Stocks Surging to Session Highs on Volume into Final Hour on Less Economic Fear, Short-Covering, Declining Financial Sector Pessimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 15.83 -2.28%
  
• ISE Sentiment Index 179.0 +129.49%
  
• Total Put/Call .56 -22.22%
  
• NYSE Arms .76 -49.30%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 84.22 bps +.43%
  
• European Financial Sector CDS Index 74.43 bps +3.63%
  
• Western Europe Sovereign Debt CDS Index 83.91 bps +3.39%
  
• Emerging Market CDS Index 211.54 bps -1.46%
  
• 2-Year Swap Spread 13.0 bps -1 bp
  
• TED Spread 15.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 281.0 bps +5 bps
  
• China Import Iron Ore Spot $174.40/Metric Tonne +1.34%
  
• Citi US Economic Surprise Index +37.70 -2.4 points
  
• 10-Year TIPS Spread 2.34% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +101 open in Japan
• DAX Futures: Indicating +11 open in Germany

Portfolio:

• Higher: On gains in my Retail, Medical, Financial and Tech long positions
  
• Disclosed Trades: Added to (F) long position and took some profits in another long
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as stocks trade near session highs on good volume despite rising sovereign debt angst. On the positive side, Oil Tanker, Oil Service, Computer, Semi, Disk Drive, Networking, Bank, Homebuilding, Road/Rail and Airline stocks are especially strong, rising 2.0%+. Small-cap and Cyclical shares are outperforming. (XLF) has traded very well throughout the day. The Transports are making another 52-week high, rising 2.3%. The 10-year yield is just 3 bps higher on the day despite the rally in equities and positive economic data, which is also a large positive. On the negative side, HMO and Education shares are underperforming, falling 1.0%+. (IYR) is -.4% lower on the day. The Portugal sovereign cds is jumping +14.6% and the Greece sovereign cds is surging 11.3% today, which bares close monitoring. Shanghai copper inventories are hitting another new high, rising +12.98% today. Many bears expected (INTC) shares to sell-off on its earnings announcement, thinking the stock's recent run already reflected very positive results. Instead it is breaking out of its recent trading range to a new 52-week high on heavy volume, which is a large psychological positive for the entire tech sector. Tech stocks, in general, have lagged the broad market mildly this year. I suspect they are now beginning another run of outperformance. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, stable long-term rates, diminishing financial sector pessimism, investment manager performance anxiety and less economic fear.