Stocks Surging into Final Hour on Tech Sector Earnings, Positive Countrywide Financial Comments

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Retail longs, Computer longs and Biotech longs. I covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is positive today as the advance/decline line is higher, most sectors are rising and volume is heavy. The catalyst for a reversal in commodities will likely come from a bounce in the U.S. dollar, which could come after the next Fed rate cut. This sounds counterintuitive, but with each additional U.S. rate cut, the ECB will likely get more hawkish. This could lead traders to conclude that U.S. growth will be rebounding next year, just as Europe slows more, which would be dollar positive. As well, speculation for a continuation of the recent dollar decline is extraordinary, which means it won't take much to get at least a bounce in the hated currency. According to fed fund futures, the odds for a 25-basis-point cut at the meeting next week are 94%, up from 86% yesterday and 92% one week ago. The odds of a 50-basis-point cut are only 6%. The speculative credit and investment grade credit default swap indices have stabilized and are about even over the last week, which is a big positive. As well, the Bear Stearns High Yield Index, which had been declining again, is slightly higher over the last week. The bears had their chance this morning to create a reversal and failed. As a result, I wouldn't be surprised to see some more strength into the close. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, more earnings optimism and short-covering.