BOTTOM LINE: Overall, last week's market performance was bullish. The advance/decline line rose, almost every sector gained and volume was above average on the week. Measures of investor anxiety were mostly lower. The AAII percentage of Bulls rose to 41.33% this week from 38.94% the prior week. This reading is still below above-average levels. The AAII percentage of Bears fell to 38.0% this week from 41.59% the prior week. This reading is still well above average levels. The 10-week moving average of the percentage of Bears is currently 36.1%, an above-average level. The 10-week moving average of the percentage of Bears was 43.0% at the major bear market low during 2002. Moreover, the 50-week moving average of the percentage of Bears is 36.50%, a very high level seen during only two other periods in U.S. history.

I continue to believe steadfastly high bearish sentiment in many quarters is mind-boggling, considering the S&P 500's 17.7% rise in less than six months, one of the best August/September/October runs in U.S. history, the fact that the Dow made another all-time high today and that we are in the early stages of what is historically a very strong period for U.S. stocks after a mid-term election. Despite recent gains, the forward P/E on the S&P 500 is a very reasonable 16.2 due to the historic run of double-digit profit growth increases, which are poised to continue this quarter. Bears still remain stunningly complacent, in my opinion. As I have said many times over the last few months, every pullback is seen as a major top and every move higher is just another shorting/selling opportunity.

As well, there are many other indicators registering high levels of investor skepticism regarding recent stock market gains. The 50-day moving average of the ISE Sentiment Index just recently crossed above the 200-day moving average for the first time since November 2005. Nasdaq and NYSE short interests are just off record highs. Moreover, public short interest continues to soar to records, and U.S. stock mutual funds have seen outflows for most of the year, according to AMG Data Services. Finally, investment blogger bullish sentiment just hit another new low. There is still a high wall of worry for stocks to climb substantially from current levels as the public remains very skeptical of this bull market.

I continue to believe this is a direct result of the strong belief by the herd that the U.S. is in a long-term trading range or secular bear environment. There is still overwhelming evidence that investment sentiment by the general public regarding U.S. stocks has never been this poor in history, with the Dow registering all-time highs almost weekly. I still expect the herd to finally embrace the current bull market next year, which should result in another meaningful move higher in the major averages as the S&P 500 breaks out to an all-time high to join the Dow and Russell 2000. I continue to believe the coming bullish shift in long-term sentiment with respect to U.S. stocks will result in the "mother of all short-covering rallies."

The average 30-year mortgage rate rose 1 basis point to 6.12%, which is 68 basis points below July highs. I still believe housing is in the process of stabilizing at relatively high levels. Former Fed Chairman Alan Greenspan, current Fed Chairman Ben Bernanke and several current Fed members reiterated there belief recently that the “worst may well be over” for the housing slowdown. Mortgage applications surged 11.4% this week and continue to trend higher with the decline in mortgage rates. This is the second time in less than three months that mortgage applications have seen weekly double-digit percentage gains. The last time this happened was mid-2004. Moreover, the Mortgage Bankers Association said this week that the US housing market will “fully regain its footing” by the middle of 2007.

As well, housing inventories have been trending lower and homebuilding equities have been moving higher. The Housing Index(HGX) has risen 25.4% from July lows. The Case-Schiller housing futures have improved recently and are now projecting a 2.9% decline in the average home price over the next 6 months, up from projections of a 5.2% decline a couple of months ago. Considering the median house has appreciated over 50% during the last few years with record high US home ownership, this would be considered a “soft landing.” The overall negative effects of housing on the US economy and the potential for significant price drops are still being exaggerated by the bears in hopes of dissuading buyers from stepping in, in my opinion. Housing and home equity extractions have been slowing substantially for well over a year and have been mostly offset by many other very positive aspects of the US economy.

Home values are more important than stock prices to the average American, but the median home has barely declined in value after a record run-up, while the S&P 500 has risen 14.8% over the last year and 92.4% since the Oct. 4, 2002 low. Americans’ median net worth is still very close to or at record high levels, a fact that is generally unrecognized or minimized by the record number of market participants that feel it is in their financial and/or political interests to paint a bleak picture of America. Moreover, energy prices are down significantly, consumer spending remains healthy, unemployment is low by historic standards, interest rates are very low, inflation is below average rates, stocks are surging and wages are rising. The economy has created 644,000 jobs in the last four months. Challenger, Gray & Christmas reported recently that November job cuts were 22.7% lower than year-ago levels. As well, the Monster Employment Index hit another record high in November. The unemployment rate is a historically low 4.5%, down from 5.1% in September 2005, notwithstanding fewer real estate-related jobs and significant auto production cutbacks. Retail Sales ex autos for November rose the most since January. Consumer spending is still above long-term average levels and looks poised to remain healthy over the intermediate-term.

