Stocks Reversing Higher into Final Hour on Tech Sector Optimism, Short-Covering, Bargain-Hunting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 25.31 -3.54%
  
• ISE Sentiment Index 94.0 +42.42%
  
• Total Put/Call .69 -37.27%
  
• NYSE Arms .80 -85.95%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 113.45 bps +2.57%
  
• European Financial Sector CDS Index 129.40 bps +2.77%
  
• Western Europe Sovereign Debt CDS Index 136.0 bps +1.84%
  
• Emerging Market CDS Index 244.74 bps -.40%
  
• 2-Year Swap Spread 23.0 -2 bps
  
• TED Spread 37.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 237.0 +2 bps
  
• China Import Iron Ore Spot $118.10/Metric Tonne +.17%
  
• Citi US Economic Surprise Index -34.10 -.6 point
  
• 10-Year TIPS Spread 1.70% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -118 open in Japan
• DAX Futures: Indicating +48 open in Germany

Portfolio:

• Higher: On gains in my Biotech and Technology long positions
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 reverses to session highs on light volume despite some negative eurozone sovereign debt news and another poor US housing reading. On the positive side, Education, REIT, Wireless, Computer Service, Disk Drive, Semi, Software, Oil Service and Utility stocks are especially strong, rising 1.0%+. The MS Tech Index is jumping +1.2%. The 2-year swap spread is falling to the lowest level since early May. Gold is falling to the lowest level since mid-May, which is also a positive. The 10-year yield is also rebounding +4 bps today. On the negative side, Airline, Road&Rail, Gold, Ag and Oil Tanker shares are under pressure, falling more than -1.0%. Small-caps are underperforming. (XLF) has been unable rebound despite recent losses and today's broad market reversal. The European Investment Grade CDS Index is rising +3.5% to 116.5 bps today. Moreover, the Hungary sovereign cds is soaring +16.08% to 371.05 bps and the Russia sovereign cds is rising +4.6% to 180.25 bps. So far, the euro is ignoring this development. I would like to see better breadth and volume materialize before becoming more aggressive on the long side. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, rising economic fear, increasing financial sector pessimism, tax hike worries and regulatory concerns.