Stocks Sharply Higher into Final Hour on Another Plunge in Oil and Rising Economic Optimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Telecom longs, Medical longs, Retail longs, Biotech longs and Energy-related 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, almost every sector is rising and volume is heavy. Oil Movements is saying that OPEC shipments of crude are rising 1.5% this month from December. This is likely the reason for oil's $3 per barrel decline in the last few hours. The commodity continues to trade very poorly. OPEC tried to defend it at $60, then at $58 and then at $55. OPEC has never had much success stopping a substantial decline in the past. As I have said many times before, the longer oil stays anywhere near current levels, the greater the long-term demand destruction, which is already pervasive globally. A CNBC commentator just asked why natural gas is plunging 6%. Natural gas inventories are at all-time high levels and 18% above the five-year average for this time of the year. The long-term average price for natural gas is $4.63. Prices anywhere near current levels are absurd, in my opinion. The same thing that has been driving the mania for most commodities -- namely, historic speculation by investment funds -- has been keeping natural gas levitating at sky-high prices. The CRB Index is now in a bear market, falling 21.4% from May 2006 record highs. Natural gas is falling because the mania for commodities is ending. Forced liquidations and redemptions are likely just beginning for the hordes of newly minted commodity funds, and downside speculation has just begun. I expect US stocks to trade modestly higher into the close from current levels on short-covering, more economic optimism, lower energy prices and bargain-hunting.