Stocks Slightly Higher into Final Hour on Diminishing Euro Sovereign Debt Angst, Less Financial Sector Pessimism, Lower Long-Term Rates

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Technology longs, Medical longs, Biotech longs and Financial longs. I covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 100% net long. The tone of the market is mildly positive as the advance/decline line is about even, most sectors are rising and volume is slightly below average. Investor angst is very high. Today's overall market action is mildly bullish. The VIX is falling -3.33% and is around average at 19.43. The ISE Sentiment Index is low at 89.0 and the total put/call is slightly above average at .89. Finally, the NYSE Arms has been running slightly above average most of the day, hitting 1.33 at it intraday peak, and is currently .87. The Euro Financial Sector Credit Default Swap Index is falling -6.71% to 89.09 basis points. The North American Investment Grade CDS Index is falling -3.35% to 92.21 basis points. The TED Spread is unch. at 14.0 basis points. The 2-Year Swap Spread is rising +.73% to 24.13 basis points. The Libor-OIS Spread is unch. at 9.0 basis points. The 10-Year TIPS Spread is down -1 basis point to 2.15%. The 3-Month T-Bill is yielding .11%, which is unch. today. Construction shares are especially weak today, falling -1.31%. On the positive side, Airline, Homebuilding, Coal, Steel, Hospital and Bank shares are especially strong, rising 1.0%+. (IYR)/(XLF) have traded well throughout the day. Market leading stocks are outperforming. The Western Europe Sovereign CDS Index is dropping -6.52%, which is also a big positive. I suspect the major average would be up more today if it were not for the weather, which is definitely impacting volume. There is also likely some month-end hedge fund profit-taking/new shorting going on after a pretty good month for stocks. Investors are mostly ignoring the recent poor economic data, taking into account record winter weather around the globe. I suspect this will remain the case for several more weeks. However, if datapoints continue to deteriorate into March/April investors will step back. Notwithstanding a likely euro bounce next week on some sort of help for Greece, I still expect the region's debt problems to remain with us for some time and eventually become more pronounced. Nikkei futures indicate an +14 open in Japan and DAX futures indicate an up +8 open in Germany on Monday. I expect US stocks to trade modestly higher into the close from current levels on technical buying, less financial sector pessimism, declining euro sovereign debt angst and lower long-term rates.