Stocks Soaring into Final Hour on Bernanke Comments, Buyout Speculation, Lower Energy Prices, Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical 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 positive today as the advance/decline line is higher, sector performance is mostly positive and volume is heavy. Investor anxiety is high again, despite today’s gains. Today’s overall market action is bullish. The total put/call hit a high 1.23 again and the ISE Sentiment Index hit a depressed 82.0 this morning. The TED spread is dropping another 7 basis points today to 115 basis points, the lowest level since November 1. Moreover, the 30-day asset backed commercial paper yield is plunging another 18 basis points today to 4.34%, the lowest since December 2005. Given today’s news, I am surprised the major averages aren’t rising more than they are. Bear complacency is extraordinarily high. While I am not predicting it, I believe Bernanke set the stage for a rate cut before the January 29 meeting with the wording of his statements today. I suspect the Fed will no longer be perceived as being “behind the curve” over the coming weeks. As well, the acquisition of Countrywide(CFC) by Bank of America(BAC) would be a huge positive for the broad market. An eventual acquisition by another suitor of Washington Mutual(WM) is also likely, in my opinion. Today’s news and market action continues to be indicative of another meaningful stock market bottom. Illumina Inc.(ILMN) is jumping 16% today to another record high. I remain long the stock and still see further substantial upside from current levels. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices, diminishing credit angst, less economic pessimism and bargain hunting.