Stocks Near Session Highs on Tech Sector Optimism, Short-Covering, Less Economic Fear

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Mixed
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 29.69 -1.59%
  
• ISE Sentiment Index 85.0 +5.0%
  
• Total Put/Call 1.01 +13.48%
  
• NYSE Arms .99 +253.86%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 116.80 bps -3.49%
  
• European Financial Sector CDS Index 157.96 bps -.04%
  
• Western Europe Sovereign Debt CDS Index 150.0 bps -.22%
  
• Emerging Market CDS Index 273.22 bps -.19%
  
• 2-Year Swap Spread 44.0 +1 bp
  
• TED Spread 41.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .13% -1 bp
  
• Yield Curve 255.0 +2 bps
  
• China Import Iron Ore Spot $147.20/Metric Tonne +1.24%
  
• Citi US Economic Surprise Index +14.80 -1.0 point
  
• 10-Year TIPS Spread 2.08% +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -24 open in Japan
• DAX Futures: Indicating +13 open in Germany

Portfolio:

• Slightly Higher: On gains in my Biotech, Medical and Technology long positions
  
• Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and then covered them
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 recoups mid-day losses despite some very negative headlines. On the positive side, Gaming, HMO, Disk Drive, Semi and Internet stocks are especially strong, rising 1.5%+. Small-cap shares are outperforming again. Tech stocks have been leaders throughout the day. The Spain sovereign cds is falling -3.7% to 243.56 bps and the Portugal cds is declining -4.02% to 332.9 bps. On the negative side, Gold, Coal, Bank and Homebuilding shares are under pressure, falling more than .75%. (XLF) has been heavy throughout the day. Red flags abound, but the market is showing exceptional resilience. The euro trades like another disorderly decline is coming, the Shanghai Composite fell -.7% last night despite big gains in most other major global indices, copper is rolling over again, some market leaders are stalling, the TED spread continues to grind to new 52-week highs, the Greece sovereign cds is rising to its highest level since May 10 at 776.0 bps and key cds indices are staying stubbornly high. I suspect recent gains are mainly attributable to short-covering as hedge fund market exposure had gotten very low and many expect a blowout jobs number tomorrow. It would be a very good sign for the bulls if the S&P 500 could break above its 200-day moving average convincingly on tomorrow's report. However, unless there is a much better-than-expected surge in private employment(weekly jobless claims have shown no improvement since late December), a sell the news reaction is more likely, in my opinion. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, more shorting, rising financial sector pessimism and euro worries.