Stocks Rising into Final Hour on Short-Covering, Technical Buying, Seasonal Strength, Investor Performance Angst

Broad Market Tone:

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

Equity Investor Angst:

• VIX 17.07 -2.63%
  
• ISE Sentiment Index 104.0 -28.28%
  
• Total Put/Call .78 -1.27%
  
• NYSE Arms .79 +.76%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 85.46 -.26%
  
• European Financial Sector CDS Index 161.18 bps +5.76%
  
• Western Europe Sovereign Debt CDS Index 202.25 bps +4.93%
  
• Emerging Market CDS Index 201.61 -2.06%
  
• 2-Year Swap Spread 19.0 unch.
  
• TED Spread 18.0 +2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .12% -2 bps
  
• Yield Curve 270.0 -3 bps
  
• China Import Iron Ore Spot $170.20/Metric Tonne -.35%
  
• Citi US Economic Surprise Index +6.30 -.2 point
  
• 10-Year TIPS Spread 2.28% -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +6 open in Japan
• DAX Futures: Indicating +13 open in Germany

Portfolio:

• Higher: On gains in my Biotech, Tech, Retail and Ag long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite recent stock gains, rising euro sovereign debt angst and China inflation worries. On the positive side, Airline, Education, Restaurant, Homebuilding, Computer Service, Disk Drive, Paper, Steel, Ag, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than 1.0%. Cyclicals are also outperforming. Oil is slightly lower despite a year-end short-covering rally in the euro. The 10-year yield is plunging -15 bps to 3.33%. The Shanghai Composite reversed opening losses and finished at session highs overnight. On the negative side, I-Banking shares are under mild pressure, falling more than .5%. The Greece sovereign cds is climbing +3.02% to 1,067.37 bps, the China sovereign cds is rising +3.46% to 70.44 bps and the Italy sovereign cds is climbing +3.57% to 241.92 bps. The Euro Financial Sector CDS Index remains at the highest level since mid-June and the Western Europe Sovereign CDS Index is making a new record high, which is a big negative. Moreover, the Illinois municipal cds is jumping +6.04% to 350.0 bps, which is getting close to its late-June record of 370.0 bps. Gold is rising another +.37%. The broad market continues to grind higher in a healthy fashion despite high short/intermediate-term levels of investor complacency. I still believe the odds of a short-term gap higher in stocks are fairly high as shorts and underperforming longs capitulate. I expect US stocks to trade mixed-to-higher into the close from current levels on seasonal strength, short-covering, technical buying, buyout speculation and investment manager performance angst.