Stocks Mostly Higher into Final Hour on Rising Economic Optimism

BOTTOM LINE: The Portfolio is slightly higher into the final hour on gains in my Internet longs, Telecom longs and Airline longs. I covered some of my (EEM) short and some of my (IWM)/(QQQQ) hedges today, thus leaving the Portfolio 75% net long. The tone of the market is positive as the advance/decline line is higher, sector performance is mostly positive and volume is above average. While holiday retail sales came in slightly above most forecasts, spending was still modestly below average levels. The Department of Energy is projecting nationwide average gas prices to fall to $1.95 per gallon over the coming weeks, with oil around current levels. Moreover, jobless claims have been trending lower of late, housing has improved, wages are rising, stocks are mostly higher, and inflation is below long-term average rates. Both main consumer confidence readings are very near cycle highs, and many consumers are chomping at the bit to buy new spring clothing after such a warm winter muted winter shopping. I expect retail sales to accelerate back to above-average levels over the coming months. I expect US stocks to trade mixed into the close from current levels as more economic optimism and short-covering offsets higher energy prices and long-term rates.