Stocks Sharply Higher Heading into Final Hour Despite Today's Headwinds

BOTTOM LINE: The Portfolio is slightly higher heading into the final hour on gains in my Semi longs, Medical longs and Networking longs. I added to my (AAPL) long and exited my IWM and QQQQ shorts, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is gaining and volume is heavy. Measures of investor anxiety are lower. Today, we have seen new threats from Bin Laden, higher energy prices, higher long-term rates, a $15 rise in gold, weaker-than-expected housing and manufacturing numbers and some "disappointing" earnings reports. All these perceived negatives and the major averages and breadth are at session highs on heavy volume. Small caps are especially strong as the Russell 2000 makes another all-time high. This is one of the most underreported stories around. The vast majority of U.S. companies are strong and getting stronger. This is what is fueling the best string of 3%+ GDP quarters since 1986. I expect US stocks to trade modestly higher from current levels into the close on short-covering.