Stocks Mostly Higher into Final Hour on Reveral Lower in Oil, Less Economic Pessimism, Diminishing Credit Market Angst

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Software longs, Gaming longs, Computer longs, Medical longs and Internet longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are rising and volume is about average. Investor anxiety is slightly above average. Today’s overall market action is bullish. The VIX is falling 1.9% and remains above average at 20.82. The ISE Sentiment Index is slightly below average at 141.0 and the total put/call is slightly above average at .92. Finally, the NYSE Arms has been running about average most of the day and is currently .92. Oppenheimer said today that the prevailing crude oil market fundamentals should have resulted in oil prices at or below last year’s level of around $65/bbl., but instead, oil prices soared by more than 100% over the last year. Oppenheimer believes the government’s inability, or unwillingness, to curb rampant speculation has significantly contributed to the current oil bubble. I completely agree. On the positive side, the Euro Financial Sector Credit Default Swap Index is falling 3.4% today to 74.0 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 falling 5.9% today to 107.73, which is also a large positive. Lehman Brothers(LEH), the source of much recent angst, is jumping another 6.2% today. Leading growth stocks are especially strong again today, substantially outperforming the broad market and value stocks. Corporate insider activity remained bullish again last week. (HD), (CHK), (MAS), (VHI), (JAH), (EPD), (DNR), (GE), (DISCA), (HTBK) and (VRX) all saw notable insider buying in their shares last week. Hedge funds remain positioned net short equities. As I said on Friday, given the recent parabolic surge in short interest, positive action in the financial sector and spike in bearish sentiment, I suspect this rally has some legs, as long as commodities behave. Nikkei futures indicate an +51 open in Japan and DAX futures indicate an +26 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on falling energy prices, less economic pessimism, bargain-hunting and short-covering.