Stocks Reversing Higher into Final Hour on Less Economic Fear, Short-Covering, Buyout Speculation, Bargain-Hunting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 25.10 -8.26%
  
• ISE Sentiment Index 101.0 -5.61%
  
• Total Put/Call .82 -8.89%
  
• NYSE Arms .61 -65.76%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 112.90 bps +.57%
  
• European Financial Sector CDS Index 131.07 bps +.76%
  
• Western Europe Sovereign Debt CDS Index 154.33 bps +.95%
  
• Emerging Market CDS Index 258.11 bps +.40%
  
• 2-Year Swap Spread 17.0 +1 bp
  
• TED Spread 16.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .14% -1 bp
  
• Yield Curve 209.0 +11 bps
  
• China Import Iron Ore Spot $142.90/Metric Tonne -.56%
  
• Citi US Economic Surprise Index -59.60 +3.2 points
  
• 10-Year TIPS Spread 1.64% +7 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +89 open in Japan
• DAX Futures: Indicating +5 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 reverses higher on better volume despite weaker economic data, Intel's lowered guidance, retail sector worries and some initial disappointment over Bernanke's comments. On the positive side, Airline, Gaming, Disk Drive, Computer, Oil Service, Coal, Road&Rail, Construction, Insurance, Steel, Energy and Alt Energy stocks are especially strong, rising 2.75%+. Cyclicals and small-caps are outperforming. Copper is rising +2.18% and the S&P GSCI Ag Spot Index is gaining +1.39%. The US scrap steel benchmark index is rising another +4.6% and has risen 8.9% over the last five days. The 10-year yield is reversing +19 points higher from session lows to 2.66%, which is a large positive. On the negative side, Retail and Oil Tanker shares are underperforming, rising less than +.5%. The Ireland sovereign cds is gaining +2.72% to 333.83 bps. The main cds indices are not confirming today's equity rally. As well, the euro trades poorly considering today's stock rally and Bernanke's comments. The large reversal higher in the 10-year yield off today's news likely indicates much of the recent turn lower in economic activity is now priced in and higher yields are likely over the coming weeks. I suspect US stocks can build on today's gains next week. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, less economic fear, technical buying and buyout speculation.