Stocks Soaring into Final Hour on Diminishing Credit Market Angst, Short-Covering, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Alternative Energy longs, Gaming longs and Medical longs. I covered some of my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 75% 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 heavy. Investor anxiety is above-average despite large gains in the averages. Today’s overall market action is very bullish. The VIX is falling to 27.5, but remains high. The ISE Sentiment Index is a very low 66.0 and the total put/call is a high 1.17 again today. Finally, the NYSE Arms is a below average .61. The TED spread is falling 17 basis points to 141 basis points and the 10-year swap spread is falling 1.70 basis points to 78.25 basis points over Treasuries. The 3-month T-bill yield is jumping 13 basis points to 1.46%, which is also a big positive. The G-7 Currency Volatility Index is falling 3.5% to 11.2. We are seeing the first meaningful decline in credit market angst today in quite some time. Moreover, the US dollar is rising on the news, which is a major positive. The (XLF) is trading near session highs, rising 4.7%. Bear Stearns(BSC) is actually 1.7% higher now, after this morning’s sharp sell-off. Given the massive short positions in many stocks, historic bearish investor sentiment, very bullish corporate insider sentiment, large cash position at many funds and today’s meaningful decline in credit market angst, I suspect this rally has legs. Google(GOOG) received EU approval today for its DoubleClick acquisition and is almost 6% higher for the day. I continue to believe the recent sell-off was way overdone and the stock will trade substantially higher by year-end. Nikkei futures indicate an +300 open in Japan and DAX futures indicate an +60 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting and diminishing credit market angst.