Stocks Higher into Final Hour on Strength in Homebuilders, Biotech and Airlines Shares

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is gaining and volume is about average. The AAII investor sentiment survey just came out today at 32.26% Bulls and 39.78% Bears. I would like to emphasize the point that I truly believe overall investor sentiment has never been this poor in US history with the DJIA just off record highs. This is a gigantic positive. Current readings(not one or two weeks, but longer-term) are at levels associated with major market bottoms and this is with the DJIA only 1.6% off its all-time high. Of course bears will say sentiment gauges are “different this time” and are poor mechanisms to help time the longer-term trend of the market because current sentiment readings are so disturbing to the secular bear case. Let’s not forget the market is up almost 100% from its lows and the “bears that cried wolf” are more widely followed than ever. Moreover, during the recent mild pullback numerous market “fearleaders” insinuated that anyone that is bullish is a “cheerleader.” I heard this term dozens of times right around the recent lows. I would expect to hear this type of talk by bears at a market bottom, not a top. Around the time of the major market bottom in 2002, technicians didn’t like the market, quants didn’t like it and the fundamentals looked terrible. It was the extreme readings in investor pessimism that screamed “major market bottom.” The current explosion in low correlation and negative correlation US stock strategies is just a function of the current US “negativity bubble,” in my opinion. I know there will always be a place for these strategies in some investors’ portfolios, but their current extreme popularity is a result of the belief by the herd that the US is still in a secular bear or long-term trading range, in my opinion. I suspect the demand for these types of strategies is peaking right now and will fall markedly over the longer-term as the US secular bull continues. I expect US stocks to trade mixed-to-higher into the close on short-covering, buyout speculation, lessoned geopolitical tensions and bargain-hunting.