Stocks Slightly Higher into Final Hour on Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Biotech longs and Medical longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is neutral today as the advance/decline line is slightly lower, sector performance is mixed and volume is above average. My intraday gauge of investor angst is elevated again. Investor angst is still levels normally associated with meaningful market bottoms. I had thought that, given recent stock declines and hedge fund de-leveraging, we would see diminished short selling. However, last week saw a massive spike in short sales by the public and total short sales. As well, the specialist short sales/total short sales ratio continues to move lower as it has since near the major market bottom in 2002. SentimenTrader's All-Index, All-Product Stochastic remains near levels normally associated with a meaningful market bottom. The Rydex Nova/Ursa Ratio also recently hit levels not seen since the depths of the 2000-2002 bear market. This also corresponds with the recent pessimistic extreme readings in the 10-day total put/call ratio, 10-day ISE Sentiment Index and highest VIX since early 2003. Let's also not forget that insiders are buying at levels not seen since right before the 2002 bottom. Goldman Sachs (GS) said this morning that non-financial companies in the S&P 500 have $800 billion in cash, or 10% of their market cap, which is double the historical average. This is one of the many large positives that continue to be ignored in the current climate of fear. A U.S. recession is a foregone conclusion in many circles, even as little evidence suggests this, and it has mostly been priced into stocks at current levels, in my opinion. I suspect with so many investors positioned so bearishly that we have to see significant economic weakness very soon or a substantial market rally is in the cards from current levels. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism and bargain hunting.