Stocks Surging into Final Hour on Bargain-Hunting, Short-Covering, Less Pessimism

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Semi longs, Biotech longs, Computer longs and Energy shorts. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is mildly positive today as the advance/decline line is slightly higher, most sectors are rising and volume is above average. My intraday gauge of investor angst is at an elevated level again. Other measures of anxiety are near or above the levels seen at the March market lows. We have been hearing for two years that the housing downturn would lead to an imminent economic decline as consumer spending collapses, sending unemployment soaring. I see no evidence of this. The latest consumer confidence report just hit new cycle highs, jobless claims are falling to low levels and retail sales are accelerating. And that is with oil at record highs and housing-related fear stories rampant in the media. I continue to believe the recent credit turmoil will remain a financial event and not an economic one. I see consumer spending actually accelerating to above-average rates this autumn as energy prices fall meaningfully, interest rates remain low, inflation decelerates to low rates, consumer sentiment rises further, stock gains continue, wages continue to substantially outpace inflation, housing fears subside and unemployment remains historically low. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, more economic optimism and short-covering.