign Debt CDS Index is surging 8.5% today to a new 52-week high. As well, semis are underperforming today, despite Intel’s move higher. This year has been very good for stockpicking, so far. I continue to see numerous stocks breaking meaningfully higher on volume and massively outperforming the major averages. Nikkei futures indicate a +43 open in Japan and DAX futures indicate an +16 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, technical buying, diminishing financial sector pessimism, lower long-term rates and declining energy prices.