Stocks Slightly Higher into Final Hour on Short-Covering, Rising Bernanke Confirmation Odds, Less Sovereign Debt Fear

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs, Medical longs and Financial longs. I have not traded today, thus leaving the Portfolio 50% net long. The tone of the market is slightly positive as the advance/decline line is about even, most sectors are rising and volume is above-average. Investor anxiety is very high. Today’s overall market action is neutral. The VIX is falling -9.48% and is above-average at 24.68. The ISE Sentiment Index is low at 84.0 and the total put/call is above-average at .97. Finally, the NYSE Arms has been running around average most of the day, hitting 1.16 at its intraday peak, and is currently .84. The Euro Financial Sector Credit Default Swap Index is falling -1.79% to 76.82 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 +4.30% to 96.20 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 falling -3.30% to 29.33 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 2.32%, which is down -33 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .05%, which is unch. today. Small-caps are underperforming today and market breadth is mediocre. Market leading stocks are mixed. Another jump in the North American Inv. Grade CDS Index is especially negative considering the rise in stocks. On the positive side, cyclical shares are outperforming. Semi, Coal, Oil Tanker, Oil Service, Insurance and Telecom shares are especially strong, rising 1.5%+ today. Considering last week’s stock decline, Bernanke’s rising confirmation odds and declining Greece debt fears, today’s rebound is rather poor in quality. One of my longs, (AAPL), reports after the close today. While some of the optimism towards the stock has been tamped down, I suspect the shares may not react much to an expected good report this close to another big product announcement. Other large-cap tech stocks have seen negative or flat reactions to positive earnings reports and that could be the case with AAPL, as well. I still plan to add to my (AAPL) long on any significant decline from current levels. Nikkei futures indicate an +23 open in Japan and DAX futures indicate an +14 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less financial sector pessimism, diminishing economic fear and declining European sovereign debt concerns.