Stocks Rising into Final Hour on Short-Covering, Bargain-Hunting, Technical Buying

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Biotech longs and Medical longs. I added (STRA) long and took profits in another trading long today, thus leaving the Portfolio 100% net long. The tone of the market is mildly bullish as the advance/decline line is about even, most sectors are rising and volume is above average. Investor anxiety is high. Today’s overall market action is bullish. The VIX is falling 8.6% and is elevated at 46.60. The ISE Sentiment Index is low at 88.0 and the total put/call is above average at .96. Finally, the NYSE Arms has been running at a high level most of the day, hitting 2.13 at its intraday peak, and is currently 1.04. The Euro Financial Sector Credit Default Swap Index is falling 1.26% today to 108.67 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 5.08% to 210.92 basis points. The TED spread is rising 4.75% to 103 basis points. The TED spread is now down 363 basis points in just over three months. The 2-year swap spread is unch. at 60 basis points. The Libor-OIS spread is rising 7.74% to 97 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 5 basis points to .48%, which is down 222 basis points in just over 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 .11%, which is up 1 basis point today. Considering the massive carnage in the global banking sector this morning, today’s broad market action is very impressive. Airline, technology, education, restaurant, reit, homebuilding, hmo, defense and utility shares are all surging 2.5%+, substantially outperforming the major averages. I expect stocks to build on today’s gains next week. Nikkei futures indicate an +35 open in Japan and DAX futures indicate an +11 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on short-covering, technical buying and bargain-hunting.