Stocks Higher into Final Hour on Diminishing Sovereign Debt Angst, Tax Policy/Election Optimism, QE2 Expectations, Earnings Optimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 19.60 +4.37%
  
• ISE Sentiment Index 115.0 -12.21%
  
• Total Put/Call .95 +10.47%
  
• NYSE Arms .71 -28.79%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 93.33 bps -3.54%
  
• European Financial Sector CDS Index 93.67 bps -2.63%
  
• Western Europe Sovereign Debt CDS Index 138.92 bps unch.
  
• Emerging Market CDS Index 202.23 bps -3.11%
  
• 2-Year Swap Spread 17.0 unch.
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .11% -1 bp
  
• Yield Curve 220.0 -1 bp
  
• China Import Iron Ore Spot $149.40/Metric Tonne -1.58%
  
• Citi US Economic Surprise Index -3.90 +.8 point
  
• 10-Year TIPS Spread 2.17% +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +30 open in Japan
• DAX Futures: Indicating +13 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades higher despite recent sharp gains, mixed economic data and further bank weakness. On the positive side, Networking, Coal, Gold, Semi, Gaming, Ag, Alt Energy and Airline shares are especially strong, rising 1.5%+. Small-cap and cyclical shares are outperforming. "Growth" shares are also outperforming "value" shares again. Copper is rising +1.78% and the S&P GSCI Ag Spot Index is rising +1.43%. The Eurozone Investment Grade CDS Index is dropping -3.78% to 79.11 bps and the California Municipal CDS is falling -7.61% to 257 bps. The ongoing trend lower in key credit default swap indices remains a large positive. On the negative side, Hospital, Bank, Disk Drive, Oil Tanker and Utility shares are down on the day. (XLF) has been a bit heavy throughout the day. The Emerging Markets Sovereign CDS Index is rising +1.92% to 186.98 bps. I continue to see select stocks exploding higher on volume despite overall lackluster market volume. Despite high correlations in the markets this year, it has been a very good year for true stockpickers. I suspect this trend will become more pronounced over the intermediate/long-term. I expect US stocks to trade mixed-to-higher into the close from current levels on tax policy/election optimism, diminishing sovereign debt angst, less economic fear, short-covering, buyout speculation, investment manager performance angst and earnings optimism.