Year-end Scoreboard*

Indices
S&P 500 1,211.92 +8.99%
Dow 10,783.01 +3.15%
NASDAQ 2,175.44 +8.59%
Russell 2000 651.57 +17.0%
DJ Wilshire 5000 11,951.47 +10.67%
Morgan Stanley Consumer 590.79 +7.76%
MS Cyclical 784.10 +15.36%
MS Technology 507.67 +6.69%
Transports 177.61 +28.22%
Utilities 334.95 +25.5%
Put/Call .62 -50.0%
NYSE Arms 1.20 +57.9%
Volatility(VIX) 13.29 -27.42%
AAII % Bulls 57.66 -12.0%
US Dollar 80.85 -6.83%
CRB 283.90 +11.21%

Futures Spot Prices
Gold 438.40 +4.13%
Crude Oil 43.45 +52.46%
Natural Gas 6.15 +9.8%
Base Metals 125.66 +24.35%
10-year US Treasury Yield 4.22% -.71%
Average 30-year Mortgage Rate 5.81% unch.

Leading Sectors
Gaming +64.63%
HMOs +46.27%
Iron/Steel +35.32%

Lagging Sectors
Airlines -2.10%
Drugs -5.65%
Semis -14.72%

*% Gain or loss for the year

Friday Watch

Earnings of Note
Company/Estimate
None of note

Splits
None of note.

Economic Data
None of note

Recommendations
Goldman Sachs reiterated Outperform on BSX and Underperform on PPS, TCO.

Late-Night News
Asian indices are mostly higher on optimism for exporters in the region. Saudi forces killed the suspected leader of the al-Qaeda terrorist network in Saudi Arabia, along with nine other members of the group, in separate gun battles, Agence-France Presse reported. A free trade agreement with China would boost Japan’s GDP by .5%, the Nihon Keizai newspaper reported. Oracle fired PeopleSoft’s Co-President and CFO and three other top executives, putting Oracle officials in their places as part of the $10.3 billion takeover, Bloomberg reported. Huawei Technologies, China’s largest phone-equipment maker, said it received a $10 billion credit line from China Development Bank to finance overseas expansion, Bloomberg said.

Late-Night Trading
Asian Indices are unch. to +.50% on average.
S&P 500 indicated +.07%.
NASDAQ 100 indicated +.18%.

BOTTOM LINE: I expect U.S. equities to open modestly higher in the morning on short-covering and window-dressing. The Portfolio is at its highs for the year and 125% net long heading into tomorrow.

Thursday Close

S&P 500 1,213.55 +.01%
NASDAQ 2,178.34 +.06%

Leading Sectors
Airlines +1.07%
Hospitals +.74%
Networking +.64%

Lagging Sectors
Restaurants -.45%
Oil Service -.65%
Iron/Steel -2.50%

Other
Crude Oil 43.45 -.23%
Natural Gas 6.15 unch.
Gold 438.40 +.32%
Base Metals 124.97 +.63%
U.S. Dollar 80.62 -.28%
10-Yr. T-note Yield 4.25% -1.59%.
VIX 12.56 +8.09%
Put/Call .86 -24.56%
NYSE Arms 1.20 +33.33%

After-hours Movers

Recommendations

After-hours News

BOTTOM LINE: The Portfolio finished substantially higher today on gains in my security, internet, Chinese ADR and software longs. I did not trade in the afternoon, thus leaving the Portfolio 125% net long. The overall tone of the market was mildly positive today. Volume fell slightly as stocks continue to consolidate recent gains. The declines in base metal stocks likely mark the beginning of a period of underperformance for this sector through the first half of 05. However, one more test of recent highs may occur in January. I continue to believe all commodity-related stocks will underperform through this period as demand decelerates, supply increases and the US dollar stabilizes.

***Alert***

There will not be a mid-day report today due to a scheduling conflict.

Bottom Line: The Portfolio is higher mid-day on gains in my internet, security and software longs. I added a few new longs from various sectors this morning, thus bringing the Portfolio to 125% net long exposure. One of my new longs is AUDC and I am using a $15.25 stop-loss on this new position. The tone of the market is slightly positive today and I expect stocks to rise into the afternoon on falling energy prices/interest rates, short-covering, more optimism and year-end positioning.

