Stocks Finish at Session Highs, Reversing Losses on Heavy Volume

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Stocks Rebounding into Final Hour on Short-Covering, Bargain-Hunting, Reversal Lower in Oil

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Computer longs and Biotech longs. I added to my QQQQ/IWM hedges and then covered all of them today, thus leaving the Portfolio 100% net long. The overall tone of the market is neutral today as the advance/decline line is lower, sector performance is mostly positive and volume is heavy. Investor anxiety is high again. Today’s overall market action is bullish. This is the type of action I would expect to see at the very least at a tradable bottom. The (XLF) has turned higher on the day and market leading stocks are gaining significant upside traction. It has become way too easy to make money on the short side, which also usually indicates a vigorous move higher is close at hand. I expect US stocks to trade higher into the close from current levels on short-covering, lower energy prices, diminishing credit angst and bargain hunting.

Today's Headlines

Bloomberg:
- Mortgage applications in the US jumped last week, led by a surge in refinancing as long-term interest rates fell to the lowest level in two years.
- Countrywide Financial Corp.(CFC) said home loans in December were a better-than-forecast $24 billion. “Our fourth quarter ended with a number of positive operational trends,” President and COO Sambol said.
- Crude oil is unch., falling more than $1 bbl. from session highs, on worries over slowing demand, a rising dollar and rising gasoline supplies.
- Federal Reserve Bank of St. Louis President William Poole said risks to economic growth are more “uncertain” than inflation.
- QLogic Corp., whose computer-networking storage products are used by Hewlett-Packard(HPQ) and Sun Microsytems(JAVA), rose the most since October in US trading after sales and earnings exceeded its forecast.
- DuPont Co.(DD) climbed the most in five years in NY trading after it said profit gained last year and that 2008 earnings will be higher than previously forecast.

Wall Street Journal:
- Key Union May Back Obama Run.
- Faced with recession fears, the White House is considering tax rebates for individuals to encourage spending and tax breaks for businesses to encourage investment.
- SEC Provides Incentive For Mortgage Companies To Renegotiate Loans.
- NYSE Euronext(NYX) is the frontrunner to acquire the American Stock Exchange. A deal may be announced as soon as this month that values the exchange at $350 million.

NY Times:
- Clinton’s Emotional Moment May Have Won Over Voters.

Washingtonpost.com:
- New York Presses To Deploy More Bioweapons Sensors.

Bear Radar

Style Underperformer:

Small-cap Growth (-.9%)

Sector Underperformers:

Coal (-4.88%), Construction (-4.51%) and Airlines (-4.53%)

Stocks Falling on Unusual Volume:

PZE, CYT, NFP, CTL, CMI, WCBO, HELE, VRUS, LYTS, GRMN, AKNS, VSAT, ASTE, LOOP, ISIS, CBEY, AIXG, ADVS, UEIC, SIRF, EPAY, NCT, TIE and AIXG

Bull Radar

Style Outperformer:

Large-cap Growth(+.92%)

Sector Outperformers:

Drugs (+1.62%), Computer Hardware (+1.48%) and Software (+1.24%)

Stocks Rising on Unusual Volume:

RBN, RC, TXI, TNE, PPDI, APOL, REXX, SUNH, PRFT, QLGC, SFLY, CPLA, GHDX, CVCO, BMRN, MATK, FWRD, SHPGY, OSIP, PERY, ZUMZ, ULTA, NILE, ICFI, ROS, CHA, AZN, MYL, REP, SFD, BMA, PSA and UTX

Economic Releases

- None of note