Stocks Reversing Higher On Volume Into Final Hour On Euro Bounce, Less Tech Sector Pessimism, Short-Covering, Bargain Hunting

Portfolio:

• Higher: On gains in my Technology, Medical and Retail sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added back some (IWM)/(QQQ) hedges
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 reverses morning losses and holds 1,250 on good volume despite rising eurozone debt angst, US tax hike concerns, mixed US economic data, emerging market inflation fears and global growth worries. On the positive side, Internet, Software, Semi, Computer, Computer Service, I-Banking, Hospital, Restaurant, Gaming, Networking and Wireless shares are especially strong, rising more than +.75%. The MS Tech Index has outperformed substantially throughout the day. "Growth" stocks are also strongly outperforming "value" shares. Oil is falling -1.55% and the UBS-Bloomberg Ag Spot Index is falling -1.38%. The 3-Month Euribor/OIS spread is falling -2 bps to 37 bps. On the negative side, REIT, Homebuilding, Paper, Steel, Oil Service, Energy, Oil Tanker and Coal shares are under pressure, falling more than -.75%. Lumber is dropping another -.74%, gold is rising +.33% and Copper is down -1.333%. Lumber is now back to its June 16th 52-week low. Rice is hovering near a multi-year high, soaring about +27.0% in less than 1 month. The US price for a gallon of gas is -.01/gallon today to $3.70/gallon. It is up .56/gallon in less than 5 months. The Italy sovereign cds is rising +1.43% to 364.17 bps, the France sovereign cds is rising +5.89% to 140.67 bps, the Spain sovereign cds is surging +3.32% to 418.96 bps, the Germany sovereign cds is rising +4.67% to 68.53 bps, the Belgium sovereign cds is rising +2.75% to 230.17 bps and the Ireland sovereign cds is rising +.96% to 850.17 bps. The Italy sovereign cds has soared +149 bps in 9 days. The Spain, Italy and France sovereign cds are making new record highs again today. The German sovereign cds is hitting another multi-year high. The Eurozone Financial Sector CDS Index is very close to record highs, as well. Asian indices were weak again overnight, with India's Sensex falling another -.94%, which leaves it down -12.5% ytd. Brazil's Bovespa continues to be one of the word's worst-performers, falling another -2.2% today, which leaves it down -19.1% ytd and -23.2% from its Nov. 4th high. Germany's DAX has broken down badly over the last 3 days and is now down -3.96% ytd. French(-1.93%), Italian(-1.54%) and Spanish(-.85%) stocks continue to trade very poorly. Italian stocks are now down -15.7% ytd and are down -24.5% from their Feb. 17th 52-week high. The action in European equities and cds remain a huge concern, notwithstanding today's US stock reversal. Gauges of investor angst spiked this morning, which is a big positive. This morning's lows provided a good entry for a tradable move higher in stocks. However, I would like to see euro cds show signs of reversing lower before becoming more aggressive on the long side. I expect US stocks to trade modestly higher into the close from current levels on short-covering, a bounce in the euro, technical buying, bargain-hunting, tech sector optimism and falling energy/food prices.