The Consumer Price Index for November rose 2.0% year-over-year, down from a 4.7% increase in September of 2005. This is substantially below the long-term average of around 3%. Moreover, the CPI has only been lower during 4 other periods since the mid-1960s. Many other measures of inflation have recently shown substantial deceleration. The Producer Price Index for October matched the largest decline in US history, falling 1.6% year-over-year. Most measures of Americans’ income growth are now more than twice the rate of inflation.

The benchmark 10-year T-note yield rose 4 basis points on the week on stronger economic data and diminishing recession worries. In my opinion, investors’ continuing fears over an economic “hard landing” are still misplaced, notwithstanding recent weak manufacturing data. Moreover, the ISM’s semi-annual forecast was released this week and gave an upbeat assessment expected manufacturing activity next year. The ISM Non-Manufacturing Index, which accounts for the vast majority of U.S. economic growth, rose to a very healthy 58.9 in November. Manufacturing accounts for roughly 12% of US economic growth, while consumer spending accounts for about 70% of growth. U.S. GDP growth came in at 1.1% and 0.7% during the first two quarters of 1995. The ISM Manufacturing Index fell below 50, which signals a contraction in activity, during May 1995. It stayed below 50, reaching a low of 45.5, until August 1996. During that period, the S&P 500 soared 31% as the P/E multiple expanded from 16.0 to 17.2. This was well before the stock market bubble began to inflate. As well, manufacturing was more important to US growth at that time. Stocks can and will rise as P/E multiples expand, even with more average economic and earnings growth. As I have said many times before, P/E multiple expansion is the bears' worst nightmare.

Weekly retail sales rose an above-average 3.2% for the week. Spending is poised to remain strong on lower energy prices, very low long-term interest rates, a rising stock market, healthy job market, decelerating inflation and more optimism. The current conditions component of the December Univ. of Mich. Consumer Confidence Index, which gauges whether or not consumers feel it is a good time to buy big-ticket items, rose to its highest level since March ahead of the holidays.

The CRB Commodities Index, the main source of inflation fears, has declined 4.65% over the last 12 months and is down 14.2% from May highs despite a historic flood of capital into commodity funds and numerous potential upside catalysts. Oil has declined $15/bbl from July highs. The average commodity hedge fund is down substantially for the year. I continue to believe inflation fears have peaked for this cycle as global economic growth stabilizes around average levels, unit labor costs remain subdued and the mania for commodities continues to reverse course.

The EIA reported this week that gasoline supplies fell more than expectations as refinery utilization fell. U.S. gasoline supplies are still at high levels for this time of the year. Gasoline futures fell for the week and have plunged 41.4% from September 2005 highs even as some Gulf of Mexico oil production remains shut-in and fears over future production disruptions persist. Gasoline demand is estimated to rise .8% this year versus a 20-year average of 1.7% demand growth. The still very elevated level of gas prices, related to crude oil production disruption speculation by investment funds, will further dampen global fuel demand, sending gas prices still lower over the intermediate-term.

US oil inventories are still near 7-year highs. Since December 2003, global oil demand is only up .7%, despite booming global growth, while global supplies have increased 6.3%, according to the Energy Intelligence Group. OPEC said recently that crude oil supply would exceed demand by 100 million barrels by the second quarter of next year. Moreover, worldwide oil inventories are poised to begin increasing at an accelerated rate over the next year. I continue to believe oil is priced at extremely elevated levels on fear and record speculation by investment funds, not fundamentals. The Amaranth Advisors hedge fund blow-up is a prime example of the extent to which many investment funds have been speculating on ever higher energy prices through futures contracts, thus driving the price of the underlying commodity to absurd levels. Amaranth, a multi-strategy hedge fund, lost about $6.5 billion of its $9.5 billion under management in less than two months speculating mostly on higher natural gas prices. I continue to believe a number of other funds will experience similar fates over the coming months after managers “press their bets” in hopes of making up for poor performance, which will further pressure energy prices as these funds unwind their leveraged long positions to meet investor redemptions.

