Stocks Rising into Final Hour on Falling Energy Prices, Buyout Speculation, Fund Inflows, Earnings Optimism

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Rising
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 16.42 +3.08%
  
• ISE Sentiment Index 55.0 -60.43%
  
• Total Put/Call .79 -8.14%
  
• NYSE Arms .73 -21.46%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 80.79 -1.46%
  
• European Financial Sector CDS Index 134.42 bps +6.13%
  
• Western Europe Sovereign Debt CDS Index 163.50 bps +1.03%
  
• Emerging Market CDS Index 210.28 -.14%
  
• 2-Year Swap Spread 20.0 -1 bp
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .14% unch.
  
• Yield Curve 288.0 unch.
  
• China Import Iron Ore Spot $185.60/Metric Tonne unch.
  
• Citi US Economic Surprise Index +63.20 -.9 point
  
• 10-Year TIPS Spread 2.35% -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +48 open in Japan
• DAX Futures: Indicating -7 open in Germany

Portfolio:

• Higher: On gains in my Medical, Ag and Tech 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 higher, despite recent equity gains, Mideast tensions, emerging markets inflation worries and rising long-term rates. On the positive side, Airline, Education, REIT, Homebuilding, Construction, Insurance, Hospital, Medical, I-Banking, Bank, Computer and Software shares are especially strong, rising more than 1.0%. Small-cap and cyclical stocks are outperforming. (XLF)/(IYR) have traded well throughout the day. Oil is falling -1.77% and the 10-year yield is stable at 3.64%. The Egypt sovereign cds is falling -8.69% to 345.0 bps and the Saudi sovereign cds is plunging -13.38% to 110.44 bps. The ISE Sentiment Index hit 34.0 today, the lowest since August 18th, which is also a positive. On the negative side, Food and HMO shares are under mild pressure, falling more than .75%. The UBS-Bloomberg Spot Ag Index is gaining +.55% and copper is dropping -.49%. The Spain sovereign cds is up +3.58% to 160.45 bps, the Belgium sovereign cds is rising +3.58% to 160.45 bps, the Italy sovereign cds is gaining +4.42% and the Portugal sovereign cds is rising +3.51% to 419.22 bps. The Citi Eurozone Economic Surprise Index appears to be rolling over, falling -14.26% to +45.70. Hong Kong was down -1.49% overnight as Shanghai remains closed. The major US averages continue to trade very well as they slowly build on their recent technical breakouts. I expect US stocks to trade modestly higher into the close from current levels on earnings optimism, technical buying, US fund inflows, buyout speculation, short-covering, falling energy prices and rising economic optimism.