Stocks Surging into Final Hour on Lower Energy Prices, Buyout Speculation, Short-Covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Software longs, Biotech longs, Computer longs and Internet longs. I covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short today, thus leaving the Portfolio 100% net long. The tone of the market is bullish as the advance/decline line is substantially higher, most sectors are rising and volume is below average. Investor anxiety is about average. Today’s overall market action is bullish. The VIX is falling 7.3%, but remains above average at 18.0. The ISE Sentiment Index is below average at 120.0 and the total put/call is about average at .86. Finally, the NYSE Arms has been running around average most of the day and is currently .93. I said on Friday that I thought a reversal lower in oil is all that stands in the bulls way of another meaningful market surge higher. Oil trades heavy today for the first time in awhile and is near session lows. A meaningful continuation of oil’s decline should help boost the S&P 500 up through its 200-day moving average over the coming weeks. Market-leading growth stocks continue to trade very well. Retail stocks are especially strong. The action in (FDX) and (MBI) shares, considering the news, is also a very positive indication for the broad market. Moreover, the TED spread is falling another 11 basis points today to .89 basis points, which is the lowest since February 20^th and down from 204.0 on March 19^th, which is a significant positive. The 30-day asset backed commercial paper yield is down another 8 basis points to 2.55%, the lowest since January 2005 and down from 6.18% in December of last year. The European Financial Sector Credit Default Swap Index is falling 3.06 basis points to 64.06 basis points. The Eurozone Economic Surprise Index has fallen to -31.20, down from 79.0 in late March. Reports of a Hewlett-Packard(HPQ) deal for Electronic Data Systems(EDS) are also a major positive for the broad market. Nikkei futures indicate a +112 open in Japan and DAX futures indicate a +66 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, lower energy prices, diminishing credit market angst, buyout speculation and bargain hunting.