Stocks Soaring into Final Hour on Tax Policy/Election Optimism, Less Financial Sector Pessimsm, Diminishing Economic Fear, Investor Performance Angst

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.80 -3.89%
  
• ISE Sentiment Index 113.0 -14.39%
  
• Total Put/Call .73 -19.78%
  
• NYSE Arms .57 -27.81%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 88.20 bps -4.86%
  
• European Financial Sector CDS Index 95.83 bps -5.0%
  
• Western Europe Sovereign Debt CDS Index 162.66 bps +1.88%
  
• Emerging Market CDS Index 184.45 bps -8.18%
  
• 2-Year Swap Spread 15.0 -1 bp
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .11% -1 bp
  
• Yield Curve 216.0 -12 bps
  
• China Import Iron Ore Spot $153.20/Metric Tonne +2.0%
  
• Citi US Economic Surprise Index +12.80 +.1 point
  
• 10-Year TIPS Spread 2.08% -11 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +127 open in Japan
• DAX Futures: Indicating +13 open in Germany

Portfolio:

• Higher: On gains in my Tech, 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 trades near session highs despite recent equity gains, fears over a possible "sell the news" reaction to the election/Fed announcement, a jump in jobless claims and euro sovereign debt concerns. On the positive side, Coal, Alt Energy, Energy, Oil Service, Gold, Steel, Semi, Bank, Hospital, Homebuilding shares are especially strong, rising 3.0%+. (XLF)/(IYR) have been relatively strong throughout the day. (XLF) is surging on block buys into the final hour after the Fed said strong banks will be allowed to raise dividends. Cyclicals and small-caps are also outperforming. Copper is jumping +3.01%. The Eurozone Investment Grade CDS Index is falling -3.16% to 78.23 bps, the Emerging Markets Sovereign Debt CDS Index is declining -4.53% to 175.99 bps and the California Municipal CDS is falling -2.56% to 263.48 bps. Other key CDS indices are showing large declines, as well. The AAII % Bulls fell to 48.23, while the % Bears jumped to 29.79%, which is also a positive. On the negative side, Biotech and Education shares are down on the day. The Portugal sovereign cds is gaining +5.58% to 440.39 bps, the Ireland sovereign cds is gaining +5.59% to 576.70 bps and the Spain sovereign cds is gaining +2.47% to 235.22 bps. The large declines in the yield curve and TIPS spread are a bit odd given today's macro backdrop. I suspect tomorrow's jobs report will have a muted impact on stocks. The major averages are extended short-term, but should move still higher into year-end after a consolidation period. The I expect US stocks to trade mixed-to-higher into the close from current levels on tax policy/election optimism, less economic fear, buyout speculation, investment manager performance angst, diminishing financial sector pessimism, short-covering and earnings optimism.