Stocks Sharply Higher into Final Hour on M&A Activity, Falling Energy Prices and a Firming US Dollar

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Telecom longs, Medical longs and Biotech longs. 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, almost every sector is rising and volume is above average. Last week, Banc of America put out a report, which stated that U.S. investors have poured $106.1 billion this year into mutual funds that invest in international equities. This is 40% more than last year at this time. On the other hand, investors have pulled $1.4 billion from U.S. mutual funds so far this year vs. inflows of $18.7 billion this time last year. I have heard many pundits and analysts say recently that U.S. stocks are still expensive relative to international equities. I couldn't disagree more. Many international markets, especially emerging markets, are heavily weighted toward very cyclical or commodity companies. These types of companies always look the cheapest before significant declines. This is just more evidence that the public remains very skeptical of U.S. stocks despite recent gains. I suspect a chain reaction of events has begun that will eventually lead to a bad ending to the mania for emerging market stocks and a dramatic increase in demand for U.S. stocks. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower energy prices, merger & acquisition speculation, portfolio manager performance anxiety and bargain-hunting.