Stocks Higher into Final Hour on Tech Sector Optimism, Short-Covering, Investor Performance Angst

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 22.76 +5.52%
  
• ISE Sentiment Index 177.0 +30.15%
  
• Total Put/Call .91 +1.11%
  
• NYSE Arms .98 -9.59%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 104.78 bps +1.54%
  
• European Financial Sector CDS Index 110.83 bps +1.95%
  
• Western Europe Sovereign Debt CDS Index 154.56 bps +1.51%
  
• Emerging Market CDS Index 241.14 bps -.95%
  
• 2-Year Swap Spread 19.0 +1 bp
  
• TED Spread 14.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% +1 bp
  
• Yield Curve 223.0 +6 bps
  
• China Import Iron Ore Spot $139.50/Metric Tonne +.22%
  
• Citi US Economic Surprise Index -10.20 -.6 point
  
• 10-Year TIPS Spread 1.79% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +89 open in Japan
• DAX Futures: Indicating +2 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 builds modestly on recent gains and remains slightly above its 200-day moving average despite mounting headwinds. On the positive side, Hospital, Medical, Disk Drive, Computer, Oil Tanker and Education shares are especially strong, rising 1.0%+. (IYR) has traded well throughout the day. The 10-year yield is +3 bps higher despite mixed economic data. On the negative side, Homebuilding, Steel, Ag, Gold, Oil Service, Energy, Coal, Alt Energy, Defense and Utility shares are lower on the day. Cyclicals are underperforming today. Oil has diverged from equities over the last few days. The Shanghai Composite fell -1.34% overnight and continues to run into serious resistance around 2,700. Shanghai copper inventories are up +13.45% today and have risen +21.96% over the last 5 days. The Portugal sovereign cds is rising another 2.67% to 341.09 bps, the Greece sovereign cds is rising +2.34% to 931.94 bps and the Ireland sovereign cds is gaining +1.76% to 384.59 bps, which are major negatives. The Ireland cds continues its recent parabolic move higher and is testing its record set 5 days ago. Moreover, the Portugal and Greece cds are very close to technical breakouts again. The market is ignoring quite a bit of negative news today, which is a big positive and likely related to triple-witching on Friday and investor performance angst. Breadth and volume remain underwhelming. The S&P 500 remains near a critical technical level. I am still closely monitoring my technical gauges for any signs of developing weakness, given the trading range we have be trapped in for some time and mounting headwinds. I expect US stocks to trade mixed-to-lower into the close from current levels on profit taking, rising sovereign debt angst, mounting US housing concerns and China bubble worries.