Stocks Rising to Session Highs into Final Hour on Tech Sector Optimism, Falling Sovereign Debt Angst, Diminishing Energy Sector Fear

Broad Market Tone:

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

Equity Investor Angst:

• VIX 29.71 -2.78%
  
• ISE Sentiment Index 113.0 +34.52%
  
• Total Put/Call 1.01 +1.0%
  
• NYSE Arms 1.16 +681.42%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 126.15 bps -.76%
  
• European Financial Sector CDS Index 157.64 bps -3.86%
  
• Western Europe Sovereign Debt CDS Index 127.17 bps -2.80%
  
• Emerging Market CDS Index 287.33 bps +.44%
  
• 2-Year Swap Spread 39.0 +2 bps
  
• TED Spread 47.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .07% -1 bp
  
• Yield Curve 249.0 -5 bps
  
• China Import Iron Ore Spot $143.10/Metric Tonne -.07%
  
• Citi US Economic Surprise Index -14.20 -17.4 points
  
• 10-Year TIPS Spread 1.97% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +105 open in Japan
• DAX Futures: Indicating +4 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 pushes to session highs despite recent gains, a euro decline and disappointing economic data. On the positive side, Education, Airline, Semi, Software, Paper and Oil Tanker stocks are especially strong, rising 1.0%+. Cyclical and small-cap shares are outperforming. Copper is bouncing another +1.2% today. The BP(BP) cds is falling -13.4% to 401.47 bps. On the negative side, Retail, Homebuilding, Bank and Utility shares are under pressure, falling 1.0%+. The TED spread continues to grind to new 52-week highs, which remains a big negative. As well, the yield on 3-Month Treasuries is now down to February levels and the 10-year yield is falling too much today. The Citi US Economic Surprise Index is rolling over, which usually indicates economists will soon ratchet down their forecasts. This also corresponds with the recent deterioration in the ECRI weekly leading index. I suspect upcoming inflation readings will come in meaningfully below current estimates. The tone of trading today is better than the major averages would suggest. Action in tech sector shares is much improved. Leader (AAPL) is at session highs and is trying to break back above its 50-day moving average. The recent bounce in the major averages looks to continue short-term. I expect US stocks to trade modestly higher into the close from current levels on short-covering, tech sector optimism, less energy sector fear, declining sovereign debt angst and lower energy prices.