Stocks Rising into Final Hour on Better US Economic Data, Short-Covering, Bargain-Hunting, Investor Performance Angst

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 30.74 -1.22%
  
• ISE Sentiment Index 77.0 -58.90%
  
• Total Put/Call 1.11 unch.
  
• NYSE Arms .77 -59.09%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 133.05 +3.95%
  
• European Financial Sector CDS Index 277.90 +9.46%
  
• Western Europe Sovereign Debt CDS Index 356.67 +2.22%
  
• Emerging Market CDS Index 316.56 +3.55%
  
• 2-Year Swap Spread 47.0 unch.
  
• TED Spread 46.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .01% +1 bp
  
• Yield Curve 182.0 +1 bp
  
• China Import Iron Ore Spot $146.30/Metric Tonne +5.78%
  
• Citi US Economic Surprise Index 44.60 +8.1 points
  
• 10-Year TIPS Spread 2.02 -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +39 open in Japan
• DAX Futures: Indicating +45 open in Germany

Portfolio:

• Higher: On gains in my Technology, Medical and Biotech sector longs.
  
• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short and then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades back near its 200-day moving-average despite rising Eurozone debt angst, rising global growth worries and rising food/energy prices. On the positive side, Construction and REIT shares are especially strong, rising +1.5%. Small-caps are outperforming. Tech shares have traded well throughout the day. Johnson Redbook Weekly Retail Sales rose +3.2% this week versus +3.1% last week. This is down from an avg. of +4.6% weekly gains in October. On the negative side, Energy, Ag, Paper, Hospital, Retail and Airline shares are flat-to-lower on the day. Lumber is falling -.26%, copper is just slightly higher, gold is flat and oil is surging +1.56%. India shares continue to trade very poorly, falling another -1.38% overnight, and are now down -17.7% ytd. Major European equity indices fell 1-2% again today. The France sovereign cds is surging +8.8% to 233.50 bps, the Spain sovereign cds is rising +4.7% to 480.50 bps, the Belgium sovereign cds is rising +6.13% to 343.33 bps, the UK sovereign cds is gaining +3.56% to 95.17 bps, the Italy sovereign cds is gaining +5.91% to 592.50 bps, the China sovereign cds is rising +3.9% to 144.61 bps, the Russia sovereign cds is gaining +6.85% to 247.50 bps, the Brazil sovereign cds is gaining +5.3% to 166.68 bps, the Israel sovereign cds is gaining +5.4% to 195.0 bps and the Germany sovereign cds is rising +3.06% to 97.17 bps. The TED spread continues to trend higher and is at the highest since June 2010. The 2-Year Swap spread is at the highest since June 2010 today. The FRA/OIS Spread is now at the highest since June 2010. The 2yr Euro Swap Spread is rising today to the highest since Nov. 2008. The 3M Euro Basis Swap is falling -6.52 bps to -119.50 bps. The Libor-OIS spread is at the widest since July 2009, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -23.8% since February 16th and -19.2% since Sept. 7th. The 10-year yield is flat today despite stock strength and better economic data. Oil continues to trade very well, which is also a large negative. As well, retailers are lower on the day despite the better-than-expected monthly retail sales report and market rally. Equity market volume remains poor. I still believe that given the recent and ongoing significant deterioration in gauges of Eurozone debt health, the big jumps in some gauges of stock market bullish sentiment and the recent equity rally, investors seem a bit complacent. Stocks do trade very well, however the risk of another turn lower in equities is rising substantially unless a positive catalyst emerges from Europe over the coming days. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, rising global growth worries, profit-taking, more shorting, rising food/energy prices and technical selling.