Stocks Rebounding into Final Hour on Economic Data, Buyout Speculation and Short-Covering

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, I-Banking longs and Biotech longs. I covered some of my (QQQQ)/(IWM) hedges this morning, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is gaining and volume is below average. The major averages and breadth are pushing back to session highs after the news of a possible terror attack in Germany failed to make a dent in today's rally. I suspect many that were caught off guard by today's sharp morning snapback, including myself, were waiting for midday weakness to surface. That didn’t happen, thus we are seeing more short-covering into the close. The CBOE total put/call is an above average 0.94, and the ISE Sentiment Index is falling to a below average 128.0, despite today's gains. The 10-year yield is at session highs, rising 3 basis points, as I suspect many traders are anticipating better economic data going forward. Retail is the only sector not participating today. I still believe the Fed will remain on hold this year as economic growth accelerates back near average levels in the second half of the year. However, a rate cut is still much more likely than a rate hike. While most emerging markets were just modestly lower last night, Russian shares fell 2.5% and appear to be rolling over as the index breaks back below its 50-day moving-average. I expect US stocks to trade modestly higher into the close from current levels on buyout speculation and short-covering.