Stocks Higher into Final Hour on Plunge in Oil, Less Economic Pessimism, Reveral Higher in Financials

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Alternative Energy longs, Medical longs, Biotech longs and Software longs. I added to my (WMS) and (NUAN) longs and took some profits in another long today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is mildly higher, most sectors are rising and volume is above average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 4.6% and remains above average at 21.18. The ISE Sentiment Index is below average at 115.0 and the total put/call is above average at 1.06. Finally, the NYSE Arms has been running around average most of the day and is currently .85. The Euro Financial Sector Credit Default Swap Index is rising 4.5% today to 80.0 basis points. This is up from a low of 52.66 on May 5^th, but still down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is rising 4.4% today to 113.48. The TED spread is rising 2.2% today to .91 basis points. On the positive side, the (XLF) has trimmed losses meaningfully as it attempts to push into positive territory. Transport, tech and medical tech shares are very strong today with many posting 3%+ gains. Growth shares are substantially outperforming value stocks again today. Over the last five days, small-cap growth stocks are 3.4% higher, while large-cap value shares are .4% lower. I continue to believe that growth stocks will outperform value for several more years. The AAII % Bulls rose to 32.3% and the % Bears fell to 45.7%. Overall investor pessimism remains intense. A convincing break below $130/bbl. in oil would likely lead to a more broad-based and powerful rally. Right now, the overwhelming majority of investors think any sharp decline in oil will be met with a sharp rise the very next day. A break below $118/bbl. would likely spur a significant rally in the broad US stock market. Nikkei futures indicate an +155 open in Japan and DAX futures indicate an +43 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, lower energy prices, less economic pessimism and short-covering.