Stocks Surging into Final Hour, Led by Tech Shares and Falling Energy Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Internet longs, Medical longs, Retail longs and Software longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is slightly positive today as the advance/decline line is mildly higher, most sectors are rising and volume is above average. If things were as bad as the many bears claim, we should be seeing numerous forward guidance cuts. We are not seeing that. Earnings growth will remain muted over the intermediate term, however, and investors will increasingly pay a premium for those companies that can generate substantial growth given the current macro environment. I want to reiterate for emphasis that there are many companies with significant growth prospects, and it is beginning to be reflected in their stocks. It definitely is not just "the anointed ones." Midcap growth remains the best-performing style, and there are many under-the-radar stocks that I rarely hear mentioned in the press soaring right now. The NYSE reported recently that short interest on the exchange for the first two weeks of October fell to 11.66 billion shares from 11.88 billion shares. The 1.89% decline still leaves NYSE short interest up a whopping 22% since mid-February, the largest eight-month percentage jump since at least 1991, when Bloomberg began tracking. I continue to believe the recent parabolic rise in short interest was mainly the result of the avalanche of capital that had flowed into global market neutral funds, which help to pump air into the current U.S. "negativity bubble." Past poor performance and recent events have likely ensured that a significant portion of the capital allocated to these funds will flow back into more positively correlated U.S. stock strategies going forward. That process may already be beginning and could account for some of the recent decline in short interest. It is also noteworthy that public short sales continue to explode, S&P 500 futures traders remain positioned near historically net shortmoney market fund inflows continue to soar to records. levels, and

Here are the 25 NYSE stocks with the largest percentage increase in their short interest relative to their float for the first two weeks of October:

1. VMW +15.5%
2. BZH +14.4%
3. DHX +8.6%
4. DM +8.1%
5. UIC +7.0%
6. AVR +5.8%
7. HGG +5.4%
8 CXO +5.2%
9. NZ +4.9%
10. OWW +4.7%
11. BIG +4.3%
12. VR +3.9%
13. WCI +3.6%
14. VSE +3.5%
15. VG +3.4%
16. SAM +3.4%
17. BBY +3.4%
18. MDG +3.3%
19. PNW +3.1%
20. MFW +3.0%
21. BOL +2.8%
22. CLR +2.8%
23. EXM +2.9%
24. PFB +2.7%
25. VVC +2.7%

I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, rising fed rate cut odds, falling energy prices, investment manager performance anxiety and short-covering.