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

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Financial longs, Biotech longs, Retail longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is slightly higher, most sectors are rising and volume is slightly above average. Investor anxiety is high. Today’s overall market action is mildly bullish. The VIX is falling -.68% and is above average at 19.03. The ISE Sentiment Index is above average at 177.0 and the total put/call is below average at .70. Finally, the NYSE Arms has been running around average most of the day, hitting 1.08 at its intraday peak, and is currently .76. The Euro Financial Sector Credit Default Swap Index is falling -3.69% to 57.34 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 -1.90% to 77.20 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 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 rising +.68% to 27.56 basis points. The Libor-OIS spread is unch. at 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up +3 basis points to 2.44%, which is down -21 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .05%, which is unch. today. There are an unusual number of stocks rising on above-average volume again today for a flat broad market. Value shares are outperforming growth today. Education, Airline, Homebuilding, Construction, HMO, Hospital and Bank shares are especially strong, rising 1.5%+. (XLF) is trading very well today as the euro financial sector cds index dropped to the lowest level since trading in the instrument began in March 2008, which is a large positive. The US sovereign debt credit default swap is plunging 21% to 34.0 basis points, which is also a large positive. The AAII % Bulls fell to 41.0 this week, while the % Bears rose to 26.0%. Considering the major averages are at 52-week highs, this is constructive. On the negative side, select tech leaders are relatively weak again. This is likely the result of hot money traders taking profits into CES and major product announcements. While competition is increasing for weaker players, (GOOG), (AAPL) and (AMZN) should see little new pressure on their core businesses. I will add to my (GOOG) and (AAPL) long positions on any meaningful decline in the stocks from current levels. As well, recent pullbacks are a healthy development ahead of quarterly earnings releases, especially given the broad market’s resilience in the face of this select weakness. I suspect the market will respond positively to tomorrow's jobs report. Nikkei futures indicate an +140 open in Japan and DAX futures indicate an +19 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 energy prices, buyout speculation and less financial sector pessimism.