Stocks Rising into Final Hour on Short-Covering, Less Economic Fear, Earnings Optimism

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Most Rising
  
• Volume: Heavy
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 21.27 -6.93%
  
• ISE Sentiment Index 130.0 +19.27%
  
• Total Put/Call .82 -7.87%
  
• NYSE Arms .53 -84.09%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 95.81 bps +2.72%
  
• European Financial Sector CDS Index 117.30 bps +3.65%
  
• Western Europe Sovereign Debt CDS Index 115.83 bps +4.83%
  
• Emerging Market CDS Index 229.20 bps -.92%
  
• 2-Year Swap Spread 16.0 -7 bps
  
• TED Spread 19.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% +1 bp
  
• Yield Curve 272.0 unch.
  
• China Import Iron Ore Spot $177.40/Metric Tonne -2.58%
  
• Citi US Economic Surprise Index +19.20 -3.7 points
  
• 10-Year TIPS Spread 2.39% +5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +50 open in Japan
• DAX Futures: Indicating +21 open in Germany

Portfolio:

• Slightly Higher: On gains in my Financial, Medical and Biotech long positions
  
• Disclosed Trades: Covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as equities trade near session highs despite rising eurozone debt concerns. On the positive side, Airline, Homebuilding, HMO and Gold stocks are especially strong, rising 1.5%+. Despite S&P's downgrade of Spain, the Spain sovereign cds is -7.11% lower on the day. Greece and Portugal sovereign cds are also declining for the first time in days. On the negative side, Disk Drive and Restaurant shares are under meaningful pressure, falling 1.25%+. The euro financial sector cds index still bares close monitoring. This index is at the highest level since June 2009. Moreover, it is a big negative to see other major cds indices rising today, despite an equity rally off the lows. Asian indices held up relatively well last night. I don't think the recent pullback is over, however another leg down may not occur until there is better understanding of the resolution to the Greece situation. I expect US stocks to trade modestly lower into the close from current levels on profit-taking, increasing sovereign debt fear, tax hike concerns and more shorting.