Stocks Higher into Final Hour on Buyout Speculation, Lower Energy Prices and Stable Long-term Rates

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Retail longs and Telecom longs. I sold an existing long and added to my (IWM)/(QQQQ) hedges this morning and then covered some (IWM)/(QQQQ) hedges this afternoon, thus leaving the Portfolio 75% net long. The tone of the market is neutral as the advance/decline line is slightly lower, most sectors are rising and volume is heavy. Under Armour (UA) reported an in-line quarter but gave mildly conservative guidance and the stock is falling 8.4%. I am still very confident in the long-term story and will look to add again to my long position on signs of technical stabilization. Bear Stearns is saying that Dow Jones (DJ) will likely accept the News Corp. (NWS-A) bid. As well, Prudential is saying that it doesn't expect other bidders to materialize. The major averages are moving higher again as the 10-year yield begins to pull back as oil prices decline. Housing stocks are now higher after the morning sell-off on the pending home sales report. Cyclicals are substantially outperforming the broad market, with the MS Cyclical Index rising 2.1%, boosted by Dow Jones(DJ). As well, shares of Whirlpool (WHR), Masco (MAS), Citigroup (C), FedEx (FDX), Honeywell International (HON) and Hewlett-Packard (HPQ) are pushing the index higher. My intraday gauge of investor angst is at high levels considering the gains in the major averages. I expect US stocks to trade mixed-to-higher into the close on positive earnings reports, short-covering, falling energy prices and buyout speculation.