DJIA Hits Another Record into Final Hour on Lower Energy Prices and Buyout Speculation

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech longs, Medical longs, Semi longs and Computer longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is slightly lower, most sectors are rising and volume is below-average. Over the weekend, as usual, I read and heard numerous scary headlines despite the DJIA putting in its best showing in decades. Local papers had big headlines on the front of their business sections talking of a U.S. recession without even mentioning the Dow's record-shattering run. As well, around the web there was more depression comparisons and 20s crash talk. Finally, a recent Street.com column illustrates the prevailing sentiment among the many bears, in my opinion. David Tice of the Prudent Bear fund said, "We've never been more confident" and "I am as confident as ever that we are going to be right," in references to his belief in the market's impending 50% collapse. Even more telling, his fund is down 5% over the last decade including dividends, yet his fund sales are near their peak during the 2000-2003 market meltdown and his assets are at a new all-time high. The many bears still remain stunningly complacent, in my opinion. I continue to believe overall investor sentiment regarding U.S. stocks has never been worse in history with the DJIA at record highs. I view sentiment as closer to a major market bottom than a major market top. Sentiment gauges have been the best market-timing tools since the major bear market lows in 2002, in my opinion. I have noticed that the new bear catchword to describe the U.S. economy relative to the U.S. stock market is "disconnect." The market anticipates the future. In the current "U.S. negativity bubble" the thought that things could actually get better, not worse, isn't even considered. The mid-cycle slowdown in 1995 was much worse than the current one, yet stocks rose by double-digit percentages during that period as multiples expanded in anticipation of faster economic growth. The real "disconnect" is between the perception of investors regarding the long-term prospects for U.S. stocks and reality, in my opinion. I expect US stocks to trade mixed into the close from current levels as lower energy prices and buyout speculation offset profit-taking and positioning ahead of likely weak retail sales reports.