Stocks Higher into Final Hour on Short-Covering, Commodity Bounce, Buyout Speculation, Earnings Optimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.20 -6.47%
  
• ISE Sentiment Index 120.0 +57.89%
  
• Total Put/Call .79 -18.56%
  
• NYSE Arms 1.06 +21.70%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.0 +1.16%
  
• European Financial Sector CDS Index 93.67 +6.90%
  
• Western Europe Sovereign Debt CDS Index 191.56 +1.04%
  
• Emerging Market CDS Index 206.27 -.51%
  
• 2-Year Swap Spread 18.0 -1 bp
  
• TED Spread 26.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 260.0 unch.
  
• China Import Iron Ore Spot $179.70/Metric Tonne -.55%
  
• Citi US Economic Surprise Index -32.10 -.8 point
  
• 10-Year TIPS Spread 2.48% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +10 open in Japan
• DAX Futures: Indicating +38 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Medical, Retail and Tech sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges, then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades near session highs despite rising food/energy prices, rising eurozone debt angst, more Mideast unrest and emerging market inflation fears. On the positive side, Hospital, Biotech, Networking, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than 1.50%. Cyclicals and small-caps are outperforming. The US dollar is stable. Copper is rising +1.57%. The 10-year yield is -1 bp to 3.13%, despite today's equity gains. On the negative side, Airline, Homebuilding, I-Banking and Bank shares are down on the day. (XLF) has been heavy throughout the day. The Transports are also relatively weak. The US price for a gallon of gas is falling -.02/gallon today to $3.96/gallon. It is up .84/gallon in 83 days. Oil is rising +4.91%, gold is jumping +1.5% and lumber is falling -2.28%. The Spain sovereign cds is rising +6.81% to 259.25 bps, the Belgium sovereign cds is climbing +5.86% to 152.50 bps, the Greece sovereign cds is soaring +8.1% to 1,459.08 bps, the Ireland sovereign cds is gaining +4.28% to 682.50 bps, the UK sovereign cds is climbing +4.79% to 60.69 bps, the Russia sovereign cds is rising +4.62% to 136.67 bps and the Italy sovereign cds is rising +7.02% to 162.67 bps. The Greece and Ireland sovereign cds are making new record highs and Spain's cds is close to a technical breakout, which is also a large neative. Spain's Ibex 35 was today's worst performer, falling -2.02% and breaking down below its 200-day moving average. The recent US equity rally remains of poor quality as volume, breadth and leadership are lacking. Many of the most beaten up stocks are leading the averages higher today on low volume, which is usually indicative of short-covering. However, unless the eurozone cds begin to come in soon, another decline in the euro currency is likely, which could lead to another wave of commodity selling. I expect US stocks to trade mixed-to-higher into the close from current levels on commodity sector strength, short-covering, earnings optimism, bargain-hunting and buyout speculation.