Stocks Higher Into Final Hour on Lower Energy Prices, Buyout Activity and Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Telecom longs and Computer longs. I covered my remaining (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are gaining and volume is about average. Merrill Lynch put out its Hedge Fund Monitor Report today. Here is a summary:

1. Large specs sold S&P 500 futures to a net short position and raised shorts in Nasdaq and Russell 2000.
2. There is now potential notional buying power of about $38.5 billion.
3. The exposure of market neutral funds to the market moved to neutral from above average.
4. Macro funds decreased their exposure to the S&P 500, Nasdaq, U.S. Dollar and the 10-year Treasury note.
5. Overall hedge fund activity is similar to that witnessed during last year's mid-year pullback and is viewed as a source of liquidity for the equity markets.

Considering all the shorting and hedging that is going on, I suspect that unless there is concrete evidence of a meaningful consumer spending slowdown sometime soon, we will see a violent upside move in the major averages into the spring. I expect US stocks to trade mixed-to-higher into the close from current levels on falling energy prices, lower long-term rates, buyout speculation, short-covering and bargain hunting.