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[TTHQ Staff]

Todd Market Forecast Stock Market Update for Wednesday 01/03/07
www.toddmarketforecast.com
Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.

DOW + 11 on 150 net advances
NASDAQ COMP. + 8 on 100 net advances


SHORT TERM TREND Bullish
INTERMEDIATE TERM TREND Bullish


STOCK MARKET ANALYSIS:

Before we get to today’s action, let’s discuss some seasonal tendencies. We have often discussed the fact that the market has a strong propensity to rally from the November lows to a high sometime in January. This is the time element. But, there is a price element also.

Over the past 38 years, the average price gain from the November low has been 10.6%. In only 3 of those years has the ultimate January high been less than 5% above that low. That means that if past tendencies hold, the Dow has a 92% chance to close over 12,585 which is 111 points higher than the close today.

But, an average gain from the November low would take the Dow to 13527 or 1000 points higher than today’s close. We doubt this will happen, but suffice to say that there are still powerful seasonal forces tugging the market higher. You can get a more definitive idea of this by looking at the first page of our December newsletter.

Today was a real roller coaster. The Dow opened sharply higher, moving to plus 110 before reversing by 160 points to actually be down 50 before bouncing back at the close. The action was blamed on the release of December’s FOMC minutes which said that the Fed was still concerned about inflation.

However, we should bear in mind that the first day of the year is frequently choppy as investors finally get to make some changes that they couldn’t make in December for various reasons. We are still looking for higher prices.



NEWS AND FUNDAMENTALS:

The ISM manufacturing index came in at 51.4% in December. The consensus was for a reading of 49.5%. Construction spending dropped 0.2% in November. The decline was less than the expected drop of 0.5%.

On the stock front, Blockbuster, Continental Airlines, Sirius Satellite Radio and Wal-Mart guided higher and rallied 5%, 4%, 5% and 3%. C.H. Robinson and J.B. Hunt were upgraded by Bear Stearns. The stocks rose 4% and 8%. Topps Co. beat estimates and jumped 7%.

On the negative side, Hess Corp., Suncor and Sunoco downgraded by Deutsch Bank and dropped 4%, 7% and 4%. Advanced Micro Devices was downgraded by Goldman Sachs and lost 5%. Amazon.com was downgraded by Citigroup and sank 3%. GM was downgraded by Banc of America and gave up 5%.



BOTTOM LINE:

Our S&P and NASDAQ intermediate term systems are on a buy signal. Mutual fund investors should be in a 100% invested position.

Short term ETF traders are long the Russell 2000 ETF, symbol IWM at 77.84. Move your stop to 77.00.



OTHER MARKETS

We are on a sell for bonds as of December 22.

We are on a sell for the Euro and a buy for the dollar as of December 13.

We are on a buy for gold as of December 28.

We are on a buy for crude oil as of November 30. Crude got mangled today, but it still hasn’t broken support and five day RSI is 16.

We are bullish for all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.



MONETARY CONDITIONS = - 1

7 day RSI for the S&P 500 = 47

7 day RSI for the NASDAQ = 49

McCLELLAN OSCILLATOR = - 78

TRADING INDEX - TRIN (10 day) = 1.11

COMPOSITE GAUGE = 11

COMPOSITE GAUGE FIVE DAY M.A. = 9.4

NOVA URSA SWITCH FUND RATIO = .86

CBOE PUT CALL RATIO = .85

VOLATILITY INDEX VIX = 12.04

SUPPLY DEMAND GAUGE 5 DAY M.A. = .58




STEPHEN TODD A SHORT BIOGRAPHY

Editor and publisher of the Todd Market Forecast, a monthly stock market newsletter with an included nightly hotline.

Steve has published articles on the stock market in the following publications: Barron’s, Stock Market Magazine, Futures Magazine, The National Educator, and others.

His stock market commentary is heard on the following stations: CNBC, Bloomberg, CNNfn, Associated Press Radio, Business Radio Network, CKNW in Vancouver, British Columbia, KFWB, Los Angeles and ROBTV in Toronto, Ontario.

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TODD MARKET FORECAST
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