Stocks Slightly Higher into Close on Less Financial Sector Pessimism, Short-Covering, Commodity Strength, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 28.15 -5.35%
  
• ISE Sentiment Index 132.0 +71.43%
  
• Total Put/Call .89 -24.58%
  
• NYSE Arms 1.10 -67.08%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 116.23 bps -3.54%
  
• European Financial Sector CDS Index 152.0 bps +2.26%
  
• Western Europe Sovereign Debt CDS Index 136.83 bps +2.50%
  
• Emerging Market CDS Index 255.52 bps -2.81%
  
• 2-Year Swap Spread 37.0 -1 bp
  
• TED Spread 41.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% unch.
  
• Yield Curve 245.0 unch.
  
• China Import Iron Ore Spot $143.10/Metric Tonne -.91%
  
• Citi US Economic Surprise Index -24.3 -4.3 points
  
• 10-Year TIPS Spread 1.94% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +43 open in Japan
• DAX Futures: Indicating +22 open in Germany

Portfolio:

• Slightly Higher: On gains in my Medical, Biotech and Retail long positions
  
• Disclosed Trades: I 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 mildly bullish as the S&P 500 trades slightly higher on less financial and commodity sector pessimism. On the positive side, REIT, Bank, Gold, Coal, Oil Tanker and Oil Service stocks are especially strong, rising 2.0%+. Small-caps are strongly outperforming. The Greece sovereign cds is pulling back -2.8% to 1,008.35 bps today. On the negative side, Telecom, Wireless, Drug, HMO, Retail, Education and Airline shares are lower on the day. The China sovereign cds is rising another +2.47% to 89.58 bps and is up +9.1% over the last five days. Moreover, the Illinois Municipal CDS is jumping +5.2% to 335.0 bps, which is a new record high. As well, the California Municipal CDS is rising 4.11% to 319.0 bps, which is also a large negative. Oil is rising today on hurricane concerns, Iran worries, the rise in the euro and financial reform. As I said the other day, the recent bounce in the euro is likely related to short-covering, US economic weakness and rising US muni debt concerns, which shouldn't be construed as bullish for equities or commodities, in my opinion. The rally today is concentrated in the most technically beaten up and fundamentally weak stocks, which is a negative. Given the market's oversold state and end-of-quarter short-covering/bargain-hunting, stocks could rally short-term. However, I suspect weakness will return before next week's end. I expect US stocks to trade mixed-to-higher into the close from current levels on less financial sector pessimism, diminishing energy sector fear, short-covering and bargain-hunting.