Analysis based on closing data for December 21.

Blue-chip and small-cap stocks were the big winners in 2006. As we prepare to close out 2006, market sentiment remains upbeat in the broader market, although we are seeing some superficial weakness in technology. The new high-new low index remains bullish on the NYSE, but has shown some weak signals over the past week towards tech.

Short-term signals for the NASDAQ are neutral with lackluster relative strength and mixed amplitude
readings The index fell below its 20-day moving average of 2438 and is showing a short-term limit
on the chart The CBOE NASDAQ Volatility Index has also been falling, suggesting a short-term top.

The DOW hit another all-time high of 12,549 on December 20 with its uptrend intact.
A continuation of this trend could see a sustainable break above 12,500.

The S&P 500 also continues to trend higher after a recent break at 1400. Decent support is
found in 1380 to 1390.

Russell 2000 is showing some top after failing to hold after its recent break above 800. Almost
Term signals are neutral.

The ability of the markets to hold up may suggest a positive start to the New Year. Market trends remain intact in the DOW and S&P 500. In technology and small caps, there are some high positions on the chart.

2006 looks set to be the best year since the 2000-2002 bear market reversal. The good start to January 2006 pointed to a bull year for stocks. Keep an eye out again this January for any clues about the markets in 2007.

George Leong is the founder of http://www.investornomics.com, an independent provider of stock and options trading commentary. He has a bachelor’s degree in finance/economics and offers over 15 years of investment and trading research experience.