Stocks Slightly Higher into Final Hour on Declining Long-Term Rates, More Economic Optimism, Seasonal Strength, Technical Buying

Broad Market Tone:

• Advance/Decline Line: About Even
  
• Sector Performance: Most Sectors Rising
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 17.87 +2.0%
  
• ISE Sentiment Index 120.0 +18.81%
  
• Total Put/Call .94 +32.39%
  
• NYSE Arms .95 -18.90%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 85.18 +.04%
  
• European Financial Sector CDS Index 152.60 bps -4.1%
  
• Western Europe Sovereign Debt CDS Index 204.83 bps unch.
  
• Emerging Market CDS Index 200.28 -1.07%
  
• 2-Year Swap Spread 20.0 +1 bp
  
• TED Spread 18.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .12% +1 bp
  
• Yield Curve 270.0 -1 bp
  
• China Import Iron Ore Spot $170.10/Metric Tonne unch.
  
• Citi US Economic Surprise Index +14.60 -.1 point
  
• 10-Year TIPS Spread 2.28% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +2 open in Japan
• DAX Futures: Indicating +13 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite recent stock gains, some weakness in European equities and China inflation worries. On the positive side, Gaming, Oil Service, Alt Energy, Ag, Telecom, Wireless, I-Banking, HMO, Homebuilding and Road & Rail shares are especially strong, rising more than .5%. Cyclicals are outperforming. Copper is jumping another +1.74% and the S&P GSCI Ag Spot Index is rising +2.28%. The 10-year yield is falling -7 bps to 3.29% despite recent positive economic data, the rise in commodities and "hot" prices paid readings. Put/call readings for the broad market are showing more bearishness today, which is a positive. The Shanghai Composite surged +1.76% last night, finishing at session highs, and is now back above its 200-day moving average. The Belgium sovereign cds is falling -3.17% to 217.93 bps and the UK sovereign cds is declining -5.57% to 72.41 bps, which are also positives. On the negative side, Education and Internet shares are under mild pressure, falling more than .5%. The Euro Financial Sector CDS Index remains near its highest level since mid-June and the Western Europe Sovereign CDS Index is right at a record high, despite the recent bounce in the euro currency. The broad market continues to trade in a healthy fashion as it grinds slowly higher and then consolidates. One of my longs, (AAPL), is resting after its recent run to record highs and +52.8% gain YTD. I still see further significant upside in the shares from current levels longer-term and expect the stock to strongly outperform the S&P 500 again next year. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, short-covering, technical buying, lower long-term rates, less financial sector pessimism, more economic optimism, buyout speculation and investment manager performance angst.