Stocks Sharply Higher into Final Hour on Falling Inflation Worries, Short-covering and Bargain-hunting

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Computer longs, Medical longs and Retail longs. I covered my (IWM) and (QQQQ) hedges today, thus leaving the Portfolio 100% net long. The tone of the market is very positive as the advance/decline line is substantially higher, almost every sector is rising and volume is about average. NYSE short interest as a percentage of total shares outstanding hit 2.5% last month. This is an all-time record high. This is also up from a low of 1.0% in Sept. 1999. The negativity bubble further inflates. I suspect today’s move is the confirmation the few remaining bulls have been waiting for. My intermediate-term broad market technical models are improving rapidly. The 10-year yield is near session lows of 4.92% despite today's sharp stock market advance. Even a bad CPI report tomorrow will not likely boost the yield meaningfully above 5%. The ISE Sentiment Index is still a depressed 93, which is a positive. Homebuilders are up 2.4% to session highs despite today's bad housing data. I expect US stocks to trade modestly higher into the close from current levels on short-covering, bargain-hunting, lower long-term rates and declining energy prices.