Stocks Reversing Slightly Higher into Final Hour on Short-Covering, Bargain-Hunting, Less Eurozone Fear

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 31.22 -4.99%
  
• ISE Sentiment Index 92.0 -4.17%
  
• Total Put/Call .89 -28.80%
  
• NYSE Arms 1.88 +116.76%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 121.55 bps -3.69%
  
• European Financial Sector CDS Index 143.85 bps -3.71%
  
• Western Europe Sovereign Debt CDS Index 152.50 bps unch.
  
• Emerging Market CDS Index 275.63 bps +.03%
  
• 2-Year Swap Spread 37.0 +1 bp
  
• TED Spread 37.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .16% -1 bp
  
• Yield Curve 236.0 +4 bps
  
• China Import Iron Ore Spot $134.40/Metric Tonne -.30%
  
• Citi US Economic Surprise Index -19.90 +23.7 points
  
• 10-Year TIPS Spread 1.77% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +2 open in Japan
• DAX Futures: Indicating -6 open in Germany

Portfolio:

• Slightly Lower: On losses in my Technology and Retail 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 trades slightly higher on a bounce in the euro, the market's oversold state, stabilizing 10-year T-note and falling sovereign debt angst. On the positive side, Biotech and Medical stocks are relatively strong, rising .5%+. Copper is rising +1.95% and the 10-year yield is rising +3 bps, despite this morning's poor economic data, which is a positive. The Spain sovereign cds is falling another -8.44% to 240.27 bps, the European Investment Grade CDS Index is falling -3.2% to 122.08 bps and the US Municipal CDS Index is pulling back -3.0%. On the negative side, Airline, Road & Rail, Education, REIT, Hospital, Gaming and Bank shares are under meaningful pressure, falling 1.25%+. The Transports are substantially underperforming today, falling -1.6%. Despite improvements in some gauges of European credit angst, three-month euro Libor is rising another basis point today to another multi-month high of 72.7 bps. The major indices are performing much better than the average stock today. I am somewhat surprised the market wasn't able to put in a better showing today, given the set-up. However, volume is very light ahead of the holiday weekend so I am not reading too much into it. I expect to see a better showing by stocks early next week if no new significant negative catalysts arise over the 3-day weekend. I expect US stocks to trade modestly higher into the close from current levels on falling sovereign debt angst, short-covering, bargain-hunting, a stable 10-year T-Note and the bounce in the euro.