Stocks Mostly Higher into Final Hour on Falling Commodity Prices, Lower Long-term Rates and Short-covering

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Semi longs, Retail longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is modestly higher, most sectors are rising and volume is below average. The Import Price Index for October fell 2.0% yesterday vs. estimates of a 1.0% decline and a 2.0% decline in September. Moreover, import prices fell 0.2% year-over-year. This is the first year-over-year decline since 2002 and it is down from a 9.9% increase in September 2005. Almost every widely followed measure of inflation is decelerating substantially. As the many U.S. stock market bears continue to pick and chose measures of inflation that suit their arguments, the 10-year yield, the best long-term predictor of inflation, moves ever lower. I remain long (TLT). I expect US stocks to trade modestly higher into the close from current levels on short-covering, performance anxiety, declining interest rates, lower energy prices and less irrational pessimism.