Stocks Higher into Close on 50 Basis Point Fed Rate Cut

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Retail longs, Internet longs and Biotech longs. I added to my (GILD) long and took profits in a trading long today, thus leaving the Portfolio 75% net long. The overall tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is heavy. Investor anxiety is slightly above average. Today’s overall market action is very bullish. Technology and financial shares are especially strong. The financials ability to build on recent gains despite news that a bond insurer will be downgraded today is very impressive. I suspect this is mainly due to the fact that it is very likely the most heavily shorted sector in US history. I also suspect the many bears will begin to switch their arguments again to a focus on inflation and away from a recession over the coming months. We will also likely hear more stagflation talk even though data are no where near stagflation levels. There remain a very large number of investors still on the sidelines who believe a complete retest or new market lows are a certainty. I continue to believe this should keep pullbacks in the major averages relatively mild and short-term in nature. The VIX is falling 5.0% today, but remains high at 26.0. Nikkei futures indicate an +300 open in Japan and DAX futures indicate an +125 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism and bargain-hunting.