Stocks Surging into Final Hour on Technical Buying, Less Economic Fear, Short-Covering, Diminishing Financial Sector Pessimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 21.86 -7.15%
  
• ISE Sentiment Index 120.0 +17.65%
  
• Total Put/Call .93 +16.25%
  
• NYSE Arms .47 -61.39%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 100.78 bps -3.91%
  
• European Financial Sector CDS Index 93.83 bps -5.81%
  
• Western Europe Sovereign Debt CDS Index 112.33 bps -2.25%
  
• Emerging Market CDS Index 206.40 bps -3.35%
  
• 2-Year Swap Spread 17.0 unch.
  
• TED Spread 30.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .14% unch.
  
• Yield Curve 240.0 +5 bps
  
• China Import Iron Ore Spot $136.30/Metric Tonne unch.
  
• Citi US Economic Surprise Index -34.10 +3.3 points
  
• 10-Year TIPS Spread 1.84% +7 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +165 open in Japan
• DAX Futures: Indicating +9 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Medical, Technology and Retail long positions
  
• Disclosed Trades: Added to my (MOS) long, took profits in another long
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 breaks up through its 200-day moving average despite weaker manufacturing gauges in the US/China. On the positive side, Gaming, REIT, Construction, HMO, Bank, Computer, Steel, Ag, Oil Service, Energy and Coal stocks are especially strong, rising 3.0%+. (IYR)/(XLF) have traded well throughout the day. The S&P GSCI Ag Spot Index is rising another +1.2% today. Copper also continues to trade well, rising another +2.34%. Lumber is jumping another +2.8%. The European Investment Grade CDS Index is falling -5.6% today to 94.33 bps. The Hungary sovereign debt cds is dropping -3.8% to 319.44 bps and the US Muni CDS Index is falling another -4.33% to 198.88 bps. On the negative side, gold and hospitals shares are substantially underperforming. The 10-year yield is only rising +5 bps, which isn't as much as I would have expected given the magnitude of today's equity rally, which is a mild negative. I suspect investment manager performance angst will begin to surface again pretty soon, which could lead to further near-term gains after a brief pause. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, technical buying, mostly positive earnings reports, diminishing financial sector pessimism and bargain-hunting.