Stocks Sharply Higher into Final Hour on Earnings Optimism, Short-Covering, Less Economic Fear, Less Greece Contagion Fear

Broad Market Tone:

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

Equity Investor Angst:

• VIX 18.79 -10.86%
  
• ISE Sentiment Index 132.0 +1.54%
  
• Total Put/Call .69 -14.81%
  
• NYSE Arms 1.23 +122.89%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 89.91 bps -6.16%
  
• European Financial Sector CDS Index 104.32 bps -9.41%
  
• Western Europe Sovereign Debt CDS Index 122.33 bps +5.61%
  
• Emerging Market CDS Index 219.88 bps -3.33%
  
• 2-Year Swap Spread 18.0 +2 bps
  
• TED Spread 18.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .16% +1 bp
  
• Yield Curve 273.0 +1 bp
  
• China Import Iron Ore Spot $172.90/Metric Tonne -2.54%
  
• Citi US Economic Surprise Index +18.30 -.9 point
  
• 10-Year TIPS Spread 2.44% +5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +155 open in Japan
• DAX Futures: Indicating +10 open in Germany

Portfolio:

• Higher: On gains in my Financial, Medical, Tech, Retail and Biotech long positions
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short, added to my (HGSI) long
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as equities trade near session highs on volume. On the positive side, REIT, Gaming, HMO, Hospital, Biotech and Networking stocks are especially strong, rising 2.5%+. The large decline in most cds indices is a large positive. The 10-year yield is down another 3 bps, despite today's equity rally and rise in inflation expectations. There are massive gains in some individual growth stocks today(FSLR, BIDU, AKAM, ILMN, DNDN, etc.), which should give the bears pause. On the negative side, Education and Oil Service shares are under meaningful pressure, falling 3.2%+. The AAII % Bulls rose to 41.4 this week, while the % Bears fell to 28.6. China spot iron ore prices are under meaningful pressure for the second day in a row and the Shanghai Composite continues to trade poorly, falling another -1.1% last night to a new 52-week low. This index is now down -12.5% YTD. The ongoing rise in the Western Europe Sovereign Debt CDS Index is a large negative. Until European sovereign debt problems intensify further and begin to impacting the main economies in that region in a significantly negative way, investors will likely continue to perceive the situation as a net positive for U.S. equities. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less Greece contagion fear, diminishing economic fear, falling long-term rates and earnings optimism.