We are another week closer to Christmas and another week older but the stock market remains stuck in its trading range. I can sum up my commentary tonight in three words: nothing has changed. Short-term the economic picture is still improving with rising retail sales, an improvement in business inventories, manufacturing is looking better. There was a hiccup last week in the New York Fed Empire State index, which plunged unexpectedly. Yet this was balanced out (somewhat) by an improvement in the Philly Fed index a couple of days later.

The FOMC meeting last week failed to push the market from its trading range in spite of the bullish overtures and the continuation of the extended period of low interest rates. For the most part the stock market has been disconnected from the dollar's rise and even some of the commodities are fighting the uptrend in the dollar, which is normally bearish for commodities.

This week we've got the Chicago area Fed National Activity index and the Richmond Fed Manufacturing survey but the New York and Philly surveys failed to move the markets so I don't expect these will either. Tuesday will bring the latest revision to GDP and as long as the report isn't wildly outside of expectations the market will probably ignore it.

We have two weeks left for 2009 for a total of eight trading days. Fund managers have already placed their bets for the remainder of the year. Thus they have no need or desire to rock the boat or put more money at risk. This will probably keep the major indices range bound although I suspect we will still see a drift higher. There is probably going to be some last minute window dressing before the quarter ends. The rest of the year is going to be quiet and as long-term traders we won't see much action.

Now January is another story. Odds are growing that the market could see a correction in the middle of January only to bounce once earnings season begins. That's when we need to be active and use the pull back to launch new positions. Just keep in mind we may need to exit sooner than expected given my long-term outlook for the market.

I want to wish all of our readers a wonderful holiday and a very merry Christmas. Thank you for subscribing!

Chart of the S&P 500 Index:

Weekly Chart of the S&P 500 Index:

Weekly Chart of the Transportation Index:

Chart of the Russell 2000 Index:

Chart of the NASDAQ Composite:

LONGER TERM OUTLOOK

Previous Comments on my Long-Term Outlook:

My long-term outlook has not changed. I still expect the economy to see a double-dip, "W"-shaped rebound with the second dip in 2010 (some analysts are predicting it will not show up until 2011). Lousy consumer spending, rising foreclosures, and lagging job growth will be the main culprits. Several weeks ago there were some comments out of the U.S. Treasury concerning foreclosures. The Obama administration's HAMP loan modification program can only help a certain number of homeowners and one official said that even if the HAMP program was a total success we should still expect millions of new foreclosures. This only reinforces my own belief that we will see another tidal wave of foreclosed homes in 2010 and 2011. Some analysts are forecasting upwards of six million foreclosures in the next three years. What is that going to do to consumer confidence and consumer spending? It's not going to help! You can review my long-term outlook here. It's the second half our my "Two Months Left" commentary.

~ James Brown

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