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

Broad Market Tone:

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

Equity Investor Angst:

• VIX 21.91 -5.52%
  
• ISE Sentiment Index 88.0 -9.28%
  
• Total Put/Call 1.0 +9.89%
  
• NYSE Arms .57 +15.54%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 104.75 bps -3.22%
  
• European Financial Sector CDS Index 109.17 bps -7.51%
  
• Western Europe Sovereign Debt CDS Index 144.66 bps -1.05%
  
• Emerging Market CDS Index 237.69 bps -1.72%
  
• 2-Year Swap Spread 18.0 -1 bp
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .12% unch.
  
• Yield Curve 219.0 +6 bps
  
• China Import Iron Ore Spot $144.10/Metric Tonne -.55%
  
• Citi US Economic Surprise Index -38.40 +3.9 points
  
• 10-Year TIPS Spread 1.68% +5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +76 open in Japan
• DAX Futures: Indicating +4 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 builds on recent gains, despite mostly poor economic data and ahead of a three-day weekend. On the positive side, Gaming, HMO, I-Banking, Computer Service, Disk Drive, Computer, Alt Energy and Defense shares are especially strong, rising 2.0%+. (XLF) has outperformed throughout the day. Cyclicals are also outperforming. The Baltic Dry Index is gaining another +4.5% this week. The S&P GSCI Ag Spot Index is rising another +2.41% and Lumber is gaining +1.26%. Moreover, the 10-year yield is rising +9 bps to 2.71%, which is also a big positive. The European Investment Grade CDS Index is dropping -5.30% to 97.42 bps. As well, the Japan sovereign cds is dropping -2.91% to 67.59 bps, the Portugal sovereign cds is falling -2.88% to 296.67 bps and the UK sovereign cds is dropping -4.22% to 63.58 bps. On the negative side, Food, Restaurant, Homebuilding, Telecom and Steel shares are underperforming, rising less than .5%. The Ireland sovereign cds is gaining +.41% to 334.53 bps. Market volume is light on today's advance. The significant decline in key credit default swap indices is a major positive. I suspect stocks can at least maintain this week's gains next week and possibly build on them towards week's end. 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, less financial sector pessimism, buyout speculation and technical buying.