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Jump in consumer confidence gives NASDAQ Comp. a new high

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A much stronger than expected jump in the Conference Board's Consumer Confidence Index for the month of December had the major indices reversing yesterday's losses, with the very broad NASDAQ Composite (COMPX) 2,177.19 +1.06% closing at a new multi-year high.

I thought the Biotechnology Index (BTK.X) 549.69 +2.26% made a much needed move higher above the 545 level in today's session (see today's 01:00 PM EST Update), and if nothing else, gives some lift as the Semiconductor Index (SOX.X) 426.75 +0.86%, often-times viewed as the more important sector for technology strength, continues to flounder between its rising intermediate- term 50-day SMA (421.50) and longer-term and still trending lower 200-day SMA (432.00).

The U.S. Dollar Index (dx00y) 80.72 had the dollar finishing unchanged against a weighted basket of 6 major foreign currencies after the dx00y matched Monday's multi-year lows just prior to today's equity market open.

All sectors, except the Amex Gold Bugs Index ($HUI.X) 216.96 -0.95%, which has experienced a December that gold bugs would just as soon forget despite dollar weakness, finished with gains.

U.S. Market Watch - 12/28/04 Close

While the surge in the Conference Board's Consumer Confidence Index for December did find further selling coming into Treasuries at the 10:00 hour, which pushed the benchmark 10-year yield ($TNX.X) as high as 4.346%, Treasuries finished little changed by their close.

Late session buying in both the 10-year and 30-year, combined with some upbeat responses to some of the forward-looking consumer confidence survey questions had the homebuilders as depicted by the Dow Jones Home Construction Index (DJUSHB) 793.22 +2.85% closing above Thursday's close, when disappointing new home sales for November were released.

Ahead of tomorrow's weekly energy inventory figures, February Crude Oil futures (cl05g) $41.93 +1.48% settled higher by 61 cents after plunging 10.03% the prior three sessions. According to the median estimate of 10 analysts surveyed by Bloomberg, crude oil supplies are expected to rise 200,000 barrels, while distillate inventories are expected to drop by 750,000 barrels.

Market Snapshot / Internals - 12/28/04 Close

Volumes were light once again at the big board, where perhaps the headline number from the consumer confidence numbers may have pushed a vacationing fund manager to make a couple of buy side phone calls to the trading desk before the close. NASDAQ volumes were also off their current 2.13 billion share daily average for the month of December, but improved from Monday's 1.48 billion.

It would be difficult to read any more into today's internals, than that of Thursday and Friday, when many traders are probably relaxing with their feet warmed by extended holiday fire.

Still, some of the new highs for the Wilshire 5000 ($DWC.X) 11,981.40 +0.84%, the NYSE Composite ($NYA.X) 7245.81 +0.67% and the Russell 2000 Index ($RUT.X) 654.57 +1.58% would suggest market participants have their sights set on a bullish close into Friday's shortened trading day.

Pivot Matrix -

The major indices continue to be bound by their WEEKLY Pivots and DAILY R1s. After having profiled a bullish swing trade in the QQQQ last week at $39.74 with a target of $40.25, I do take note of MONTHLY R1 and DAILY R2 correlations at that level tomorrow. Unfortunately, that QQQQ bullish trade was stopped out yesterday at $39.50. Note DAILY S1 and DAILY S2, which come darned close to my bullish entry profile, and stop.

The bullish side of me still has me thinking the QQQQ gets at least a $40.25 trade by Friday's close, if not more, and I'd be hard pressed not to give the Qs another shot on a dip back near DAILY S1 tomorrow.

Earlier this months I also said I'd be on the floor if the OEX hit 584 at some point in December. If institutional computers have control of things into year's end, and with volumes light like they are, then my dog Drake has been wise to have been vying for the recliner instead of the space under my desk.

The reason I think Drake is wise in his recent move to the recliner is today's close for 3M (NYSE:MMM) $82.99 +1.02%. This is probably my #1 "key stock" for the INDU and the OEX. It's the 4th-most heavily price-weighted component for the Dow 30, and currently the 29th-most heavily market cap-weighted component in the OEX. It's also a stock I consider to be a deep cyclical, and one that "MUST" trade bullish in strong economy!

3M (MMM) - Daily Intervals

The technicals for 3M are also what I would consider to be "too perfect" as a stock to really give further lift to the INDU and OEX. It is also a stock that while looking so bullish and not extended, faces perhaps the most formidable test that any stock can be tested by. The point and figure chart's bearish resistance, which MMM now challenges today at $83. "If MMM continues to bid, then bulls will continue to raise the lid" on both the INDU and OEX. My thoughts anyway.

S&P 100 Index (OEX.X) Chart - Daily Intervals

MMM can't "make or break" the OEX by itself, but it is a stock that I have viewed as a stock that can give further lift to what some may feel is an "extended" OEX and INDU. Like an inchworm that will crawl up a tree, for the OEX to gain further, it needs some bullishness from the "tail," which can eventually rotate to the "head" and provide further bullish leadership.

Jeff Bailey

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