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

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Semi longs and Retail longs. I covered my (IWM)/(QQQQ) hedges and some of my (EEM) short 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 above average. Investor anxiety is slightly above average, despite stock gains. Today’s overall market action is very bullish. The VIX is falling 1.7% today, but remains high at 25.2. The ISE Sentiment Index is a below average 100.0, but the total put/call is a below-average .88 today. Tech, retailers, financials, homebuilders and commodities are substantially outperforming today. Market-leading stocks are especially strong. The market’s reaction to the news is always much more important than the actual news. Asian indices fell 2-3% last night and European bourses closed about 1.5% lower today. The CPI exceeded estimates, credit market angst is relatively high and oil is rising to $100.75/bbl., yet the major averages are solidly higher. This is another trading day that illustrates how much bad news is already factored into US stock prices at current valuations. Weekly retail sales rose .7% this week versus a .6% gain the prior week and a .5% gain two weeks ago. Sales are still sluggish, but headed in the right direction. Nikkei futures indicate an +220 open in Japan and DAX futures indicate an +108 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, less economic pessimism, constructive Fed commentary and short-covering.