Stocks Sharply Higher into Final Hour on Less Economic Fear, Diminishing Financial Sector Pessimism, Short-Covering, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Financial longs, Biotech longs, Retail long, Technology longs, Defense longs and Medical longs. I have not traded today, 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 below average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling -6.92% and is high at 20.17. The ISE Sentiment Index is above average at 161.0 and the total put/call is below average at .66. Finally, the NYSE Arms has been running below average most of the day, hitting .43 at its intraday trough, and is currently .61. The Euro Financial Sector Credit Default Swap Index is rising +3.12% to 64.11 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 -3.32% to 82.76 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 20 basis points. The TED spread is now down 443 basis points since its all-time high of 463 basis points on October 10^th, 2008. The 2-year swap spread is falling -2.18% to 27.88 basis points. The Libor-OIS spread is unch. at 9 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is unch. at 2.41%, which is down -24 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .05%, which is unch. today. Today’s gains are broad-based. Gaming, HMO, Disk Drive, Steel, Gold, Oil Service, Energy, Oil Tanker, Coal and I-Banking shares are especially strong, rising 2.75%+. (XLF) is trading better today. On the negative side, (IYR) has been a bit heavy throughout the day and market volume is lackluster. (IYR) has been trending lower over the last week. It needs to begin to participate for the market to build meaningfully on recent gains. Nikkei futures indicate an +216 open in Japan and DAX futures indicate an unch. open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, technical buying, stable long-term rates, buyout speculation and less financial sector pessimism.