Stocks Surging into Final Hour on Diminishing Bond Insurer Angst, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Software 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, almost every sector is rising and volume is about average. Investor anxiety is slightly above average, despite gains in the major averages. Today’s overall market action is bullish. The VIX is falling 2.5% today, but remains relatively high at 23.5. The ISE Sentiment Index is a below average 111.0 and the total put/call is a slightly above-average .95 today. Finally, the NYSE Arms has been running above-average all day and is currently 1.05. (ILMN) is hitting a new record high today. The stock is extended short-term, but I still see substantial upside in the shares over the intermediate-term and would use any meaningful pullback to add to my long position. NYSE short interest surged 4.8% during the first two weeks of February, according to the exchange, to a new record high of 14,370,000,000 shares. NYSE short interest is moving in a parabolic fashion as the "US negativity bubble" continues to inflate, rising a mind-boggling 80% over just the last year. NYSE short interest is now more extended from its four-month moving-average than at any other time since record keeping began 17 years ago. This is a huge positive for the longer-term outlook for US stocks, in my opinion. (ABK) and (MBI) are rising 16% and 22%, respectively, on today’s S&P news. I am actually surprised the (XLF) isn’t up more on the report, however it is trading at session highs. The S&P 500 is currently breaking out to the upside of the wedge that so many technical traders have been focusing on of late. This should give this rally some legs. Nikkei futures indicate an +65 open in Japan and DAX futures indicate an +48 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short covering, diminishing bond insurer angst and bargain hunting.