Stocks at Session Highs into Final Hour on Plunging Sovereign Debt Agnst, Short-Covering, Less Economic Fear

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Almost Every Sector Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 25.28 -1.67%
  
• ISE Sentiment Index 111.0 +5.71%
  
• Total Put/Call .82 +1.23%
  
• NYSE Arms .73 -14.24%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 112.68 bps -1.79%
  
• European Financial Sector CDS Index 118.21 bps -6.44%
  
• Western Europe Sovereign Debt CDS Index 123.17 bps -15.64%
  
• Emerging Market CDS Index 246.60 bps -2.07%
  
• 2-Year Swap Spread 31.0 unch.
  
• TED Spread 38.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .15% unch.
  
• Yield Curve 242.0 +3 bps
  
• China Import Iron Ore Spot $121.80/Metric Tonne -.90%
  
• Citi US Economic Surprise Index -19.60 +.5 point
  
• 10-Year TIPS Spread 1.83% +3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +75 open in Japan
• DAX Futures: Indicating +27 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Retail and Technology long positions
  
• Disclosed Trades: Added to (AAPL) long, took profits in another long
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades to session highs, building on it recent sharp advance, notwithstanding the decline in the euro. On the positive side, Bank, Gold, Coal, Airline, Road & Rail, Homebuilding and Ag stocks are especially strong, rising 1.50%+. Cyclicals are outperforming again today. Copper is rising +1.4% and is now above its 50-day moving average for the first time since April. The 10-year yield is rising another +2 bps, which is also a positive. The Western Europe Sovereign CDS Index is crashing down through its 50-day moving average, which is a major positive. Moreover, the Spain sovereign cds is plunging another -11.4% to 213.44 bps, the Portugal sovereign cds is declining -3.1% to 280.35 bps, the China sovereign cds is falling -4.6% to 82.58 bps, the Japan sovereign cds is falling -4.4% to 90.56 bps and the European Investment Grade CDS Index is falling -3.1% to 109.92 bps. Moreover, The US Muni CDS Index is falling another -2.55% to 247.0 bps, with the Illinois muni cds falling -7.5% to 334.0 bps and the Cali cds dropping -9.3% to 312.0 bps. The Shanghai Composite joined the global rally last night, jumping +2.3%. On the negative side, Software, Computer, Drug, Oil Service and Defense shares are falling slightly. China Import Iron Ore Spot prices continue to decline. Various CDS indices are confirming the recent rise in stocks. As well, a number of extremely high bearish investor sentiment readings and low hedge fund market exposure lead me to believe that this rally has more legs. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less real estate sector pessimism, falling sovereign debt angst, bargain-hunting and diminishing economic fear.