Stocks Slightly Higher into Final Hour on Tech Sector Optimism, Short-Covering, Technical Buying

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 22.24 +.63%
  
• ISE Sentiment Index 134.0 -11.84%
  
• Total Put/Call .81 -11.96%
  
• NYSE Arms .86 -5.53%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 104.51 bps -.26%
  
• European Financial Sector CDS Index 111.83 bps +1.40%
  
• Western Europe Sovereign Debt CDS Index 153.47 bps -.55%
  
• Emerging Market CDS Index 237.14 bps -1.86%
  
• 2-Year Swap Spread 19.0 unch.
  
• TED Spread 14.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 229.0 +6 bps
  
• China Import Iron Ore Spot $139.50/Metric Tonne -.43%
  
• Citi US Economic Surprise Index -7.90 +2.3 points
  
• 10-Year TIPS Spread 1.81% +2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +36 open in Japan
• DAX Futures: Indicating +10 open in Germany

Portfolio:

• Higher: On gains in my Tech, Retail and Ag long positions
  
• Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to (EEM) short
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades near session highs and remains slightly above its 200-day moving average despite mounting headwinds. On the positive side, Education, Semi, Gold and Coal shares are especially strong, rising .75%+. Most tech shares have traded well throughout the day. The 10-year yield is +4 bps higher despite mixed economic data. Copper is rising +.76%. The Spain sovereign cds is falling -1.34% to 230.12 bps and the Japan sovereign cds is declining -2.62% to 65.26 bps. On the negative side, REIT, Homebuilding, HMO, Hospital, Disk Drive and Oil Service shares are lower on the day. Small-caps are under pressure. (XLF), (XHB) and (IYR) are underperforming, as well. Oil is continuing its recent divergence from equities and lumber is falling -3.17% today. Moreover, the Shanghai Composite fell another -1.89% overnight and broke down below its 50-day moving average for the first time since April. The AAII % Bulls surged to 50.89% this week, while the % Bears fell to 24.26, which is a large negative. One of my longs, (AAPL), continues to trade very well and is helping to lift the entire market off its lows today. The stock still has substantial upside over the intermediate-to-longer term, in my opinion. Another one of my longs, (MOS), is also having a good day and is poised for further intermediate-term gains. The market is ignoring quite a bit of negative news again today, which remains a big positive. However, breadth and volume are poor. 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 and China bubble worries.