Stocks Surging into Final Hour on Less Eurozone Debt Angst, Diminishing Financial Sector Pessimism, Short-Covering, Bargain-Hunting

Broad Market Tone:

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

Equity Investor Angst:

• VIX 33.43 -9.65%
  
• ISE Sentiment Index 133.0 +9.02%
  
• Total Put/Call .85 -33.59%
  
• NYSE Arms .54 -62.48%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 123.15 -4.90%
  
• European Financial Sector CDS Index 245.50 -2.46%
  
• Western Europe Sovereign Debt CDS Index 315.17 unch.
  
• Emerging Market CDS Index 279.50 -4.17%
  
• 2-Year Swap Spread 32.0 unch.
  
• TED Spread 32.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .02% unch.
  
• Yield Curve 184.0 +6 bps
  
• China Import Iron Ore Spot $181.0/Metric Tonne +.06%
  
• Citi US Economic Surprise Index -54.70 +.4 point
  
• 10-Year TIPS Spread 1.98% +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +107 open in Japan
• DAX Futures: Indicating +36 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bullish, as the S&P 500 builds on yesterday's afternoon rebound on less Eurozone debt angst, less financial sector pessimism, short-covering, bargain-hunting and technical buying. On the positive side, Coal, Alt Energy, Oil Service, Steel, Disk Drive, Networking, Bank, Hospital, HMO, Insurance, Construction and Education shares are especially strong, rising more than +3.5%. Small-caps and cyclicals are outperforming. (XLF) has traded very well throughout the day. Gold is down -3.3% and Lumber is rising +1.98%. Weekly retail sales rose +4.9% this week versus a +4.2% gain the prior week. Major European equity indices surged 3-4% today. The Spain sovereign cds is plunging -12.44% to 368.33 bps, the Germany sovereign cds is dropping -5.06% to 78.17 bps, the France sovereign cds is falling -5.8% to 173.0 bps, the Italy sovereign cds is declining -4.23% to 432.67 bps, the Belgium sovereign cds is falling -5.96% to 271.0 bps and the UK sovereign cds is falling -4.43% to 76.14 bps. Moreover, the European Investment Grade CDS Index is dropping -4.0% to 158.74 bps. On the negative side, Restaurant, Telecom and Utility shares are underperforming, rising less than +1.0%. Oil is up +3.1%. Rice is still near a multi-year high, rising +1.0%, and has risen +36.5% in about 9 weeks. The average US price for a gallon of gas is unch. today at $3.66/gallon. It is up .52/gallon in about 7 months. The Greece sovereign cds is rising +2.1% to 2,616.50 bps, which is an all-time high. The Eurozone Financial Sector and Western European Sovereign CDS Indices are still near all-time highs. The 3-Month Euro Basis Swap dropped another -1.27 bps to -100.96 bps, which is another new cycle low. The UBS-Bloomberg Ag Spot Index is still near its recent record high, which is also a large negative. The 10-year yield rose +6 bps today to 2.04%. However, bonds are still too strong given the last 2 days stock advance. While the euro did bounce today, it wasn't that impressive given recent losses and the surge in eurozone stocks. Moreover, while most eurozone cds fell today, other gauges of eurozone debt angst remain very elevated and continue to trend higher, which remains a large concern. Today's equity surge was on lackluster volume, but much-improved breadth. Until the macro backdrop stops deteriorating, any short-covering fueled equity rallies will likely prove unsustainable over the intermediate-term. I expect US stocks to trade mixed-to-higher into the close from current levels on technical buying, short-covering, a bounce in the euro, bargain-hunting and better US economic data.