Weekly Outlook

The Week Ahead via Reuters

There are some important economic reports and a few significant corporate earnings reports scheduled for release this week.

Economic reports for the week include:

Mon. - US Markets Closed for New Years
Tues. - Construction Spending, ISM Manufacturing, ISM Prices Paid, FOMC Minutes
Wed. - Factory Orders, Total Vehicle Sales
Thur. - Initial Jobless Claims, ISM Non-manufacturing, Pending Home Sales
Fri. - Change in Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings

A few of the more noteworthy companies that release quarterly earnings this week are:

Mon. - US markets closed for New Years
Tues. - BISYS Group(BSG), Flowserve(FLS), Key Energy Services(KEGS), Walgreen(WAG)
Wed. - Sonic Corp.(SONC)
Thur. - Accenture Ltd.(ACN), Constellation Brands(STZ), Dana Corp.(DCN), Monsanto(MON), Ruby Tuesday(RI), Take Two Interactive(TTWO)
Fri. - Shaw Group(SGR)

Other events that have market-moving potential this week include:

Mon. - US markets closed for New Years
Tue. - None of note
Wed. - None of note
Thur. - None of note
Fri. - Fed’s Fisher & Minehan speak

BOTTOM LINE: I expect US stocks to finish the week modestly lower as continued profit-taking, fears over the slowdown in housing and worries over recent poor equity performances during January more than offset lower energy prices, less hawkish Fed commentary and healthy economic reports. My trading indicators are now giving mostly bearish signals and the Portfolio is 50% net long heading into the week.

Year-end Scoreboard*

Indices
S&P 500 1,248.29 +4.91%
DJIA 10,717.50 +1.72%
NASDAQ 2,205.32 +2.13%
Russell 2000 673.22 +4.64%
DJ Wilshire 5000 12,497.18 +4.57%
S&P Equity Long/Short Index 1,109.58 +9.04%
S&P Barra Growth 596.52 +4.01%
S&P Barra Value 647.55 +5.85%
Morgan Stanley Consumer 591.50 +2.21%
Morgan Stanley Cyclical 785.05 +2.17%
Morgan Stanley Technology 522.21 +3.37%
Transports 4,196.03 +11.65%
Utilities 405.11 +25.12%
S&P 500 Cum A/D Line 7,613 +8.0%
Bloomberg Crude Oil % Bulls 27.03 -33.2%
Put/Call .76 -11.63%
NYSE Arms 1.65 +37.5%
Volatility(VIX) 12.07 -9.18%
ISE Sentiment 163.00 -23.47%
AAII % Bulls 37.30 -35.31%
AAII % Bears 36.51 +108.39%
US Dollar 91.07 +12.63%
CRB 331.83 +16.88%
ECRI Weekly Leading Index 135.00 +.52%

Futures Spot Prices
Crude Oil 61.04 +47.08%
Unleaded Gasoline 172.74 +56.36%
Natural Gas 11.22 +82.44%
Heating Oil 176.98 +65.40%
Gold 519.70 +18.11%
Base Metals 152.41 +21.35%
Copper 203.20 +61.27%
10-year US Treasury Yield 4.39% +4.03%
Average 30-year Mortgage Rate 6.22% +7.06%

Leading Sectors
Energy +40.51%
HMOs +37.14%
Gold & Silver +30.55%
I-Banks +29.84%
Utilities +25.12%

Lagging Sectors
Foods -4.04%
Telecom -5.71%
Computer Hardware -7.34%
Airlines -9.34%
Broadcasting -20.12%

This Year’s Winners
This Year’s Losers

*1 Year Total Return

Stocks Lower Mid-day on Year-end Profit-taking and Rising Energy Prices

Indices
S&P 500 1,249.86 -.36%
DJIA 10,735.03 -.46%
NASDAQ 2,207.90 -.46%
Russell 2000 674.81 -.50%
DJ Wilshire 5000 12,507.36%
S&P Barra Growth 597.02 -.37%
S&P Barra Value 647.48 -.46%
Morgan Stanley Consumer 592.46 -.62%
Morgan Stanley Cyclical 785.55 -.57%
Morgan Stanley Technology 522.54 -.54%
Transports 4,208.48 -.77%
Utilities 404.65 -.48%
Put/Call .80 -11.11%
NYSE Arms 1.47 +22.79%
Volatility(VIX) 11.74 +1.12%
ISE Sentiment 162.00 -1.0%
US Dollar 91.22 +.13%
CRB 331.78 +.75%

