Stocks Slightly Higher into Final Hour on Falling Food/Energy Prices, Technical Buying, Short-Covering, Earnings Optimism

Broad Market Tone:

• Advance/Decline Line: About Even
  
• Sector Performance: Mixed
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 15.92 -1.91%
  
• ISE Sentiment Index 104.0 -16.13%
  
• Total Put/Call .97 unch.
  
• NYSE Arms 1.26 +30.23%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 88.74 -1.15%
  
• European Financial Sector CDS Index 98.0 +1.88%
  
• Western Europe Sovereign Debt CDS Index 180.50 +.65%
  
• Emerging Market CDS Index 203.93 -.04%
  
• 2-Year Swap Spread 19.0 unch.
  
• TED Spread 22.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .04% +1 bp
  
• Yield Curve 264.0 +2 bps
  
• China Import Iron Ore Spot $175.30/Metric Tonne -.34%
  
• Citi US Economic Surprise Index -49.0 -5.1 points
  
• 10-Year TIPS Spread 2.31% -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +5 open in Japan
• DAX Futures: Indicating +23 open in Germany

Portfolio:

• Higher: On gains in my Retail and Tech sector longs
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 maintains recent gains despite eurozone debt worries, emerging markets inflation fears, rising Mideast unrest and global growth concerns. On the positive side, Road & Rail, Airline, Tobacco, Restaurant, Telecom and Software shares are especially strong, rising more than +.50%. Cyclicals are outperforming, with the Transports surging +1.08% back near their multi-year high. Oil is falling -1.14%, the UBS-Bloomberg Ag Spot Index is down -1.1% and Lumber is gaining +2.63%. The US Muni CDS Index is falling -2.61% to 119.79 bps and the Saudi sovereign cds is falling -4.6% to 107.24 bps. The AAII % Bulls fell to 26.7 this week, while the % Bears rose to 41.3, which is a big positive. On the negative side, Coal, Steel and Semi shares are under pressure, falling more than -1.0%. The US price for a gallon of gas is falling -.02/gallon today to $3.91/gallon. It is up .77/gallon in 92 days. The Italy sovereign cds is gaining +2.11%, the UK sovereign cds is rising +2.07% to 57.67 bps, the Belgium sovereign cds is rising +2.67% to 140.64 bps, the Japan sovereign cds is rising +2.44% to 83.92 bps and the US sovereign cds is rising +3.1% to 47.18 bps. Brazil's Bovespa is falling another -.78% today and is down -9.96% ytd. Food and energy price declines today are noteworthy given the bounce in the euro. US stocks remain extraordinarily resilient to developing headwinds. The tone of the equity market remains positive, however volume is still lackluster. I continue to believe US stocks can build on recent gains in the near-term after a brief pause. I expect US stocks to trade mixed-to-higher into the close from current levels on technical buying, short-covering, bargain-hunting, buyout speculation, falling food/energy prices and earnings optimism.