Analysis based on December 21 closing data.
Blue chip and small-cap stocks were the big winners in 2006. Now as we get set to close off 2006, market sentiment remains bullish in the broader market, albeit we are seeing some weakness surface in technology. The new high-new low ratio remains bullish on the NYSE but has shown some weak signals over the past week towards technology.
Near-term signals for the NASDAQ are neutral with lackluster Relative Strength and mixed breadth
readings. Index fell below its 20-day moving average of 2438 and is showing some near-term topping
on the chart. The CBOE NASDAQ Volatility Index has also been declining, suggesting a near-term top.
The DOW broke to another record high at 12,549 on December 20 with its upward trend intact.
Continuance of this trend could see a sustainable break above 12,500.
The S&P 500 also continues to trend higher following a recent breakout at 1400. Decent support is
found at 1380 to 1390.
Russell 2000 is showing some topping after failing to hold after its recent break above 800. Near-
term signals are neutral.
The ability of markets to hold may suggest a positive start to the New Year. Market trends remain intact on the DOW and S&P 500. In technology and small-caps, there is some topping on the chart.
2006 is looking to turn out to be the best year since the reversal of the 2000-2002 bear market. The strong start to January 2006 pointed to an up year in stocks. Watch again this January for any hints for markets in 2007.
George Leong is the founder of http://www.investornomics.com – a provider of independent stock and option trading commentary. He has a degree in finance/economics and offers over 15 years of research experience in investing and trading.