Stocks Higher into Final Hour on Heavy Volume Reversal

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Telecom longs, Biotech longs and Semi longs. I added to my (IWM)/(QQQQ) hedges and covered them today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is heavy. Remember last year during the significant June/July market bottom we were told by the permabears that we had begun another bear market or resumed the secular downtrend that they believed still existed. During that period, the chief concern was the conflict between Hezbollah and Israel. Take a look at this chart from Google Trends of the blow-off top in the use of the word Hezbollah. The peak came on July 17, one day before the U.S. stock market bottomed on July 18 and began ripping higher for months. Currently, subprime mortgages are investors' chief concern. Now look at the chart of the word "subprime." Maybe this time will be different, but if the word "subpime" were a stock, I would begin shorting it very soon. The CBOE total put/call is currently 1.75. It hit 1.88 earlier today, which is a very elevated level. To put that in perspective, it only exceeded this level once during the entire 2000-2003 market meltdown, which was one of the worst in U.S. history. I sense, once again, that investors have priced in the worst-case scenario rather than the most likely scenerio for U.S. stocks. This has been a hallmark characteristic of the current “negativity bubble.” I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, less concern over the I-Banking sector and short-covering.