Recently, Cambridge Energy Research, one of the most respected energy research firms in the world, put out a report that drills gaping holes in the belief by most investors of imminent "peak oil" production. Cambridge said that its analysis indicates that the remaining global oil base is actually 3.74 trillion barrels, three times greater than "peak oil" theory proponents say and that the "peak oil" theory is based on faulty analysis. I suspect the contango that currently exists in energy futures, which encourages hoarding, will begin to reverse over the coming months as more investors come to the realization that the "peak oil" theory is hugely flawed, global storage fills, and Chinese/US demand slows.

A major top in oil is likely already in place as global crude oil storage capacity utilization is running around 97%. Recent OPEC production cuts will likely result in a complete technical breakdown in crude. Demand destruction is already pervasive globally and will only intensify over the coming years as alternative energy projects come to the fore. Moreover, many Americans feel as though they are helping fund terrorism or hurting the environment every time they fill up their gas tanks. I do not believe we will ever again see the demand for gas-guzzling vehicles that we saw in recent years, even if gas prices plunge from current levels, as I expect. OPEC production cuts, with oil still at very high levels and weakening global growth, only further deepens resentment towards the cartel and will result in even greater long-term demand destruction. Finally, as the fear premium in oil dissipates back to more reasonable levels, global growth slows and supplies continue to rise, crude oil should continue heading meaningfully lower over the intermediate-term, notwithstanding OPEC production cuts. Oil will likely begin another significant downturn before year-end. Finally, I suspect crude will eventually fall to levels that most investors deemed unimaginable just a few months ago during the next significant global economic downturn.

Natural gas inventories fell more than expectations this week. However, prices for the commodity declined as record investment fund speculation continues to subside with supplies now 7.5% above the 5-year average and near all-time high levels for this time of year, even as some daily Gulf of Mexico production remains shut-in. Natural gas prices have collapsed 53.0% since December 2005 highs.

Gold fell again on the week as the US dollar rose. Gold, natural gas and copper all look both fundamentally and technically weak. The US dollar gained on stronger economic data and short-covering. I continue to believe there is very little chance of another Fed rate hike anytime soon. An eventual cut is likely next year as inflation continues to decelerate substantially. A Fed rate cut should actually boost the dollar as currency speculators anticipate faster US growth. Moreover, this month’s net long-term TIC flows report showed foreign investors’ demand for US securities remains very strong.

Paper stocks outperformed for the week on investment bank upgrades. Steel stocks underperformed as fundamentals continue to weaken for the group and buyout speculation subsides. S&P 500 profit growth for the third quarter came in around 20% versus a long-term historical average of 7%, according to Thomson Financial. This marks the 17th straight quarter of double-digit profit growth, the best streak since recording keeping began in 1936. Moreover, another double-digit gain is likely in the fourth quarter. Just a few months ago many investors expected profit growth to fall to the low single digits this year. Despite an 92.4% total return(which is equivalent to a 16.9% average annual return) for the S&P 500 since the October 2002 bottom, its forward p/e has contracted relentlessly and now stands at a very reasonable 16.2. The 20-year average p/e for the S&P 500 is 24.4. The S&P 500 is now up 16.4% and the Russell 2000 Index is up 19.1% year-to-date. Historically, if the S&P 500 is up at least 10% going into the final two months of the year, which it was, it continues to climb the last two months 84% of the time.

Current stock prices are still providing longer-term investors very attractive opportunities, in my opinion. In my entire investment career, I have never seen the best “growth” companies in the world priced as cheaply as they are now relative to the broad market. By contrast, “value” stocks are quite expensive in many cases. A CSFB report earlier this year confirmed this view. The report concluded that on a price-to-cash flow basis growth stocks are cheaper than value stocks for the first time since at least 1977. The entire decline in the S&P 500’s p/e, since the bubble burst in 2000, is attributable to growth stock multiple contraction. I still expect the most overvalued economically sensitive and emerging market stocks to continue underperforming over the intermediate-term as the manias for those shares subside and global growth slows to more average rates. I continue to believe a chain reaction of events has begun that will result in a substantial increase in demand for US stocks.

