Stocks Surging into Final Hour on Falling Energy Prices, Short-Covering, More Economic Optimism, Technical Buying

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.70 -9.37%
  
• ISE Sentiment Index 148.0 -8.07%
  
• Total Put/Call .80 -20.0%
  
• NYSE Arms .55 -45.18%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 82.75 -1.89%
  
• European Financial Sector CDS Index 136.72 bps -4.52%
  
• Western Europe Sovereign Debt CDS Index 167.17 bps -5.64%
  
• Emerging Market CDS Index 213.44 -3.99%
  
• 2-Year Swap Spread 22.0 -1 bp
  
• TED Spread 16.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% +1 bp
  
• Yield Curve 284.0 +2 bps
  
• China Import Iron Ore Spot $185.60/Metric Tonne unch.
  
• Citi US Economic Surprise Index +40.40 +11.7 points
  
• 10-Year TIPS Spread 2.36% +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +90 open in Japan
• DAX Futures: Indicating +12 open in Germany

Portfolio:

• Higher: On gains in my Ag, Biotech, Retail, Medical and Tech long positions
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 is breaking above technical resistance at 1,300 on good volume, despite recent equity gains, rising Mideast tensions, emerging markets inflation worries and rising long-term rates. On the positive side, Education, Gaming, Homebuilding, Construction, Insurance, HMO, Hospital, Drug, Bank, Wireless, Networking, Disk Drive, Semi, Computer, Software, Internet, Steel, Ag, Alt Energy and Coal shares are especially strong, rising more than 2.0%. (XLF) has traded well throughout the day. Small-caps are also outperforming. Copper is rising +2.04% and Lumber is rising +2.55%. Oil is declining -1.4%. The Spain sovereign cds is falling -7.88% to 229.29 bps, the Italy sovereign cds is dropping -8.52% to 164.66 bps, the Portugal sovereign cds is falling -6.05% to 407.15 bps, the Hungary sovereign cds is falling -7.78% to 304.57 bps, the Belgium sovereign cds is declining -8.77% to 157.90 bps and the Russia sovereign cds is falling -6.74% to 142.50 bps. Moreover, the Egypt sovereign cds is plunging -16.9% to 350.07 bps and the Saudi sovereign cds is falling -4.8% to 113.95 bps. On the negative side, Oil Tanker shares are lower on the day. (IYR) is underperforming. The UBS-Bloomberg Ag Spot Index is rising +1.0% to another new record high. Rice futures are hitting a new 52-week high today, rising +2.74%, and are very close to a major technical breakout. The 10-Year yield is rising +7 bps to 3.44%. As long as energy prices are contained any short-term flare up in Mideast violence shouldn't have too big a negative impact on equities. The major averages will likely build on today's gains, after a brief pause, before week's end on short-covering and technical buying. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices, short-covering, technical buying, earnings optimism, less financial sector pessimism, declining eurozone debt angst and rising economic optimism.