Stocks Mostly Higher into Final Hour on Diminishing Economic Fears, Short-Covering, Less Financial Sector Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs and Medical longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is neutral as the advance/decline line is slightly lower, most sectors are rising and volume is about average. Investor anxiety is above average. Today’s overall market action is mildly bullish. The VIX is rising .34% and is elevated at 47.45. The ISE Sentiment Index is above average at 176.0 and the total put/call is below average at .76. Finally, the NYSE Arms has been running around average most of the day, hitting 1.54 at its intraday peak, and is currently .56. The Euro Financial Sector Credit Default Swap Index is rising 2.52% today to 121.66 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 2.32% to 213.20 basis points. The TED spread is rising .94% to 107 basis points. The TED spread is now down 359 basis points in just over three months. The 2-year swap spread is falling 2.93% to 66.25 basis points. The Libor-OIS spread is falling 1.34% to 92 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 14 basis points to .72%, which is down 198 basis points in just over six months and near 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 .10%, which is down 1 basis point today. Market-leading stocks are especially strong again today. Given the weakness in shares of (GE), the market’s resilience, especially the (XLF), today’s is very impressive. (GS)/(JPM) are sector leaders. Economically sensitive shares are outperforming substantially. Growth stocks are again outperforming value shares. The strong positive reaction in GOOG shares to their earnings report is a big positive for other growth-oriented named. Nikkei futures indicate an +135 open in Japan and DAX futures indicate an +33 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, diminishing economic pessimism, bargain-hunting and declining financial sector worries.