Stocks Soaring into Final Hour on Lower Energy Prices, Diminishing Credit Market Angst and Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Medical longs, Biotech longs, Retail longs, Computer longs and Alternative Energy longs. I have not traded today, thus leaving the Portfolio 100% net long. The overall tone of the market is very bullish as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. Investor anxiety is above average, despite recent gains. Today’s overall market action is very bullish. The VIX is falling 3.9%, but remains high at 25.6. The ISE Sentiment Index is a low 110.0 and the total put/call is a below-average .8. Finally, the NYSE Arms has been around average most of the day and is currently .9. Growth stock leaders are especially strong today, rising 4-6%. I continue to believe true growth stocks are in the early stages of a multi-year period of outperformance. On Thursday after the close, the NYSE reported short interest jumped another 7.0% to a record 16.01 billion shares. Short interest on the exchange is up an astonishing 97.7% over just the last two years. Oil continues to trade poorly as the US dollar gains strength. I suspect a close below $100/bbl. at week’s end is likely. The 10-year TIPS spread, a good gauge of inflation expectations, is falling another basis point today to 2.31%, which is down 37 basis points in just one week. Fed fund futures now imply a 74.0% chance for a 25 basis point cut at the upcoming April 30^th meeting, up from 44.0% last Thursday. Futures now imply a 26.0% chance for a 50 basis point cut, down from 56.0% last Thursday. I think the Fed has finally found the right mixture of actions to achieve a firmer dollar, lower inflation expectations, higher stock prices and less credit market angst. This is a huge positive. The Shanghai Composite fell another 4.5% last night and is down 41% from its high of last October. As well, Vietnam fell another 4.5% and is down 53.2% from its all-time high. I still believe developed markets, especially the US, will significantly outperform emerging markets over the next five years. Nikkei futures indicate an +250 open in Japan and DAX futures indicate an +78 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, diminishing credit market angst and falling energy prices.