Stocks Surging into Final Hour on Less Eurozone Debt Angst, Short-Covering, Earnings Optimism, Buyout Speculation

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Slightly Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 15.99 -6.82%
  
• ISE Sentiment Index 152.0 +17.83%
  
• Total Put/Call .81 +3.85%
  
• NYSE Arms 1.07 -2.46%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 88.98 -1.13%
  
• European Financial Sector CDS Index 90.08 -2.38%
  
• Western Europe Sovereign Debt CDS Index 189.08 -1.29%
  
• Emerging Market CDS Index 204.64 -.85%
  
• 2-Year Swap Spread 18.0 unch.
  
• TED Spread 24.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .03% +3 bps
  
• Yield Curve 261.0 +1 bp
  
• China Import Iron Ore Spot $179.70/Metric Tonne unch.
  
• Citi US Economic Surprise Index -32.60 -.5 point
  
• 10-Year TIPS Spread 2.49% +1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +92 open in Japan
• DAX Futures: Indicating +33 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 and some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite rising food/energy prices, eurozone debt angst, more Mideast unrest and emerging market inflation fears. On the positive side, Education, REIT, Disk Drive, Utility, Paper, Computer, Hospital and Road & Rail shares are especially strong, rising more than 1.75%. Cyclicals and small-caps are outperforming again. (IYR) has traded well throughout the day. Tech stocks also trade well. Copper is rising +.66%. Weekly retail sales rose +4.7% this week versus a +5.1% gain the prior week. The Spain sovereign cds is falling -4.36% to 248.0 bps, the Italy sovereign cds is down -3.1% to 157.66 bps, the Greece sovereign cds is falling -6.0% to 1,369.63 bps, the Belgium sovereign cds is down -4.09% to 145.83 bps and the UK sovereign cds is down -4.98% to 57.45 bps. On the negative side, Coal shares are down on the day. The US price for a gallon of gas is falling -.01/gallon today to $3.95/gallon. It is up .83/gallon in 84 days. Oil is rising +.76%, gold is gaining +.35% and lumber is falling -1.27%. Today's rally is of better quality as breadth and volume are improved, however market leading stocks are lagging. While the euro is bouncing today, the eurozone's debt problems remain a large worry and will likely resurface over the coming months. One of my longs, (SXCI), is making another new all-time high today. The shares are extended short-term, but I still see substantial upside over the longer-run. I expect US stocks to trade mixed-to-higher into the close from current levels on technical buying, short-covering, earnings optimism, bargain-hunting and buyout speculation.