Stocks Higher into Final Hour on Less Economic Pessimism, Falling Energy Prices

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Software longs and Retail longs. I have not traded 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 below average. Investor anxiety is about average. Today’s overall market action is bullish, considering recent gains. Fed fund futures now imply a 26% chance for a 50 basis point fed funds rate cut at tomorrow’s meeting, which is down from a 40% chance one week ago. While a 25 basis point fed funds rate cut seems likely now, given recent events, I suspect the odds of a 50 basis point cut are higher than the market perceives. Moreover, I believe a 50 basis point cut in the discount rate is likely. (LTD) saw notable insider buying over the last week. The Yale Crash Confidence Index for Individuals(the lower the index goes the more worried individuals are about a crash) just hit a record low last month, taking out the low seen in November 2002, which came right near the major bear market bottom in October 2002. This gauge of investor fear goes back to October 1989. This is just more evidence of the current “US negativity bubble,” in my opinion. Corporate insider activity remains exceptionally bullish. I expect US stocks to trade mixed into the close from current levels as less economic pessimism and lower energy prices offsets profit-taking and declining odds for a 50 basis point rate cut tomorrow.