Stocks Reversing Higher into Final Hour on Falling Energy Prices, Diminishing Political Fear, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Technology longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is mildly negative as the advance/decline line is slightly lower, most sectors are declining and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is neutral. The VIX is falling -.33% and is above average at 23.88. The ISE Sentiment Index is low at 96.0 and the total put/call is above average at .91. Finally, the NYSE Arms has been running very high most of the day, hitting 2.04 at its intraday peak, and is currently 1.79. The Euro Financial Sector Credit Default Swap Index is rising +5.72% to 92.72 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 falling -.49% to 100.26 basis points. This index is also well below its Dec. 5^th record high of 285.99. The TED spread is unch. at 16 basis points. The TED spread is now down 447 basis points since its all-time high of 463 basis points on October 10^th, 2008. The 2-year swap spread is rising +.29% to 29.50 basis points. The Libor-OIS spread is unch. at 10 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is down -1 basis point to 2.25%, which is down -40 basis points since July 7^th, 2008. The 3-month T-Bill is yielding .09%, which is unch. today. Commodity, Bank and HMO shares are relatively weak. The Dubai sovereign cds is soaring 40 bps to 627 bps. Other sovereign cds are also moving higher. As well, the rise in the Euro financial sector cds is a large negative. Commodities continue to trade poorly. On the positive side, Semi, Wireless, Hospital, Education and Airline shares are especially strong, rising .50%+. Market leading stocks are also outperforming. The euro continues to trade poorly despite its oversold state, a large short base and Greece bailout hopes. I continue to believe the US dollar has entered a longer-term uptrend. While this may be perceived now as a negative, it is a HUGE positive longer-term for the US economy and broad market. Given the news today, the market is displaying nice resilience. Nikkei futures indicate a -67 open in Japan and DAX futures indicate an +3 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting, lower long-term rates, falling energy prices, diminishing political fear and technical buying.