Futures Spot Prices
Crude Oil 61.04%
Unleaded Gasoline 171.00 +3.49%
Natural Gas 11.22 +.02%
Heating Oil 172.80 +1.47%
Gold 519.50 +.39%
Base Metals 152.41 -.37%
Copper 203.30 -.61%
10-year US Treasury Yield 4.38% +.81%

Leading Sectors
Oil Service +1.74%
Energy +1.15%
Disk Drives +.53%

Lagging Sectors
Gold & Silver -1.01%
Restaurants -1.06%
HMOs -1.08%

BOTTOM LINE: The Portfolio is lower mid-day on losses in my Medical longs, Semi longs and Energy-related shorts. I exiting a long and added IWM and QQQQ shorts 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 lower and volume is light. Measures of investor anxiety are mostly higher. Overall, today’s market action is negative considering recent losses and lack of year-end leadership. It looks as if the S&P 500 is going to finish the year with around a 5% total gain including dividends, short of my 10% projection. Next year has the potential to be much better. I will try and post a Year-End Scoreboard later this evening. I expect US stocks to trade higher from current levels into the close on short-covering and seasonal strength.

Today's Headlines

Bloomberg:
- Bill Miller, manager of the Legg Mason Value Trust, is about to beat the S&P 500 for a record 15th consecutive year.
- UK house prices rose for a fourth month in December, the Nationwide Building Society said, adding to evidence of a sustained pickup in the $6 trillion property market.
- Internet service providers in China, which already use software to monitor user behavior, will soon have to record which Web sites their users visit and what time they logged on, by law.
- Genentech filed for US marketing approval of its Lucentis treatment for age-related macular degeneration, the leading cause of blindness among the elderly.
- Venezuela’s IBC stock index fell the most among the world’s 78 primary equity benchmarks this year, plunging 32%, on concern President Hugo Chavez will divert profits from investors as he seeks to redistribute wealth to the country’s poor.

Wall Street Journal:
- European mergers and acquisitions activity should grow in 2006 as economic and financial conditions become more favorable, citing bankers.
- Wal-Mart Stores plans to offer employee health insurance through Sam’s Club to small business owners.
- NTP Inc., the patent-holding company involved in a dispute with BlackBerry-maker Research in Motion, has obtained a 30-day extension from the US Patent and Trademark Office to file a defense for its claims.

NY Times:
- NY Mayor Michael Bloomberg and Joel Klein, chancellor of NY’s public schools, have convinced many private donors to donate more than $300 million for the city’s schools.

USA Today:
- As many as 56% of high-definition televisions’ purchasers haven’t bought the necessary special set-top box from cable or satellite providers that will enable the high-definition programming, citing surveys by Leichtman Research Group.

Financial Times:
- US legislation passed to encourage donations after Hurricane Katrina will probably make this year the best in history for US charities.

AP:
- The US Justice Department has begun an investigation into the leak of classified information about the National Security Agency’s domestic spy program to monitor overseas terror threats to the US.

NY Post:
- NY Senate Majority Leader Joseph Bruno said yesterday that democratic sate Attorney General Eliot Spitzer should support an independent investigation into the claim by former Goldman Sachs Chairman Whitehead that Spitzer had threatened him.

Economic Releases

- None of note

Links of Interest

Market Snapshot
Detailed Market Summary
Market Internals
Economic Commentary
Movers & Shakers
IBD New America
NYSE OrderTrac
I-Watch Sector Overview
NYSE Unusual Volume
NASDAQ Unusual Volume
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NASDAQ 100 Heatmap
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