Stocks Slightly Lower into Final Hour on Year-end Profit-taking

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer 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 very light. US stock short interest is just off all-time highs, US stock mutual funds have seen outflows for months and the sentiment of the herd is very pessimistic. In fact, herd sentiment has never been worse in US history with the DJIA making record highs almost weekly. With all the many bears and even many bulls calling for a pullback in January, I wouldn’t be surprised to see stocks start the new year off with a very strong upwards bang after a couple more consolidation days as the anticipated decline fails to materialize and investors jump back on before getting left too far behind again. The S&P 500 is finishing the year with about a 15.5% total return, slightly above my early year prediction of a 15% total return. I expect US stocks to trade modestly higher into the close from current levels on more economic optimism and short-covering.