Stocks Surging into Final Hour on Plunging Sovereign Debt Angst, Short-Covering, Technical Buying, Less Economic Fear

Broad Market Tone:

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

Equity Investor Angst:

• VIX 23.31 -.68%
  
• ISE Sentiment Index 93.0 -18.42%
  
• Total Put/Call 1.08 +30.12%
  
• NYSE Arms .82 -19.69%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 103.65 bps -3.50%
  
• European Financial Sector CDS Index 103.92 bps -14.31%
  
• Western Europe Sovereign Debt CDS Index 118.33 bps -7.38%
  
• Emerging Market CDS Index 223.19 bps -3.46%
  
• 2-Year Swap Spread 23.0 -1 bp
  
• TED Spread 34.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 240.0 -1 bp
  
• China Import Iron Ore Spot $133.40/Metric Tonne +5.04%
  
• Citi US Economic Surprise Index -37.1 -.1 point
  
• 10-Year TIPS Spread 1.78% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +17 open in Japan
• DAX Futures: Indicating +2 open in Germany

Portfolio:

• Higher: On gains in my Medical, Retail, Biotech and Technology long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades near session highs, despite lingering worries over the usefulness of the European bank stress test results and mixed US economic data. On the positive side, Airline, Road&Rail, Gaming, REIT, Hospital, Biotech, Bank, Networking, Disk Drive and Alt Energy stocks are especially strong, rising 2.0%+. Small-cap and cyclical shares are outperforming again and the Transports continue to surge, rising another +2.31%. Copper is rising another +1.37%. The European Investment Grade CDS Index is plunging another -9.9% to 99.91 bps. The UK sovereign cds is falling another -9.1% to 63.66 bps, which is the lowest level since Nov. 16th, 2009. Moreover, the Japan sovereign cds is falling -4.95% to 72.72 bps and the Portugal sovereign cds is dropping -6.2% to 251.93 bps. The US Municipal CDS Index is dropping -3.9% to 210.0 bps. China Import Iron Ore spot continues its recent move higher after sharp declines and Shanghai copper inventories are falling -8.3% today. On the negative side, Education, Coal and Gold shares are lower on the day. 3-Month Euro Libor is rising slightly today to 82.0 bps. Despite ongoing concerns about the structure of eurozone bank stress tests, the huge declines in key eurozone cds indices and further euro currency strength are big psychological positives for investors. It is also a positive to see some key gauges of equity investor angst rising meaningfully today, despite another stock market advance. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic fear, short-covering, diminishing sovereign debt angst, mostly positive earnings reports, buyout speculation and technical buying.