Stocks Surging into Final Hour on Tax Policy/Election Optimism, Less Economic Fear, Buyout Speculation, Earnings Optimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 21.45 -1.74%
  
• ISE Sentiment Index 139.0 +61.63%
  
• Total Put/Call .76 -12.64%
  
• NYSE Arms 1.10 -9.82%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 93.22 bps -.49%
  
• European Financial Sector CDS Index 95.17 bps -.38%
  
• Western Europe Sovereign Debt CDS Index 153.33 bps +2.61%
  
• Emerging Market CDS Index 202.37 bps -1.17%
  
• 2-Year Swap Spread 16.0 unch.
  
• TED Spread 17.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .11% +1 bp
  
• Yield Curve 224.0 -4 bps
  
• China Import Iron Ore Spot $150.20/Metric Tonne +.20%
  
• Citi US Economic Surprise Index +10.0 +.9 point
  
• 10-Year TIPS Spread 2.17% -2 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +45 open in Japan
• DAX Futures: Indicating +12 open in Germany

Portfolio:

• Higher: On gains in my Tech, Biotech, Retail and Medical 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 near session highs despite recent equity gains, bank stock weakness and euro sovereign debt concerns. On the positive side, Gaming, Retail, Homebuilding, HMO, Oil Tanker and Alternative Energy shares are especially strong, rising 2.0%+. Small-caps are substantially outperforming. Copper is rising +1.14%. Oil Tanker rates have jumped 33.0% in 5 days. Weekly retail sales rose +2.6% this week versus a +2.7% gain the prior week. The European Investment Grade CDS Index is falling -1.05% to 79.5 basis points. On the negative side, Bank and Disk Drive shares are down slightly. (XLF) has underperformed throughout the day. The Portugal sovereign cds is gaining +2.02% to 402.33 bps, the Ireland sovereign cds is gaining +3.96% to 515.37 bps and the Emerging Market Sovereign CDS Index is gaining +2.46% to 186.22 bps. The odds that neither party controls the Senate after today's midterms have surged to a contract high of 44.0% on Intrade.com. The market has already priced in a GOP victory in the House. A tie or outright victory by the GOP in the Senate is not priced into stocks, in my opinion, and would result in further US equity strength. If the GOP fails to take the House, the market would likely experience significant weakness. 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 and earnings optimism.