Stocks Soaring into Final Hour on Plunging Gas Prices, Lower Interest Rates and Less Irrational Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Internet longs, Semi longs, Medical longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, most sectors are higher and volume is above average. The Johnson Redbook same-store sales index rose 3.8% year over year last week vs. a 3.9% rise the prior week. The long-term average is a gain of around 2.8%. There is mounting evidence that the anticipated collapse in consumer spending won't materialize anytime soon, even as investors continue to price this into stocks. As I said last week, mortgage resets and the other negative effects of housing were supposed to send consumer spending plunging already, and they have not. A healthy labor market, falling energy prices, lower long-term interest rates, decelerating inflation, a rising stock market and less irrational pessimism will continue to more than offset housing over the intermediate-term. The Morgan Stanley Retail Index (MVRX) has surged 11.8% in less than two months. I expect continued outperformance by the sector during the fourth quarter. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain hunting, short covering, lower long-term rates and declining energy prices.