Stocks Slightly Lower into Final Hour on Healthy Profit-taking

BOTTOM LINE: The Portfolio is lower into the final hour on losses in my Semiconductor longs, Telecom longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is modestly negative as the advance/decline line is lower, most sectors are declining and volume is modestly above average. The Johnson Redbook same-store sales index rose 3.4% year-over-year this week vs. a 3.5% rise the prior week. The long-term average is a gain of about 2.9%. There is still no evidence, in my opinion, that a meaningful slowdown in consumer spending is underway, even as many investors continue to worry about such a decline. Housing sales and net home equity extractions have been falling substantially for a year. The Case-Shiller housing futures are still projecting about a 5% decline in the average home price over the next seven months. Considering the average house has appreciated over 50% during the last few years with record high U.S. home ownership, this would be considered a "soft landing." I continue to believe the overall negative effects of housing on the U.S. economy are currently being exaggerated by the bears. I still expect holiday shopping sales to exceed estimates. I believe a healthy labor market, falling energy prices, relatively low long-term interest rates, decelerating inflation, a rising stock market and less irrational pessimism will continue to more than offset slowing housing over the intermediate term. The Morgan Stanley Retail Index (MVRX) has soared 22.8% in about 13 weeks vs. a 11.2% gain in the S&P 500 over the same timeframe. I still expect continued outperformance by the sector through year-end. I expect US stocks to trade modestly higher into the close from current levels on short-covering, strong profit reports and investment manager performance anxiety.