Stocks Surging into Final Hour on Less Economic Fear, Declining Sovereign Debt Angst, Short-Covering, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Around Average
  
• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• VIX 24.38 -6.41%
  
• ISE Sentiment Index 108.0 +16.13%
  
• Total Put/Call .72 -21.74%
  
• NYSE Arms .29 -67.42%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 110.05 bps -3.25%
  
• European Financial Sector CDS Index 123.02 bps -6.78%
  
• Western Europe Sovereign Debt CDS Index 149.0 bps -4.28%
  
• Emerging Market CDS Index 255.85 bps -2.38%
  
• 2-Year Swap Spread 18.0 unch.
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .13% unch.
  
• Yield Curve 207.0 +8 bps
  
• China Import Iron Ore Spot $141.80/Metric Tonne +.21%
  
• Citi US Economic Surprise Index -43.20 +9.9 points
  
• 10-Year TIPS Spread 1.58% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +163 open in Japan
• DAX Futures: Indicating -17 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 breaks substantially higher from its recent range despite mixed economic data and a -.6% decline in the Shanghai Composite overnight. On the positive side, Road&Rail, Hospital, Paper, Steel, Oil Service, Coal, Bank, Disk Drive and Computer shares are especially strong, rising 3.75%+. (XLF) has outperformed throughout the day. Cyclicals and small-caps are also outperforming. Copper is jumping +2.97% and the S&P GSCI Ag Spot Index is rising +2.2%. Moreover, the 10-year yield is rising 11 bps to 2.58%, which is also a big positive. The European Investment Grade CDS Index is dropping -6.21% to 104.33 bps and the US Muni CDS Index is dropping -2.65% to 228.29 bps. As well, the Spain sovereign cds is dropping -5.6% to 230.52 bps, the Portugal sovereign cds is falling -4.33% to 319.56 bps and the Ireland sovereign cds is dropping -3.86% to 327.91 bps. On the negative side, Gold, Telecom and Food shares are underperforming. The Japan sovereign cds is rising +2.1% to 70.75 bps. With S&P 500 1,040 holding, investor pessimism high, recent weak economic data mostly priced in and hedge fund market exposure low, I suspect stocks can build on today's large gain over the next few weeks. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting, less economic fear, diminishing sovereign debt angst, declining financial sector pessimism, buyout speculation and technical buying.