Stocks Rising into Final Hour on Less Financial Sector Pessimism, Diminishing Economic Fear, Seasonal Strength, Investor Performance Angst

Broad Market Tone:

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

Equity Investor Angst:

• VIX 15.36 -.30%
  
• ISE Sentiment Index 136.0 +7.09%
  
• Total Put/Call .73 +1.39%
  
• NYSE Arms .60 +7.29%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 85.25 -1.17%
  
• European Financial Sector CDS Index 159.94 bps +3.73%
  
• Western Europe Sovereign Debt CDS Index 192.50 bps -.69%
  
• Emerging Market CDS Index 209.12 bps -.76%
  
• 2-Year Swap Spread 21.0 -2 bps
  
• TED Spread 18.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .12% +2 bps
  
• Yield Curve 271.0 -3 bps
  
• China Import Iron Ore Spot $169.90/Metric Tonne +.18%
  
• Citi US Economic Surprise Index +17.60 +.2 point
  
• 10-Year TIPS Spread 2.28% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +45 open in Japan
• DAX Futures: Indicating +18 open in Germany

Portfolio:

• Higher: On gains in my Tech, Ag, Biotech and Retail long positions
  
• Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
  
• Market Exposure: Moved to 100% Net Long

BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades higher despite recent stock gains, US muni debt worries and rising eurozone sovereign debt angst. On the positive side, Airline, Road & Rail, REIT, Homebuilding, Construction, Insurance, I-Banking, Bank, Disk Drive, Computer, Software, Coal, Alt Energy, Oil Tanker, Energy, Ag and Steel shares are especially strong, rising more than 1.0%. Cyclicals and small-caps are relatively strong. (IYR)/(XLF) have outperformed throughout the day. Copper is jumping another +1.8% despite euro weakness. The 10-year yield is stable again. On the negative side, Medical Equipment, Restaurant and Education shares are down today. The Greece sovereign cds is climbing +3.23% to 1,005.91 bps, the Russia sovereign cds is gaining +4.81% to 151.83 bps, the Portugal sovereign cds is climbing +3.44% to 483.97 bps and the Italy sovereign cds is rising +6.03% to 220.55 bps. The Euro Financial Sector CDS Index is jumping to the highest level since mid-June and the Western Europe Sovereign CDS Index remains very near its record high set last month, which is also a big negative. Moreover, the Illinois muni cds is rising +4.03% to 330 bps, which is 40 bps away from its record set in late June. US stocks remain extremely resilient as the S&P 500 breaks out of its recent range to a new 52-week high despite these headwinds. Seasonality, diminishing attacks from Washington on business and better US economic data continue to trump these concerns. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, less economic fear, diminishing financial sector pessimism, short-covering, technical buying and investment manager performance angst.