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

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Biotech longs, Gaming longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is mildly bullish as the advance/decline line is higher, most sectors are rising and volume is below average. Investor anxiety is slightly above-average. Today’s overall market action is mildly bullish. The VIX is falling .2% and remains high at 25.7. The ISE Sentiment Index is a below average 135.0 and the total put/call is slightly above average at .98. Finally, the NYSE Arms has been below average most of the day and is currently .78. Considering the losses in Asia overnight, today’s action is more impressive. The Shanghai Composite fell another 3.0% last night and is now down -43.3% from October’s high. As well, India’s Sensex Index fell another 4.4% and is down -26.2% from October highs. The DJIA is down -12.3% from its all-time high set in October of last year. Given how long oil hedge funds are, today’s decline isn’t that surprising as there is probably some quarter-end profit-taking going on. However, a continuation of today’s oil decline over the next few days and a convincing break back below $100/bbl. may indicate the beginning of a more meaningful decline. Psychology for commodities does appear to be changing. Two of my longs, (GILD) and (ILMN), are making new record highs today. I would still be a buyer of both on pullbacks and still see substantial upside in the shares of both companies from current levels. Nikkei futures indicate an +200 open in Japan and DAX futures indicate an +77 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices and bargain-hunting.