In my opinion, the market is still factoring in way too much bad news at current levels, notwithstanding recent gains. One of the characteristics of the current “negativity bubble” is that most potential positives are undermined, downplayed or completely ignored, while almost every potential negative is exaggerated, trumpeted and promptly priced in to stock prices. Furthermore, this “irrational pessimism” by investors has resulted in a dramatic decrease in the supply of stock this year as companies bought back shares, IPOs were pulled and secondary stock offerings canceled. Booming merger and acquisition activity is also greatly constricting the supply of stock. Many commodity funds, which have received huge capital infusions this year, will likely see significant outflows at year-end. Some of this capital will likely find its way back to US stocks. As well, money market funds are brimming with cash. I continue to believe there is massive bull firepower available on the sidelines for US equities at a time when the supply of stock has contracted.

Rising optimism for a Fed rate cut, a stronger US dollar, lower commodity prices, seasonal strength, decelerating inflation readings, a strong holiday shopping season, lower long-term rates, increased consumer/investor confidence, short-covering, investment manager performance anxiety, rising demand for US stocks and the realization that economic growth is only slowing to around average levels should provide the catalysts for another substantial push higher in the major averages over the intermediate-term as p/e multiples expand further. The S&P 500 has now met my early year prediction of a 15% total return for the year. However, further gains are possible through year-end even as the bears and many bulls continue to position for an imminent pullback after recent sharp gains. Another strong performance by US equities is likely next year. Finally, the ECRI Weekly Leading Index surged this week to new cycle highs and is forecasting a modest acceleration in US economic activity.

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Telecom longs, Biotech longs, Retail longs and Commodity shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly positive as the advance/decline line is about even, most sectors are rising and volume is heavy. Level 3 Communications (LVLT) is trading 2.2% higher today, near session highs on good volume, even as the major averages and breadth are near session lows. Level 3 is my favorite low-priced speculative stock for 2007 as it becomes increasingly obvious that it is one of the main beneficiaries of the explosion in video over the net. I expect the stock to rise at least 50% next year. The ECRI Weekly Leading Index (ECRWWLI Index on Bloomberg) broke out to a new cycle high this week. It has surged from 135.1 in August to 140.8 currently. It had been bouncing around 135 to 139 for 17 months. The growth rate of the weekly leading index is now 2.8%, up from -1.7% in mid-August. I continue to believe economic growth will come in around 2.5% for this quarter. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, more economic optimism, buyout speculation and portfolio manager performance anxiety.

BOTTOM LINE: US consumer prices held steady in November after falling for two months, reassuring Fed policy makers, Bloomberg reported. The CPI is now rising 2.0% year-over-year, well below the long-term average of 2.9%. Gasoline prices fell 1.6% in November. New vehicle costs declined .7% and clothing prices fell .3%. Airfares fell 4.8%, the largest decline since 1999. Food prices fell .1%. Inflation is clearly not a problem and the 10-year T-note, the best predictor of long-term inflation, agrees with the yield falling another 8 basis points. I continue to believe inflation has peaked for this cycle as commodities fall further and unit labor costs remain subdued.

International investment in US long-term securities rose in October as stocks climbed and demand for Treasury notes surged, Bloomberg reported. Official institutions, such as central banks, bought $18.5 billion of US Treasury Notes, the most in almost 2 years. Foreign purchases of US securities have averaged $73.8 billion over the last 12 months. The US trade deficit was $58.9 billion in October, which shows how easily the US can finance its external obligations. International purchases of US stocks rose to $21.0 billion in October versus $8.6 billion the previous month. I expect foreign demand for US assets to continue to remain strong over the intermediate-term as economic growth accelerates, the US dollar firms and the mania for emerging market securities reverses course.

Industrial Production in the US unexpectedly rose in November, reflecting a jump in auto manufacturing, Bloomberg reported. Auto output rebounded 3.7% versus a 3.4% decline in October. Production of business equipment rose 1.2% versus a .1% increase in October. The gain was spurred by a 2.4% increase in computer production and a 2.6% rise in semiconductors. I suspect auto production cutbacks are subsiding, but there are more to come. This will likely weigh on industrial production until the 2nd quarter of next year. As well, while I believe the housing market is stabilizing and the worst is over, home construction will not pick up until inventories decline further from current levels.

BOTTOM LINE: Asian indices are higher, boosted by automaker and technology shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

BOTTOM LINE: The Portfolio finished higher today on gains in my Internet longs, Retail longs, Semi longs and Telecom longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was positive today as the advance/decline line finished higher, almost every sector rose and volume was slightly above average. Measures of investor anxiety were mostly lower into the close. Today's overall market action was bullish. Cyclicals were especially strong as the "recession is imminent" cries are rapidly fading. The U.S. dollar strengthened throughout the day, which could begin taking its toll on commodities. "High-school drop-out" copper looks especially vulnerable near-term as Comex inventories continue to surge. The 10-year yield remained stable throughout the day. I suspect today's action is leading to another serious bout of performance anxiety by the near-record shorts and underinvested bulls. I expect stocks to build on today's gains into year-end.

