Stocks Higher into Final Hour on Falling Energy Prices and More Economic Optimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Internet longs, Semi 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, most sectors are gaining and volume is about average. The NYSE reported after the close yesterday that short interest on the exchange, from mid-April through mid-May, rose from 10,989,500,000 shares to 11,761,000,000 shares, which is another all-time high. Moreover, this 7.03% increase leaves NYSE short interest up a whopping 22.6% since mid February, the largest three-month jump since at least 1991 when Bloomberg began tracking. This is even more remarkable considering the DJIA gained about 6.4% from mid April through mid May and was hitting one record after another. The largest overall short on the NYSE remains the iShares Russell 2000 (IWM) at 237,133,225 shares, up from 218,547,492 the prior month. The many bears remain stunningly complacent and continue to party like it's 2000-03, despite the S&P 500's 107% gain from that periods' lows. I continue to believe the current "U.S. negativity bubble" will eventually burst, thus spurring the "mother of all short-covering rallies."

Here are the 25 NYSE stocks with the largest percentage increase in their short interest relative to their float from mid April through mid May:

1) LUM +20.9%
2) MZ +16.4%
3) XJT +15.0%
4) PPS +12.1%
5) MNI +8.9%
6) MWA +8.7%
7) AXR +8.0%
8) BOW +7.7%
9) MEG +7.7%
10) EAT +7.4%
11) HZO +7.2%
12) SHS +6.9%
13) STZ +6.9%
14) VLO +6.7%
15) DVR +6.5%
16) GDP +6.5%
17) AOS +6.0%
18) HOS +5.8%
19) ORA +5.5%
20) ABD +5.3%
21) ARP +5.2%
22) AMD +5.1%
23) MNT +5.1%
24) BLG +4.9%
25) NCS +4.8%

I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices, investment manager performance anxiety, buyout speculation and more economic optimism.