Stocks Higher into Final Hour on Less Economic Pessimism, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Gaming longs and Retail longs. I covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short this morning, thus leaving the Portfolio 75% net long. The overall tone of the market is mildly positive as the advance/decline line is slightly higher, most sectors are gaining and volume is heavy. Investor anxiety is high. Today’s overall market action is mildly bullish. The VIX is falling 4.3% today, but remains high at 28.0. The ISE Sentiment Index is a below average 106.0 and the total put/call is hitting an above average 1.11. The fact that the market has recouped morning losses despite negative news today is a large positive. Cisco(CSCO) disappointed and it is unch., while many other tech stocks are rising. Moreover, many retailers reported disappointing same-store-sales, yet the Morgan Stanley Retail Index is surging another 4%. Oil is higher, but airlines are rising another 3%. Finally, financials are 1% higher notwithstanding more scary credit-related news and rhetoric. The US Dollar continues to trade as if at the very least an intermediate-term bottom is in place as the ECB finally acknowledged a cut may be in order, which is another large positive. As well, the 10-year T-note is trading as if an intermediate-term top is in, which may indicate subsiding economic pessimism. Fed funds futures imply an 88% chance for another 50 basis point cut and a 12% chance for a 75 basis point cut at the upcoming meeting. (WMS), one of my longs, is hitting a new high today, which is very impressive considering recent market turbulence. I still see substantial upside in the shares over the longer-term as server-based gaming takes hold. Nikkei futures indicate an unch. open in Japan and DAX futures indicate a +80 open in Germany. I expect US stocks to trade modestly higher into the close from current levels on less economic pessimism, bargain-hunting and short-covering.