Stocks Higher into Final Hour on Diminishing Credit Market Angst, Less Financial Sector Pessimism, Short-Covering and Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech longs, Internet longs, Financial longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is bullish as the advance/decline line is higher, almost every sector is rising and volume is light. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 2.37% and is elevated at 42.86. The ISE Sentiment Index is above average at 180.0 and the total put/call is slightly below average at .83. Finally, the NYSE Arms has been running around average most of the day, hitting 1.39 at its intraday peak, and is currently .82. The Euro Financial Sector Credit Default Swap Index is falling 2.24% today to 109.66 basis points. This index is up from a low of 52.66 on May 5^th, but down from 157.81 on Sept. 16^th. The North American Investment Grade Credit Default Swap Index is falling 3.32% to 195.79 basis points. The TED spread is down 3.88% to 134 basis points. The TED spread is now down 332 basis points in just over ten weeks. The 2-year swap spread is up 5.08% to 69.25 basis points. The Libor-OIS spread is falling 1.97% to 126 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down 5 basis points to .06%, which is down 255 basis points in just under six months and at the lowest level since Bloomberg record-keeping began in August 1998. The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown. The 3-month T-Bill is yielding .09%, which is up 3 basis points today. The (XLF) trades very well today, which is always a big plus for the broad market. Semiconductor shares are today’s best performers, rising 4.0%. The North American Investment Grade Credit Default Swap Index has now plunged 31.53% since its December 5^th high, which is a huge positive. A rumor regarding Steve Jobs' health appears to have slowed the Nasdaq rally, conveniently for the bears, just as the index was gaining traction. At 16x conservative forward earnings’ estimates, AAPL remains significantly undervalued, in my opinion. We could see further broad market year-end short-covering by large funds with significant short profits tomorrow. Nikkei futures indicate an +175 open in Japan and DAX futures indicate an +24 open in Germany on Friday. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, diminishing credit market angst, less financial sector pessimism, seasonal strength, less forced selling and short-covering.