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

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Semi longs, Computer longs, Internet longs and Biotech longs. I covered some of my (EEM) short and all of my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive today as the advance/decline line is higher, almost every sector is rising and volume is above average. Investor anxiety is slightly above average. Today’s overall market action is bullish. Oil is falling again today despite T.Boone Pickens call that it would hit $100/bbl. within six months and a larger than expected crude inventory drawdown. This is mostly the result of the large dollar rally today. Also, Sanford C. Bernstein put out a report today saying that Saudi Arabia’s Ghawar field, the world’s largest, doesn’t face rapid declines in production as forecast by peak oil theorists. The US dollar continues to trade as if at the very least an intermediate-term bottom is firmly in place, which should continue to pressure commodity prices. Despite today’s mostly positive economic data, fed fund futures still imply a 44% chance for a 50 basis point cut at the meeting next week. I still think it is very possible, but want to see Friday’s jobs report to have more conviction. The 32% surge in refi applications this week is a big positive. If mortgage rates were to continue to fall, which I expect, strong refi activity would provide a cushion to consumer spending and the housing market, in general. I expect US stocks to trade mixed-to-higher into the close from current levels on less economic pessimism, bargain-hunting, lower energy prices and short-covering.