Stocks Higher into Final Hour on Falling Commodity Prices, Diminishing Credit Market Angst, Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Gaming longs, Internet longs, Biotech longs and Software longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is bullish as the advance/decline line is higher, most sectors are rising and volume is around average. Investor anxiety is around average. Today’s overall market action is bullish. The VIX is falling 6.2% and remains above average at 17.88. The ISE Sentiment Index is below average at 127.0 and the total put/call is slightly below average at .84. Finally, the NYSE Arms has been running above average most of the day and is currently 1.11. The AAII % Bulls plunged this week to 31.4% and the % Bears jumped to 45.8%, which is a large broad market positive. The Citigroup US Economic Surprise Index is rising to -11.0 today, up from -100 in March. As well, the EU Index and Japanese Index are still below the US at -26.70 and -26.50, respectively. The US dollar continues to trade very well. The 10-year yield is rising another 8 basis points today, however the 10-year TIPS spread has declined 10 basis points over the last few days to 2.49%, which indicates the rise in the 10-year yield is more a function of diminishing economic worries rather than an increase in inflation expectations. Oil is plunging today despite the large US crude oil inventory drawdown. This is likely due to the fact that US imports of oil are falling as demand declines. The Baltic Dry Index has fallen 4.5% over the last five days. The Bloomberg Base Metals Spot Index is falling another 1.5% today and is down 15.4% since March 6^th. The S&P Goldman Agriculture Spot Index is falling another 1.7% today, dropping below its 200-day moving average, and has plunged 24.2% since February 27^th. We should begin to see meaningfully lower Prices Paid economic data over the coming months and declining inflation expectations as a result. The European Financial Sector Credit Default Swap Index is falling 3.77 basis points today to 66.96 basis points. This is down from 78.0 basis points just 3 days ago. Nikkei futures indicate a +125 open in Japan and DAX futures indicate a +54 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic pessimism, falling energy/food prices and diminishing credit market angst.