Stocks Mostly Higher into Final Hour on Short-Covering, Diminishing Credit Market Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Biotech longs, Alternative Energy longs and Medical longs. I added to my (PWR) long and took some profits in another long, thus leaving the Portfolio 100% net long. The overall tone of the market is bullish as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is about average. Today’s overall market action is bullish. The VIX is falling 3.5%, but remains above average at 19.4. The ISE Sentiment Index is below average at 138.0 and the total put/call is about average at .92. Finally, the NYSE Arms has been running about average most of the day and is currently .88. Considering the Consumer Confidence report, Microsoft’s disappointing earnings report and the surge in oil, today’s market performance is more impressive. Market action today sets the S&P 500 up nicely for a break above the technically important 1,400 level next week, which should lead to another surge in stocks as some of the bearish herd scrambles to increase market exposure. The fact that yields on commercial-mortgage backed securities are plunging is a major positive. Soaring spreads had been a source of much angst with respect to the prospects for commercial real estate. According to Intrade.com, the odds of a US recession beginning this year have declined to 51.5% from 79% last month. Finally, the European Financial Sector Credit Default Swap Index is dropping another 7.3% today to a new low, which is also a big positive. The (XLF) is near session highs, rising 1.7%. Nikkei futures indicate an +157 open in Japan and DAX futures indicate an +94 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, US dollar strength and diminishing credit market angst.