Stocks Soaring into Final Hour on Less Eurozone Debt Angst, Short-Covering, Less Financial Sector Pessimism, Investor Performance Angst

Broad Market Tone:

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

Equity Investor Angst:

• VIX 28.09 -8.32%
  
• ISE Sentiment Index 119.0 +12.26%
  
• Total Put/Call .94 +1.08%
  
• NYSE Arms .34 -63.57%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 130.77 bps -5.98%
  
• European Financial Sector CDS Index 292.37 -8.14%
  
• Western Europe Sovereign Debt CDS Index 345.92 -3.58%
  
• Emerging Market CDS Index 307.45 -6.24%
  
• 2-Year Swap Spread 40.0 -12 bps
  
• TED Spread 53.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% -1 bp
  
• Yield Curve 182.0 +8 bps
  
• China Import Iron Ore Spot $130.90/Metric Tonne +.08%
  
• Citi US Economic Surprise Index 61.80 +10.4 points
  
• 10-Year TIPS Spread 2.06 +6 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +195 open in Japan
• DAX Futures: Indicating +13 open in Germany

Portfolio:

• Higher: On gains in my retail, technology, medical and biotech sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, 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 substantially on Monday's sharp gains, despite Eurozone debt angst, rising global growth fears and rising food/energy prices. On the positive side, Coal, Alt Energy, Oil Service, Steel, Semi, Bank, I-Banking and Homebuilding shares are especially strong, soaring more than +5.0%. Small-caps and cyclicals are outperforming. (XLF) has traded very well throughout the day. Copper is rising +5.43%. The 10-Year Yield is rising +9 bps to 2.08%. The Germany sovereign cds is falling -7.15% to 100.0 bps, the Italy sovereign cds is falling -7.79% to 485.83 bps, the Spain sovereign cds is falling -9.88% to 408.33 bps, the France sovereign cds is dropping -10.78% to 200.83 bps and the Belgium sovereign cds is dropping -16.52% to 303.67 bps. On the negative side, Retail shares are underperforming, rising less than 2.0%. Oil is rising +.75%, gold is gaining +1.86% and the UBS-Bloomberg Ag Spot Index is rising +.64%. The European Financial Sector CDS Index is still near its Nov. 25 all-time high. The TED spread continues to trend higher and is at the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is the highest since March 2009. The Libor-OIS spread is the widest since June 2009, which is also noteworthy considering the equity surge off the recent lows. China Iron Ore Spot has plunged -31.8% since February 16th and -27.7% since Sept. 7th. The Shanghai Composite fell -3.3% overnight, as it nears its October lows, and is down -17.0% ytd. This move lower in equities occurred before China cut the reserve requirement ratio 50 bps. This would leave the RRR for large banks at 21.0%. The market seems to believe this is a major shift in policy. However, I suspect this is just another "tweak", unless their economy is in much more trouble than their officials are currently indicating. Volume remains lackluster, however leadership and breadth were much improved today. Given investment manager underperformance, a subsiding in eurozone debt angst and seasonal strength, I still suspect stocks can build on recent gains over the short-term after a brief pause. However, over the intermediate-term, recent central bank actions do not address the real problem, the European sovereign debt crisis, in a meaningful way. While US economic data remain mostly firm, a real solution to the Eurozone crisis is needed in short order to prevent a global double dip next year, in my opinion. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, investor performance angst, a bounce in the euro, seasonality, technical buying and less financial sector pessimism.