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Internet longs, Semi longs, Retail longs and Telecom longs. I covered my (QQQQ), (IWM), (EEM) hedges this morning, took profits in a few longs and added to my (BRCM), (ISRG) longs 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 above average. Global Internet information provider comScore just issued a press release, stating that Apple Computer's (AAPL) iTunes revenue soared 84% during the first three quarters of 2006 vs. the same period last year. Moreover, it reported that the number of iTunes buying transactions have surged 67% on a 10% increase in the dollars spent per transaction.I continue to believe that too much emphasis is being placed on the iPod and not enough on Macs or new products, however, this completely refutes the recent Forrester report. Apple remains my second-largest long position behind Google (GOOG), and I expect substantial gains in the stock next year from current levels. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, more economic optimism, buyout speculation and portfolio manager performance anxiety.

BOTTOM LINE: Prices of goods imported into the US rose for the first time in three months because of a jump in the cost of natural gas, Bloomberg reported. Outside of natural gas, price gains were minimal. Import prices fell 2.3% in October and 2.2% in September, the largest declines since record-keeping began in 1989. Imports account for roughly 17% of all goods and services. Import prices rose 1.2% from year-ago levels. I continue to believe inflation fears have peaked for this cycle and long-term rates will remain low over the intermediate-term.

Fewer US workers filed first-time applications for state unemployment benefits for a second consecutive week, a sign that demand for labor is holding up, Bloomberg said. The four-week moving-average of jobless claims fell to 327,250 versus 328,750 the prior week. Claims have been distorted the last three weeks by seasonal adjustments even as unemployment remains near a five-year low. The unemployment rate among those eligible for jobless benefits, which tracks the US unemployment rate, held steady at 1.9% last week. Job growth has averaged about 149,000/month so far this year, well above the rate necessary to keep unemployment from rising, notwithstanding housing and auto-related job cuts. Moreover, hourly wage growth is rising at the fastest pace in five years and almost 4 times the rate of inflation. I continue to expect the job market to remain healthy without generating substantial unit labor cost increases over the intermediate-term

BOTTOM LINE: Asian indices are higher, boosted by automaker and technology shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Biotech longs, Medical longs and Energy-related shorts. I have not traded today, thus leaving the Portfolio 75% net long. The tone of the market is neutral as the advance/decline line is slightly lower, most sectors are rising and volume is below average. The 10-year yield is at session highs, rising 8 basis points to 4.57%. I think this is a result of bond investors finally acknowledging that an imminent recession is a remote possibility. Equity investors are so far ignoring this morning's positive economic data as many large funds continue to position right now for a pullback in stocks, thus adding to the massive bull firepower available on the sidelines. The DJIA hit another all-time high this morning. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, buyout speculation and portfolio manager performance anxiety.

BOTTOM LINE: Retail Sales in the US rose moiré than forecast in November as consumer rushed to take advantage of early holiday discounts, Bloomberg said. Purchases excluding autos rose the most since January. Sales at electronics and appliances stores surged 4.6%. Purchases at non-store retailers, which includes online and catalog sales, gained 1.3%. Wage gains and low unemployment are the main reasons for continuing healthy consumer spending. Average hourly earnings rose 4.1% from a year earlier in November, almost four time the rate of the Consumer Price Index. The average price of a gallon of gas was $2.23 in November, about the same as the prior month. Gasoline prices plunged 27% from August through October. The ICSC and UBS Securities said yesterday that weekly retail sales rose at their fastest pace so far this holiday season last week. Mortgage applications surged 11.4% last week. This is the second time in less than three months that mortgage applications have seen weekly double digit percentage gains. The last time this happened was mid-2004. I continue to believe consumer spending, which accounts for almost 70% of US economic growth, will stay healthy over the intermediate-term as energy prices fall further, the job market remains healthy, stocks rise, housing stabilizes at relatively high levels, long-term rates remain low, irrational pessimism subsides and inflation decelerates.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

BOTTOM LINE: The Portfolio finished slightly lower today as losses in my Computer longs and Retail longs more than offset gains in my Steel shorts. I did not trade in the final hour, thus leaving the Portfolio 75% net long. The tone of the market was negative today as the advance/decline line finished lower, most sectors declined and volume was above average. Measures of investor anxiety were mostly higher into the close. I would classify today's overall market action as mildly bearish. The NYSE Arms registered above-average readings throughout the day and the ISE Sentiment Index plunged 17% to a below-average 131.0. I continue to believe that large funds are positioning now for what they believe will be a weak January for stocks. So far, this has resulted in relatively little broad market damage, while adding to the massive bull firepower that is already on the sidelines.

