Thursday, December 22, 2005

Stocks Modestly Higher Mid-day as Natural Gas Falls Substantially

Indices
S&P 500 1,266.35 +.28%
DJIA 10,872.39 +.35%
NASDAQ 2,240.01 +.38%
Russell 2000 682.57 +.41%
DJ Wilshire 5000 12,659.33 +.28%
S&P Barra Growth 605.78 +.16%
S&P Barra Value 656.05 +.38%
Morgan Stanley Consumer 600.72 -.03%
Morgan Stanley Cyclical 790.15 +.35%
Morgan Stanley Technology 530.78 +.58%
Transports 4,246.03 +1.12%
Utilities 409.72 +.36%
Put/Call .72 +1.41%
NYSE Arms .85 -4.44%
Volatility(VIX) 10.51 -2.78%
ISE Sentiment 172.00 -15.69%
US Dollar 90.73 -.23%
CRB 326.05 -.11%

Futures Spot Prices
Crude Oil 58.25 -.53%
Unleaded Gasoline 153.75 +.07%
Natural Gas 12.89 -9.68%
Heating Oil 174.00 -.93%
Gold 505.90 +2.14%
Base Metals 152.55 +.58%
Copper 202.55 +.40%
10-year US Treasury Yield 4.42% -1.36%

Leading Sectors
Airlines +1.47%
HMOs +1.40%
Biotech +1.23%

Lagging Sectors
Oil Service -.23%
Broadcasting -.33%
Oil Tankers -.66%
BOTTOM LINE: The Portfolio is substantially higher mid-day on gains in my Semi longs, Medical longs, Internet longs and Energy shorts. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, most sectors are higher and volume is below average. Measures of investor anxiety are mostly lower. Overall, today’s market action is mildly positive considering the decline in natural gas and long-term rates. The AAII percentage bulls fell to 41.03% this week from 46.15% the prior week. This reading is now at below-average levels and has declined 18 percentage points in six weeks. The percentage bears rose to 28.21% from 22.12% the prior week. This reading is now back to average levels and has increased 12 percentage points in four weeks. I expect bullish sentiment to fall modestly again next week. The fact that bullishness has declined to this extent with the market near a four-year high bodes very well for another push higher in the major averages during first quarter 2006. I expect US stocks to trade mixed-to-higher into the close on short-covering and falling energy prices.

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