Stocks Rising Modestly into Final Hour on Positive Earnings and Buyout Activity

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs and Retail 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 mildly higher, most sectors are higher and volume is heavy. In today's manic market where a short-sited pessimistic day trading mentality still rules the day, we jump from recession fears to boom fears almost overnight. While some recent data are indicating a sharp acceleration in U.S. economic activity, other data points are more muted. Moreover, the effects of the recent rise in the 10-year yield are already taking hold. The average 30-year mortgage rate has jumped from 6.11% in December to 6.42% last week. Moreover, mortgage applications fell -7.3% last week, the worst decline since January. On top of this, global growth, while still very high, is decelerating, not accelerating. I believe it is unlikely the 10-year yield will move substantially higher from current levels. Maybe the economy isn't too hot or too cold again, but just about right. I plan to add to my core iShares Lehman 20+ Year Treasury Bond (TLT) long on any substantial move higher in the 10-year yield from current levels. Bloomberg is reporting today that Royal Dutch Shell and Vitol Group are among companies that are hiring supertankers to hoard up to 20 million barrels of oil in the Gulf of Mexico due to the fact that U.S. onshore storage is completely full. Oil companies have hired at least 10 supertankers for storage, according to the report. An analyst at BNP Paribas said that storing the oil on tankers is a "cheaper alternative" than trying to deliver to a market that "may not want the incremental barrels now." This could be one of the reasons oil is coming under pressure again today. Moreover, demand destruction is pervasive, China's bubble is poised to burst, the U.S. dollar is firming, alternatives are exploding onto the scene like never before, conservation is taking hold, global spare production capacity is rising and the risk premium is shrinking. I still expect oil to head into the 40s before year-end. I expect US stocks to trade mixed-to-higher into the close from current levels on buyout speculation, stabilizing long-term rates, short-covering and investment manager performance anxiety.