BOTTOM LINE: The Portfolio is slightly lower into the final hour as losses in my Computer longs and Retail longs more than offset gains in my Steel shorts. I took profits in an existing long, added to my (BBY) long and added (EEM), (IWM) and (QQQQ) hedges this morning, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are falling and volume is slightly above average. A recent Barclays report trumpets the massive amount of capital that has gone into commodity-related funds of late. I would just like to point out that global growth has been booming, the U.S. dollar has been weakening, yet, notwithstanding the mania for commodities, the CRB Index is down 6.7% over the last year. Moreover, the average commodity hedge fund is down double digits for the year. I see extraordinarily high bearish sentiment in the broad U.S. stock market, given recent gains. However, equity investor complacency regarding commodity-related stocks is exceptionally high. I remain overweight short these stocks. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, buyout speculation, lower energy prices, declining long rates and portfolio manager performance anxiety.

BOTTOM LINE: The US Trade Deficit shrank the most in almost five years in October as the price of imported oil dropped and US exports surged, Bloomberg reported. Imports of goods and services dropped 2.7% in October, the most since December 2001. The average price per barrel of imported oil declined to $55.47 versus $62.52 the prior month. US exports rose to $123.6 billion on increasing demand for computers, drilling equipment and medicines. I expect the US trade deficit to only improve modestly over the intermediate-term as falling prices more than offsets an acceleration of US demand.

BOTTOM LINE: Asian indices are mostly higher, boosted by exporting shares in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

BOTTOM LINE: The Portfolio finished slightly higher today on gains in my Telecom longs, Medical longs and Retail longs. I did not trade in the final hour, thus leaving the Portfolio 100% net long. The tone of the market was slightly positive today as the advance/decline line finished about even, most sectors gained and volume was above average. Measures of investor anxiety were mixed into the close. I would classify today's overall market action as another healthy consolidation of recent gains. While analysts, managers and pundits continue to overwhelmingly love all energy-related stocks, the underlying commodity trades poorly in the face of potential upside catalysts. As well, the despised 10-year T-note finished near session highs and continues to trade well.

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Medical longs, Retail longs and Telecom longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is modestly positive as the advance/decline line is modestly higher, most sectors are rising and volume is above average. A recent Piper Jaffray survey of 20 Apple (AAPL) specialist retailers shows about 25% of Mac purchasers are new to the Apple platform. Piper thinks the number will continue to grow due to the "halo effect" from iPods and the Boot Camp software. I continue to believe that Apple's full-year 2007 consensus earnings estimates are way too low as the Mac gains much more market share than most expect and new products gain significant traction. I suspect the stock will have another banner year next year as the multiple expands, demand for high-quality U.S. growth stocks increases globally and earnings meaningfully exceed estimates. Apple remains my second-largest long position, after Google (GOOG), due to substantial gains since adding to my long earlier in the year. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, buyout speculation, lower energy prices, declining long rates and portfolio manager performance anxiety.

BOTTOM LINE: Inventories at US wholesalers rose at a faster pace in October as sales fell modestly, Bloomberg reported. The inventory-to-sales-ratio increased to 1.2 months in October versus 1.18 months the prior month. Lower oil prices limited the increases in sales as the average price of crude fell to $59.41/bbl. from $63.90/bbl. the prior month. I expect inventories to begin falling again over the intermediate-term as housing stabilizes at relatively high levels, auto production cutbacks subside and consumer spending remains healthy.

BOTTOM LINE: Asian Indices are higher, boosted by automaker and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.

BOTTOM LINE: I expect US stocks to finish the week modestly higher on mostly positive economic data, a stronger US dollar, lower energy prices, seasonal strength, strong corporate profits, bargain-hunting, investment manager performance anxiety and short-covering. My trading indicators are still giving bullish signals and the Portfolio is 100% net long heading into the week.