Stocks Rising into Final Hour on More Economic Optimism, Bargain-Hunting, Short-Covering, Stable Energy Prices

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.81 -1.06%
  
• ISE Sentiment Index 120.0 -30.64%
  
• Total Put/Call .81 -8.99%
  
• NYSE Arms .94 +71.76%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 94.74 -.57%
  
• European Financial Sector CDS Index 100.42 -1.96%
  
• Western Europe Sovereign Debt CDS Index 169.26 bps +.15%
  
• Emerging Market CDS Index 209.02 -2.38%
  
• 2-Year Swap Spread 19.0 -2 bps
  
• TED Spread 23.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .08% unch.
  
• Yield Curve 270.0 -2 bps
  
• China Import Iron Ore Spot $166.40/Metric Tonne unch.
  
• Citi US Economic Surprise Index +54.2 +.4 point
  
• 10-Year TIPS Spread 2.45% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -81 open in Japan
• DAX Futures: Indicating +23 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Tech and Medical longs
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 builds on recent gains, despite high energy prices, growing Mideast unrest, more hawkish Fed commentary and Japan concerns. On the positive side, Road & Rail, Homebuilding, Hospital, Computer Service, Disk Drive, Computer, Paper, Ag, Energy, Oil Tanker and Coal shares are especially strong, rising 1.25%+. (IYR) has traded well throughout the day. Small-cap shares are strongly outperforming. The Transports are also relatively strong again today. Lumber is rising another +1.79%. Shanghai copper inventories have dropped -14.4% in 5 days. The Hungary sovereign cds is falling -1.53% to 257.93 bps, the Portugal sovereign cds is falling -2.5% to 547.15 bps and the Russia sovereign cds is declining -3.5% to 126.32 bps. On the negative side, I-Banking, Wireless, Networking, Internet and Oil Service shares are lower on the day. Tech shares have weakened into the afternoon, however sector leader (AAPL) trades very well. US price for a gallon of gas is +.01/gallon today to $3.56/gallon. It is up .44/gallon in 38 days. The Spain sovereign cds is climbing +4.02% to 226.87 bps and the Ireland sovereign cds is rising +2.1% to 618.57 bps. Volume remains poor given the extent of the recent rally, however leadership and breadth are improving. The US dollar has likely begun a tradable rally, which could crimp further commodity price gains and help boost the broad equity market back to its recent highs, barring significant deterioration in Mideast unrest or the Japan nuclear situation. The fact that the bears were unable to gain any traction this afternoon despite negative headlines from Japan, hawkish Fed rhetoric and rising worries over Spanish debt, is a large positive. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, stable energy prices, more economic optimism and bargain-hunting.