Stocks Surging into Final Hour on Less Eurozone Debt Angst, Global Central Bank Stimulus Hopes, Short-Covering, Technical Buying

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.83 -7.81%
  
• ISE Sentiment Index 123.0 +39.77%
  
• Total Put/Call .88 -6.38%
  
• NYSE Arms .41 -36.32%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 105.38 bps -5.30%
  
• European Financial Sector CDS Index 267.78 bps -4.27%
  
• Western Europe Sovereign Debt CDS Index 261.85 -3.39%
  
• Emerging Market CDS Index 245.03 -6.80%
  
• 2-Year Swap Spread 21.25 +.25 basis point
  
• TED Spread 34.50 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -39.0 +1.75 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .10% unch.
  
• Yield Curve 131.0 +11 basis points
  
• China Import Iron Ore Spot $116.20/Metric Tonne -.94%
  
• Citi US Economic Surprise Index -51.0 +2.8 points
  
• 10-Year TIPS Spread 2.08 +6 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating +144 open in Japan
• DAX Futures: Indicating +75 open in Germany
  

Portfolio:

• Higher: On gains in my Tech, Retail, Medical and Biotech sector longs.
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades near session highs despite eurozone debt angst, rising food prices/energy prices, US "fiscal cliff" worries, earnings concerns and rising global growth fears. On the positive side, Coal, Oil Tanker, Steel, Internet, Disk Drive and Oil Service shares are are especially strong, rising more than +2.5%. Tech shares have traded well throughout the day. Copper is rising +1.1% and Lumber is gaining +1.8%. The 10Y Yld is rising +11 bps to 1.55%. Major Asian indices were higher overnight, led by a +2.6% gain in South Korea. The Shanghai Composite has not participated in the recent global equity rally and is down -1.8% this week despite rising stimulus hopes. Major European indices are jumping today, led by a +3.6% gain Spain. Spanish equities are up +5.1% this week, but still down -23.3% ytd. The Bloomberg European Bank/Financial Services Index is rising +2.6%. Brazil is gaining +1.4%. The Germany sovereign cds is falling -5.4% to 72.89 bps, the France sovereign cds is falling -5.8% to 163.34 bps, the Italian sovereign cds is falling 5.5% to 496.17 bps, the Spain sovereign cds is falling -6.3% to 550.33 bps and the Brazil sovereign cds is falling -5.8% to 137.1 bps. Moreover, the Spain 10Y Yld is falling -2.7% to 6.74% and the Italian/German 10Y Yld Spread is falling -3.7% to 455.81 bps. On the negative side, Restaurant and Education shares are lower-to-flat on the day. Oil is rising +.75%, Gold is gaining +.4% and the UBS-Bloomberg Ag Spot Index is rising +1.3%. The UBS-Bloomerg Ag Spot Index is still up +25.2% in about 8 weeks. The China benchmark Iron/Ore Spot Price Index remains technically weak, falling -22.2% since April 13th and -35.8% since Sept. 7 of last year. As well, the China Hot Rolled Steel Sheet Spot Index is also picking up downside steam. The Saudi sovereign cds is jumping +6.5% to 106.5 bps and the Japan sovereign cds is gaining +1.1% to 97.41 bps today. US weekly retail sales have decelerated to a sluggish rate at +1.7%, which is the slowest since the week of Feb. 2, 2010. US Trucking Traffic continues to soften. Moreover, the Citi US Economic Surprise Index, while showing some improvement this week, is still around early-Sept. levels. Lumber is -3.7% since its March 1st high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite investor perceptions of a big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -55.0% from its Oct. 14th high and is now down around -45.0% ytd. Shanghai Copper Inventories have risen +90.0% ytd. Oil tanker rates have plunged recently, with the benchmark Middle East-to-US voyage down to 25.0 industry-standard worldscale points, which is the lowest since Oct. 2009. The CRB Commodities Index is now down -17.3% since May 2nd of last year despite the recent surge in food prices. Copper and the euro currency remain in intermediate-term downtrends and trade poorly despite recent bounces. The 10Y T-Note continues to trade too well despite today's loss. There still appears to be a high level of complacency among US investors regarding the still-deteriorating macro backdrop. The Citi Eurozone Economic Surprise Index is at -70.0 points, which is near the lowest since mid-Sept. of last year. Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession. A lack of competitiveness remains unaddressed. The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. Uncertainty surrounding the effects on business of Obamacare, the "US fiscal cliff " and the election outcome uncertainty will likely become more and more of a focus for investors as the year progresses. Recent sharp equity gains are mainly the result of global central bank hopes, not actions, and the Fed’s ZIRP policy forcing institutional money further out on the risk spectrum. Little if anything being discussed will actually boost global economic growth in any meaningful way, in my opinion. Thus, recent market p/e multiple expansion is creating an unstable situation for equities, which could become a big problem this fall unless a significant macro catalyst materializes soon. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade mixed-to-higher into the close from current levels on falling eurozone debt angst, global central bank stimulus hopes, tech sector strength, short-covering and technical buying.