Stocks Surging on Improved Volume into Final Hour on Less Economic Fear, Short-Covering, Less Hostile Political Rhetoric

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Every Sector Rising
  
• Volume: Slightly Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 23.65 -3.19%
  
• ISE Sentiment Index 78.0 -12.36%
  
• Total Put/Call .85 -15.0%
  
• NYSE Arms .56 -23.55%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 109.42 bps -2.32%
  
• European Financial Sector CDS Index 119.54 bps -3.58%
  
• Western Europe Sovereign Debt CDS Index 130.66 bps +8.89%
  
• Emerging Market CDS Index 235.09 bps -4.37%
  
• 2-Year Swap Spread 29.0 -2 bps
  
• TED Spread 39.0 +1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .14% unch.
  
• Yield Curve 245.0 +4 bps
  
• China Import Iron Ore Spot $117.60/Metric Tonne -.42%
  
• Citi US Economic Surprise Index -26.0 -8.8 points
  
• 10-Year TIPS Spread 1.88% +4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +143 open in Japan
• DAX Futures: Indicating +9 open in Germany

Portfolio:

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

BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades substantially higher, up to its 50-day moving average, on improved volume and breadth. On the positive side, Semi, Networking, Homebuilding, Gaming, Airline, Paper, Internet, I-Banking, REIT and Construction stocks are especially strong, rising 2.5%+. Cyclical and small-cap shares are strongly outperforming. (XLF)/(IYR) continue to trade well. The 10-year yield is near session highs, rising +5 bps. The US Muni CDS Index is falling another -3.9% to 226.50 bps, which is also a big positive. The Spain sovereign cds is falling another -4.5% to 210.0 bps and the Greece sovereign cds is dropping another -3.85% to 816.16 bps. Lumber is rising +3.4% today, as well. On the negative side, Road & Rail, Drug, Oil Service and Utility shares are underperforming, rising less than +1.0%. China Import Iron Ore Spot prices continue to decline. As well, the Shanghai Composite Index fell -1.62% last night on real estate worries. The Western Europe Sovereign CDS Index is rebounding further after last week's sharp drop, which is also a mild negative. The market is short-term overbought now and will likely consolidate recent gains before an attempt to push up throw the S&P 500 200-day moving average occurs. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting, less hostile political rhetoric and diminishing economic fear.