Stocks Sharply Higher into Final Hour on Less Energy Sector Pessimism, Diminishing Economic Fear, Falling Sovereign Debt Angst, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Every Sector Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 30.62 -9.04%
  
• ISE Sentiment Index 75.0 -8.54%
  
• Total Put/Call .96 -6.80%
  
• NYSE Arms .20 -81.40%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 127.11 bps +.30%
  
• European Financial Sector CDS Index 165.46 bps -4.37%
  
• Western Europe Sovereign Debt CDS Index 130.83 bps -7.32%
  
• Emerging Market CDS Index 287.54 bps -3.73%
  
• 2-Year Swap Spread 37.0 -3 bps
  
• TED Spread 46.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .08% -1 bp
  
• Yield Curve 254.0 +9 bps
  
• China Import Iron Ore Spot $143.20/Metric Tonne -1.04%
  
• Citi US Economic Surprise Index +3.20 +2.0 points
  
• 10-Year TIPS Spread 2.0% +6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +203 open in Japan
• DAX Futures: Indicating -1 open in Germany

Portfolio:

• Higher: On gains in my Technology, Medical, Retail 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 very bullish as the S&P 500 trades near session highs on declining sovereign debt angst and less energy sector pessimism. On the positive side, Road&Rail, REIT, Homebuilding, Semi, Steel, Oil Service, Energy, Oil Tanker and Coal stocks are especially strong, rising 4.0%+. Cyclical shares are outperforming. Copper is bouncing another +1.1% today. The Spain sovereign cds is falling -17.15% to 203.38 bps and the Portugal sovereign cds is falling -8.95% to 291.20 bps. On the negative side, Education, HMO, Gold and Restaurant shares are underperforming. The Eurozone Investment Grade CDS Index is rising another +.78% today to 129.37 bps, despite the rise in the euro and global stocks. As well, the TED spread continues to grind to new 52-week highs, which is also a big negative. The Citi(C) CDS is up another +8.0% today to 228.45 bps and is trading at the upper end of the range it has been in since Sept. 2009. Moreover, the GE Capital CDS is rising another +2.2% today to 276.38 bps, which is the highest since August 2009. Some key stocks continue to meaningfully underperform the broad market, which is also a big negative. The UK's defense of (BP) today is helping the entire group, which is a key reason for the market's sharp gain. The most heavily shorted stocks are up the most today. For this rally to gain real upside traction, volume needs to improve with better performance by market leaders, in my opinion. I expect US stocks to trade modestly lower into the close from current levels on more shorting, profit-taking and tax hike worries.