Stocks Lower into Final Hour on Weakness in Financials, Homebuilders

BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs and Retail longs. I have not traded today, thus leaving the Portfolio 75% net long. The overall tone of the market is negative today as the advance/decline line is lower, sector performance is mostly negative and volume is around average. Investor anxiety is above average. Today’s overall market action is mildly bearish. Oil is falling again today despite dollar weakness. It is interesting to note that OPEC said today that production only fell by 125,000 bpd in November despite a 400,000 bpd cut by the UAE due to maintenance. Saudi production rose 125,000 bpd last month. Weekly retail same-store-sales rose 2.4% versus 2.4% the prior week and up from 1.4% in July. Today’s report that CEOs have become more optimistic of late corresponds with the recent surge in insider stock buying. There is now a 48% chance for a 50 basis point cut at the Fed meeting next week and a 52% chance for a 25 basis point cut. I am currently leaning towards a 50, depending on this Friday’s jobs report. A 50 basis point cut and likely better economic data over the next few weeks should lead to another surge in stocks, especially the more economically sensitive ones. I expect US stocks to trade mixed into the close from current levels as profit-taking offsets short-covering.