Stocks Higher into Final Hour on Falling Oil, Short-Covering, Diminishing Credit Angst, Less Financial Sector Pessimism

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Biotech longs, Gaming longs, Retail longs and Commodity shorts. I covered all my (IWM)/(QQQQ) hedges, added to my (AAPL) long and covered some of my (EEM) short today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, sector performance is mostly positive and volume is above average. Investor anxiety is about average. Today’s overall market action is mildly bullish. The VIX is falling 2.86% and is still above-average at 22.39. The ISE Sentiment Index is about average at 151.0 and the total put/call is around average at .91. Finally, the NYSE Arms has been running high most of the day and is currently 1.22. The Euro Financial Sector Credit Default Swap Index is rising .68% today to 83.56 basis points. This index is up from a low of 52.66 on May 5^th, but down from 129.46 basis points on March 20^th. The North American Investment Grade Credit Default Swap Index is -1.0% today at 137.0 basis points. The TED spread is falling 6.94% to 1.28. The 10-year TIPS spread, a good gauge of inflation expectations, has dropped 24 basis points in 11 days to 2.40% on the fall in commodities. Considering the earnings disappointments yesterday after the close, today’s action is even more bullish. Financials continue to trade very well, notwithstanding recent gains, as evidenced by Wachovia’s(WB) 10% jump on its poor report. The (XLF) is 3.04% higher on the day. The (XLF) is up 23.7% in 7 days. Oil continues to trade poorly and now the US dollar appears to be beginning another surge. The Transport Index is soaring 3.3% on crude’s decline and is now back above its 50-day moving average. Moreover, the S&P Goldman Ag Spot Price Index is falling another 1.0% today and is now slightly below its 200-day moving-average. The last time this index broke down through this technical level in a convincing way was June 2004. I continue to see much more upside for the broad US stock market if in fact the commodity bubble is finally bursting. Apple(AAPL) is falling 5% today after investors were disappointed with its guidance. I suspect today will mark an excellent entry point for both short and long-term investors in the shares. I still see significant upside in Apple from current levels. Weekly retail sales rose 2.7% this week. This is the best level since September 2007, despite record gas prices and the diminishing effects of the stimulus checks. Retail sales should move back above long-term average levels over the intermediate-term as gas prices fall. Nikkei futures indicate an +100 open in Japan and DAX futures indicate an +50 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, diminishing credit market angst, short-covering, bargain-hunting and less financial sector pessimism.