Stocks Mixed into Final Hour on Healthy Consolidation of Recent Gains

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Medical longs and Software longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is mixed today as the advance/decline line is mildly lower, sector performance is mixed and volume is above average. Investor anxiety is above average. Today’s overall market action is very healthy given the recent two-day advance that was the largest since near the major bear market low in 2002. The latest NYSE short interest data figures show a meaningful increase in short interest in the already heavily-shorted and beaten up financials and retailers. If I were one of the many bears that increased short positions meaningfully right near the lows, I would be very concerned by recent market action. The fact that the dollar is rallying nicely on today’s economic data and increased expectations for Fed rate cuts bodes well for my belief that the despised currency has at the very least put in place an intermediate-term bottom. This is one of the main reasons that oil is trading so poorly and failed to maintain this morning’s large gains related to the pipeline explosion. I continue to believe any meaningful decline in the price of oil would be a much larger positive for the broad US stock market than most investors perceive. The 10-year swap spread is falling again today and has declined 16% over five days, which is a large positive. As well, the investment grade credit default swap index has declined 9% over the last week and the Goldman Sachs(GS) credit default swap has plunged 31% over the last five days, which are big positives. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain hunting and short-covering ahead of Fed chief Bernanke’s speech and Dell’s(DELL) earnings report tonight.