Stocks Surging Into Final Hour on Less Sovereign Debt Agnst, Short-Covering, Diminishing Economic Fear, Bargain-Hunting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 26.70 -.45%
  
• ISE Sentiment Index 101.0 +1.0%
  
• Total Put/Call .83 -2.53%
  
• NYSE Arms 1.05 +257.24%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 114.73 bps -4.24%
  
• European Financial Sector CDS Index 127.53 bps -6.12%
  
• Western Europe Sovereign Debt CDS Index 146.0 bps -1.02%
  
• Emerging Market CDS Index 258.43 bps -1.49%
  
• 2-Year Swap Spread 31.0 -1 bp
  
• TED Spread 38.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 239.0 +2 bps
  
• China Import Iron Ore Spot $122.90/Metric Tonne -2.92%
  
• Citi US Economic Surprise Index -20.10 +.7 point
  
• 10-Year TIPS Spread 1.80% +7 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +105 open in Japan
• DAX Futures: Indicating +23 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades to session highs, building on yesterday's sharp advance. On the positive side, Education, Restaurant, Disk Drive, Ag, Oil Service, Oil Tanker, Alt Energy and Defense stocks are especially strong, rising 1.25%+. Cyclicals are outperforming again today. The S&P GSCI Ag Spot Index is rising another +1.54% today to 320.55 and is now slightly above its 200-day moving average for the first time since early March. The 10-year yield is rising another +3 bps, which is also a positive. The large jump in the AAII% Bears to 57.1% is also a noteworthy positive. Moreover, the Spain sovereign cds is dropping another -9.9% to 226.25 bps and the European Investment Grade CDS Index is falling -4.7% to 113.08 bps. The US Muni CDS Index is falling -2.4% to 253.46 bps. On the negative side, Gold, Homebuilding, Semi and Bank shares are relatively weak, falling .5%+. China Import Iron Ore Spot prices continue to decline and the Shanghai Composite was unable to rally last night with most other global indices. After a mixed performance yesterday on the big rally in stocks, it is good to see some meaningful cds declines today. The current rally looks like it still has more upside steam. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less real estate sector pessimism, falling sovereign debt angst, bargain-hunting and diminishing economic fear.