Stocks Mostly Higher into Final Hour as DJIA Approaches 12,000

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Telecom longs and Retail longs. I took profits in my (EEM) short, added to my (LVLT) long and took profits in a couple of trading longs, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, sector performance is mixed and volume is about average. The inflation component of this morning's confidence report, which measures consumers' expectations for inflation over the next year fell to 2.9% vs. expectations of a 3.1% gain the prior month. This is down from a cycle high of 4.6% in October 2005. Consumers are expecting the lowest inflation over the next 12 months since April 2005. This is significant considering inflation expectations are a large component of inflation itself. The bears' attempts to ingrain problematic inflation into consumers' psyches appear to have failed at this point. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, earnings optimism and investment manager performance anxiety.