Stocks Higher into Final Hour, Boosted by Tech Shares

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Software longs, Biotech longs, Retail longs, Semi longs and Medical longs. I added to my (ILMN), (AMSC) and (GILD) longs and took some profits in a few other longs today, thus leaving the Portfolio 100% net long. The overall tone of the market is mildly positive today as the advance/decline line is slightly higher, most sectors are rising and volume is about average. Investor anxiety is above average again. Today’s overall market action is bullish. The total put/call hit a high 1.25 and the ISE sentiment index hit a depressed 80.0 today, as retail option traders remain skeptical of the chances for a year-end rally, which bodes well for further gains. Despite Morgan Stanley’s(MS) writedown and S&P’s downgrades of some bond insurers, the (XLF) is .8% higher on the day, which is also a big positive. Moreover, the 30-day asset backed commercial paper yield is falling another 6 basis points today and is down 42 basis points in a week. Despite a 5 basis point drop in the 10-year yield today, the dollar is firm, which bodes well for further dollar strength. Oil will likely begin another move lower at the first of the year after year-end mark-ups by investment funds end, the dollar strengthens more, supply exceeds estimates and global demand continues to decelerate. The Fed’s Lacker said today that he sees growth of 2-2.25% next year. I agree with his prediction. I continue to believe that as we move into the first quarter of next year without seeing a further meaningful deterioration in economic data that stocks will rise substantially from current levels as the recession trades are taken off. As I said yesterday, modestly below trend economic growth, low interest rates and decelerating inflation should prompt another explosive move higher in true “growth” stocks. This may already be beginning as many leading growth stocks are trouncing the major averages today. I expect US stocks to trade modestly higher into the close from current levels on diminishing credit market angst, bargain-hunting and short-covering.