Stocks Rising into Final Hour on Less Economic Fear, Diminishing Financial Sector Pessimism, Short-Covering, Lower Energy Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Financial longs and Retail longs. I added to my (DISCA) long and took profits in another trading long today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is slightly higher, most sectors are rising and volume is above average. Investor anxiety is above average. Today’s overall market action is neutral. The VIX is falling 2.83% and is very high at 42.85. The ISE Sentiment Index is around average at 152.0 and the total put/call is slightly above average at .91. Finally, the NYSE Arms has been running low most of the day, hitting .49 at its intraday trough, and is currently .67. The Euro Financial Sector Credit Default Swap Index is rising 3.42% today to 181.33 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising 4.00% to 202.97 basis points. This index is still below its Dec. 5^th record high of 285.99. The TED spread is falling 2.74% to 96 basis points. The TED spread is now down 367 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is rising 2.68% to 57.50 basis points. The Libor-OIS spread is falling .52% to 96 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 3 basis points to 1.34%, which is down 130 basis points since July 7th. 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 .21%, which is up 1 basis point today. It is a good sign that (XLF)/(IYR) are maintaining yesterday’s gains. It is also a big positive that the TED spread continues to trend lower. The ongoing drop in mortgage rates remains a huge positive, as well. The MS Cyclical Index is substantially outperforming the broad market today, rising 3.5%. Nikkei futures indicate an +209 open in Japan and DAX futures indicate an +20 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic fear, diminishing financial sector pessimism and lower energy prices.