Stocks Reversing to Session Highs into Final Hour on Falling Long-Term Rates, Short-Covering, Less Economic Fear

Broad Market Tone:

• Advance/Decline Line: Slightly Lower
  
• Sector Performance: Mixed
  
• Volume: Above Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 15.96 +2.44%
  
• ISE Sentiment Index 79.0 -49.03%
  
• Total Put/Call .72 +10.77%
  
• NYSE Arms 1.51 +104.98%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 83.84 bps -1.34%
  
• European Financial Sector CDS Index 71.04 bps -6.78%
  
• Western Europe Sovereign Debt CDS Index 81.17 bps +2.74%
  
• Emerging Market CDS Index 215.11 bps +.99%
  
• 2-Year Swap Spread 14.0 bps unch.
  
• TED Spread 16.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% +2bps
  
• Yield Curve 276.0 bps -4 bps
  
• China Import Iron Ore Spot $172.10/Metric Tonne +2.81%
  
• Citi US Economic Surprise Index +40.10 -3.0 points
  
• 10-Year TIPS Spread 2.32% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +49 open in Japan
• DAX Futures: Indicating +19 open in Germany

Portfolio:

• Higher: On gains in my Retail, Medical and Tech long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as stocks trade near session highs on less real estate sector pessimism, stable energy prices and falling long-term rates. On the positive side, Education, Semi, Networking, Computer Service, Wireless, REIT, Retail, Restaurant and Road/Rail stocks are especially strong, rising .75%+. (IYR) has traded very well throughout the day. The Transports are making another 52-week high. Weekly retail sales rose +3.3% this week, versus a +3.9% gain the prior week, which is still healthy. Investor angst gauges are rising meaningfully today, which is a large positive. The 10-year yield has declined -20 bps in 7 days. The euro financial sector cds is moving back to the lower end of its recent range, which is a large positive. On the negative side, HMO, Bank, Computer and Commodity shares are underperforming, falling 1.0%+. Shanghai copper inventories are hitting another new high, rising +4.2% today. One of my longs, (ISRG), is hitting another new all-time high today. While I still see substantial upside in the shares longer-term, I would wait for a pullback before adding around current levels. (INTC) reports after the close today and I suspect its release will be treated favorably by investors. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, falling long-term rates, investment manager performance anxiety and less economic fear.