Stocks Rising into Final Hour on Tech Sector Optimism, Buyout Speculation, Short-Covering

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 21.70 -.09%
  
• ISE Sentiment Index 86.0 -31.75%
  
• Total Put/Call .90 +11.11%
  
• NYSE Arms 1.57 +91.57%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 103.77 bps -.71%
  
• European Financial Sector CDS Index 116.83 bps +4.41%
  
• Western Europe Sovereign Debt CDS Index 156.37 bps +1.83%
  
• Emerging Market CDS Index 241.19 bps +2.08%
  
• 2-Year Swap Spread 21.0 +2 bps
  
• TED Spread 15.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 228.0 -1 bp
  
• China Import Iron Ore Spot $140.0/Metric Tonne +.79%
  
• Citi US Economic Surprise Index -13.70 -5.8 points
  
• 10-Year TIPS Spread 1.78% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -66 open in Japan
• DAX Futures: Indicating +11 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech and Medical long positions
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades modestly higher and remains slightly above its 200-day moving average despite mounting headwinds. On the positive side, Education, Hospital, Software and Defense shares are especially strong, rising .75%+. Small-cap and cyclical shares are outperforming. Copper is rising +.84% despite today's weak economic data. On the negative side, Airline, Restaurant, Steel, Gold and Coal shares are under pressure, falling .75%+. (XLF) is underperforming, as well. The Portugal sovereign cds is jumping +7.95% today to 365.70 bps and is very close to a major technical breakout. As well, the Ireland sovereign cds is surging another +7.13%, hitting another record high at 412.18 bps and is continuing its recent parabolic move higher. Spain's sovereign cds is rising +2.21% to 235.20 bps and the UK sovereign cds is rising +2.36% to 67.63 bps. If these moves persist, the euro will come under renewed pressure next week. Oil is continuing its recent negative divergence from equities. Moreover, the Shanghai Composite was unable to bounce overnight after breaking below its 50-day moving average for the first time since April yesterday, falling another -.15%. Shanghai copper inventories are jumping another +13.6% today and are up +32.9% over the last 5 days. The market is ignoring negative news again today, which remains a big positive. However, breadth and volume are mediocre given today's gains and triple-witching. Bloomberg's technical research team put out a note today saying that in January of this year they wrote about the +25% reading in the spread between AAII Bulls and Bears. What ensued was an 8% sell-off in the S&P. That was a rather mild swoon compared to the average of 12% when looking at all of the >25% readings going back to 2006, they said. The S&P 500 remains near a critical technical level as headwinds mount. I expect US stocks to trade mixed-to-lower into the close from current levels on profit taking, China trade tensions, mounting US housing concerns, rising sovereign debt worries, increasing economic fear and China bubble worries.