Thursday Watch

Earnings of Note
Company/Estimate
None of note.

Splits
BEBE 3-for-2

Economic Data
Initial Jobless Claims for last week estimated at 335K versus 333K the prior week.
Continuing Claims estimated at 2729K versus 2721 prior.
Chicago Purchasing Manager for December estimated at 63.0 versus 65.2 in November.

Recommendations
Affiliated Managers Group(AMG), a US company that owns stakes in 30 money management firms, will benefit from cash it invests in new companies, Business Week reported. Barr Pharmaceuticals(BRL) may benefit from $30 billion in patents that will expire by the end of 2007, Business Week reported.

Late-Night News
Asian indices are higher on optimism for exporters in the region. Lockheed Martin and Kerr McGee have set aside funds to pay for possible cleanups of perchlorate, an ingredient in rocket fuel and fireworks, Business Week reported. China's top planning agency set an 8% ceiling on coal price increases next year amid an electricity shortage that's fueling demand for the commodity, the China Securities Journal reported. Tyco Intl.'s CEO Breen and Xerox Corp.'s CEO Mulcahy are among the best managers of 2004, Business Week said, after surveying its more than 130 writers and editors worldwide. China Life Insurance faces a formal investigation into its IPO by the US SEC, after the regulator stepped up its probe from an informal inquiry, the Financial Times reported. China will destroy imports from Taiwan with labels that designate the island as a nation, the Commercial Times reported. New prescriptions of Pfizer's painkiller Celebrex fell 56% last week, the Wall Street Journal reported. Bankruptcy filings by US public companies reached a 10-year low in 2004 as low interest rates, a strong economy and better access to financing helped troubled businesses amass cash and pay debts, Bloomberg reported. The Australian dollar is poised for its biggest drop in almost three weeks against the US dollar, tracking declines in the price of gold, copper and other commodity exports the currency is closely correlated with, Bloomberg said. Fannie Mae sold $5 billion of preferred stock after its regulator said it broke accounting rules and is "significantly undercapitalized," Bloomberg reported. Amazon.com, Starbucks, Coca-Cola, FedEx and Pfizer are among US companies that have taken steps to provide aid to the survivors of the earthquake and tsunamis that struck South Asia on Dec. 26, Bloomberg said. India put coastal states and islands on alert against a "possible" tsunami and asked residents of low-lying areas to move to safer areas, Bloomberg reported.

Late-Night Trading
Asian Indices are +.25% to +1.0% on average.
S&P 500 indicated unch.
NASDAQ 100 indicated +.03%.

BOTTOM LINE: I expect U.S. equities to open mixed and move modestly higher throughout the day on strong economic reports, lower energy prices, strength in Asia, stabilizing US dollar/interest rates, short-covering, year-end positioning and more optimism. The Portfolio is 100% net long heading into tomorrow.

Wednesday Close

S&P 500 1,213.45 -.01%
NASDAQ 2,177.19 -.01%

Leading Sectors
Oil Service +1.39%
Semis +.89%
Disk Drives +.70%

Lagging Sectors
Wireless -.54%
I-Banks -.55%
Defense -1.62%

Other
Crude Oil 43.65 +.02%
Natural Gas 6.44 +.67%
Gold 437.30 +.07%
Base Metals 124.19 +1.35%
U.S. Dollar 80.88 +.20
10-Yr. T-note Yield 4.32% +.73%.
VIX 11.62 -3.17%
Put/Call 1.14 +67.65%
NYSE Arms .90 +47.54%

After-hours Movers

Recommendations

After-hours News

BOTTOM LINE: The Portfolio finished higher today on gains in my security and semi-equipment longs. I did not trade in the afternoon, thus leaving the Portfolio 100% net long. The overall tone of the market improved throughout the day with the advance/decline line finishing at its daily highs. Volume fell slightly as stocks consolidated recent gains. Considering the rise in energy prices and interest rates, today's action was positive.