Stocks Surging into Final Hour on Diminishing Financial Sector Pessimism, Lower Credit Market Angst, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Healthcare longs, Retail longs, Financial longs and Medical longs. I added to my (GME) long and took some profits in another long today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Investor anxiety is above average. Today’s overall market action is very bullish. The VIX is falling 5.8% and is very high at 39.80. The ISE Sentiment Index is slightly below average at 137.0 and the total put/call is below average at .70. Finally, the NYSE Arms has been running above average most of the day, hitting 1.22 at its intraday peak, and is currently .84. The Euro Financial Sector Credit Default Swap Index is falling .08% 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 3.08% to 192.88 basis points. The TED spread is falling 5.28% to 100 basis points. The TED spread is now down 366 basis points in over three months. The 2-year swap spread is plunging 15.28% to 55.63 basis points. The Libor-OIS spread is falling .21% to 95 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 7 basis points to .89%, which is down 181 basis points in 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 .18%, which is up 5 basis points today. It is a large positive to see many of the “fear” assets trading lower again today. As well, the North American Investment Grade Credit Default Swap Index appears to be breaking down, which is also a huge positive. Many market-leading stocks are rising 2-3x more than the gains in the major averages. US stocks are getting extended very short-term and could see a pullback materialize over the coming days, but another meaningful surge higher is likely soon thereafter. Nikkei futures indicate an +304 open in Japan and DAX futures indicate an +40 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, less financial sector pessimism and declining credit market angst.