Stocks Slightly Higher into Final Hour on Bargain-Hunting, Euro Bounce, Short-Covering, Commodity Sector Strength

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Mixed
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 17.74 -2.90%
  
• ISE Sentiment Index 87.0 -31.13%
  
• Total Put/Call .73 -31.13%
  
• NYSE Arms .76 -67.76%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.79 -.50%
  
• European Financial Sector CDS Index 119.58 +9.65%
  
• Western Europe Sovereign Debt CDS Index 199.83 +2.57%
  
• Emerging Market CDS Index 212.41 +.90%
  
• 2-Year Swap Spread 21.0 +1 bp
  
• TED Spread 20.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .05% unch.
  
• Yield Curve 261.0 unch.
  
• China Import Iron Ore Spot $174.50/Metric Tonne -.29%
  
• Citi US Economic Surprise Index -48.0 +1.8 points
  
• 10-Year TIPS Spread 2.31% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +28 open in Japan
• DAX Futures: Indicating -2 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech and Retail sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and then added them back
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades just slightly higher despite some better US housing data, a bounce in the euro, commodity sector strength and recent equity losses. On the positive side, Energy, Oil Service, Steel and Education shares are especially strong, rising more than +1.0%. (IYR) has traded well throughout the day. Lumber is gaining +2.25% and copper is rising +.85%. Weekly retail sales rose +4.0% last week versus a +4.3% gain the prior week and down from a +5.1% increase the week ended May 3rd. The Spain sovereign cds is falling -4.42% to 261.17 bps and the Italy sovereign cds is falling -1.66% to 166.39 bps. On the negative side, Airline, Retail, HMO, Networking, Semi and Oil Tanker shares are under pressure, falling more than -.75%. Cyclicals are underperforming again. The Transports are relatively weak, falling -.55%. Oil is rising +2.4% and gold is +.6% higher. The US price for a gallon of gas is falling -.01/gallon today to $3.83/gallon. It is up .69/gallon in 97 days. The Greece sovereign cds is rising +4.96% to 1,483.69 bps, the US sovereign cds is gaining +1.86% to 49.92 bps and the Emerging Markets Sovereign CDS Index is jumping +4.80% to 164.15 bps. The Greece sovereign cds is back near its record high of 1,504.99 bps. The +33% rise in the Eurozone Financial Sector CDS Index over the last 7 days is also a large negative. The Western Europe Sovereign CDS Index is also breaking out technically. The Vietnam Stock Index dropped another -3.7% last night and has plunged about -18% in less than 3 weeks. The broad market is weaker today than the major averages suggest. A number of market leaders are heavy. Gauges of investor angst are trending higher over the last few days, however the magnitude of current developing headwinds warrants more investor concern, in my opinion. I still believe that until eurozone debt angst subsides meaningfully the major averages will likely continue to trend lower. I expect US stocks to trade mixed-to-lower into the close from current levels on eurozone debt worries, technical selling, more shorting, rising food/energy prices and emerging markets inflation fears.