Stocks Soaring into Final Hour on Lower Energy Prices, Stronger US Dollar, Less Economic Pessimism

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs, Biotech longs, Medical longs, Retail longs and Alternative Energy longs. I have not traded today, 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 above average. Investor anxiety is above average. Today’s overall market action is very bullish. The VIX is falling 7.9%, but remains above average at 19.2. The ISE Sentiment Index is low at 93.0 and the total put/call is above average at .98. Finally, the NYSE Arms has been running about average most of the day and is currently .78. As I said yesterday, investors’ initial negative reaction to the 25 basis point fed funds rate cut and less-hawkish-than-expected FOMC commentary seemed overdone. Today the US dollar is surging, which is further pressuring commodity prices and boosting the broad stock market. I still think the dollar has seen its lows for at least this year and probably much longer. I heard a trader on CNBC say recently that global oil production was capped at 85 million barrels per day, even though global oil production is currently a new record 87.6 mbpd and has been above 85 mbpd for quite some time. I also heard someone say today that US oil demand has been rising for 30 years, which is also an incorrect statement. These are just two of the many false statements I hear from oil bulls regarding the current state of the fundamentals for the commodity. The TED spread is falling 9 basis points today to 139 basis points, which is the lowest since April 8^th. The US dollar-based Libor rate is falling 7 basis points today to 2.78% and appears to be rolling over again. This rate, which many mortgage rates are tied to, has plunged from 5.73% in September of last year. The 30-day asset backed commercial paper yield is falling 11 basis points today to 2.83% and also appears to be rolling over again. The European Financial Sector Credit Default Swap Index is falling another 3.16 basis points today to 59.10. This is another new low and down from 131.41 on March 21, which is also a big positive. Nikkei futures indicate an +314 open in Japan tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, lower energy prices, technical buying and less economic pessimism.