Stocks Surging into Final Hour on Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Biotech longs and Medical longs. I covered some of my (EEM) short and all of my (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 100% net long. The overall tone of the market is positive today as the advance/decline line is substantially higher, every sector is rising and volume is below average. The ISE Sentiment Index plunged to a very depressed 48.0 this morning even as the DJIA soared. It has been below 50 only six other times in history. Moreover, it was very near the record low 36.0 hit on July 3, 2006, right before the market went on a tear. It is also noteworthy that the CBOE total put/call spiked to a very high 1.41 as the notes from Bernanke's speech were released. These readings are highly unusual given today's strength and bode well for future gains. Tech is outperforming again on the heels of a boost to first-quarter sales and earnings guidance by Western Digital (WDC) on rising orders to Europe and increased pricing. The MS Tech Index is tripling the performance of the S&P 500 year-to-date, rising 13.4%. As I said several months ago, I expect substantial outperformance by tech to continue over the intermediate term. The Biotech sector is jumping another 2.0% today on news that phase III data from Imclone's (IMCL) Erbitux showed improved survival in patients with non-small-cell lung cancer. The MS Biotech Index (MVBX) is 12.2% higher in just the last five weeks. Given the macro environment, this sector should also continue to outperform over the intermediate term. Gilead Sciences (GILD) is still one of my favorites and is still providing investors an attractive entry point, in my opinion. Apple (AAPL) is lower today, however, the EE Times is reporting that an announcement regarding a 3G iPhone is imminent. Recent Apple concerns will likely fade over the coming weeks as investors begin to anticipate a monster holiday selling season. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic pessimism, short-covering and bargain-hunting.