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Dec 25, 2006 - Issue #038



Deterioration?



Dow score card for the week ending 12/22/06.

DJ-30: 12343.22 -102.30 -0.82%. In the Real World: 51.36 -0.42 -0.82%.

UP: 10 (-13), Down: 20 (+13).

Trends (weekly): This is the subjective part.

Rising 15 (-5):

C, DD, DIS, GE, HON, HPQ, JNJ, JPM, KO, MCD, MO, PG, T, VZ, XOM.

Consolidating 10 (+3):

-*AIG, -*AXP, BA, GM, -*HD, -*IBM, MRK, -*MSFT, UTX, WMT.

Declining 5 (+2):

-*AA, CAT, -*INTC, MMM, PFE.

* denotes change of category.

+/- denotes change of direction.

Deterioration?

Notice that five Dow components moved from rising to consolidating and two more joined the declining trend category as Friday closed with all of the "Dirty 30" down for the day.

The final week of the year will be interesting. Friday 12/29 is the last day to take losses for 2006. It's also the last chance for mutual fund portfolio managers to complete their year-end "window dressing".

Notice also the slight increase in the volatility indexes. Are traders starting to get nervous? I think they should be. Buying cheap options is looking pretty good, so far.

The guest economists on CNBC-TV's Kudlow & Company are split on their forecasts for 2007. Although when "experts" say, "the economy is fine, everthing is fine, don't worry about it", that's when I start to worry.

Holiday sales, or the lack thereof, was a major topic of discussion, understandably. While the results will be out in due course, have you noticed how many retail stocks have been hit already? What is the market telling us?

The once high flying Dow Transportations are looking anything but robust. What is the market telling us?

Oil may be basing. One "expert" said, recently, that high oil prices are good for the market. You think? Be careful what you wish for.

You, no doubt, have heard some "experts" say stocks are "tremendously undervalued" despite the highs in the averages. They may be right. Or not. Isn't that what they always say at the top?

Isn't that why derivatives were created? To hedge risk? Read a book!

By the way, I just happen to know a very good bookstore. It's called Hot Stuff!





Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!

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