Stocks Higher into Final Hour on Short-Covering, Lower Energy Prices, Bernanke Comments

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Gaming longs, Software longs, Semi longs, Medical longs and Biotech longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 4.8% today, but remains high at 26.3. The ISE Sentiment Index is a very low 80.0 and the total put/call is an above-average 1.06. The JPMorgan G-7 Currency Vix is falling 4% today and appears to be rolling over, which is also positive. Fed Chairman Bernanke said earlier today that inflation won’t prevent any needed cuts and that he is “ready to move if he needs to move.” He was also “very upbeat” about the prospects for avoiding recession. He said he sees very slow growth this quarter and just slow growth next quarter, before growth picks up in the second-half of the year. Fed fund futures now imply an 82% chance for a 50 basis point rate cut at the upcoming meeting and an 18% chance for a 75 basis point cut. It may just be profit-taking, but today’s oil/gold weakness is noteworthy considering emerging market stock gains and US dollar weakness. Many investors are worried about how much Shanghai re-opens lower tonight after its holiday break. This could be one of the reasons for today’s commodity weakness and above-average investor angst readings, despite nice stock gains. I still sense very few investors believe the lows for the major averages are in, which is a large positive. One of my longs, Nuance Communications(NUAN) is jumping 13% today on large volume after reporting solid 1Q results and boosting 2Q revenue guidance. I plan to add to this long position on any meaningful pullback from current levels and still see significant upside in the shares over the intermediate-term. The only real negative I see in today’s action is the relative weakness in some large-cap leaders. However, many of these stocks have posted pretty good gains over the last few days so I am not reading too much into it at this point. Nikkei futures indicate an +230 open in Japan and DAX futures indicate a +13 open in Germany. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, lower energy prices, constructive Fed comments and short-covering.