Stocks Soaring into Final Hour on Short-Covering, Diminishing Pessimism, Bargain-Hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Biotech longs, Alternative Energy longs and Gaming longs. I added to my (ISRG) long and added to an existing short 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 above average. Investor anxiety is about average. Today’s overall market action is very bullish. The VIX is falling 2.8%, but remains above average at 19.8. The ISE Sentiment Index is a below average 120.0 and the total put/call is below average at .77. Finally, the NYSE Arms has been running below average most of the day and is currently .76. Yesterday before Google(GOOG) reported, I said that I thought there are few stocks in the world with Google’s massive opportunities, current market dominance and cheap valuation. I still consider the stock cheap, given its fundamentals, even after today’s 90 point rise. I suspect Google's stock will be substantially higher than current levels at year-end. Another one of my long positions, Intuitive Surgical(ISRG) is falling 16.1% today on its earnings report. I think this is a severe overreaction to conservative guidance. Since the stock’s IPO, management has given conservative guidance the overwhelming majority of the time. I still believe this company has the potential to be one of the greatest growth stocks over the coming years and I will accumulate more shares on any further meaningful weakness. The 10-year swap spread, which had been inching higher, is falling 2.6 basis points today to 69.2 basis points over Treasuries. This is down from a high of 92.75 in early March. The G-7 Currency Volatility Index is falling 3.5% today, breaking below its 50-day moving average, but remains high at 11.3. Finally, the 3-month T-bill yield is rising 7 basis points today to 1.35%, which is also a positive. This is up from a low of .39% during the later part of March. Nikkei futures indicate an +360 open in Japan and DAX futures indicate an +50 open in Germany on Monday. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism, less earnings pessimism and bargain hunting.