Snapshot Notes - December 29, 2006

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FRIDAY, DECEMBER 29, 2006

PostCloseSummary

12/29/06 5:00 PM EST

I mentioned this morning that the last trading day of the year has often had a weak bias to it, particularly going into the final part of the day. While those types of historical comparisons have been inconsistent in their usefulness over the past six months, today held pretty true to form.

This kind of weakness to end a year has seeped into the first of the new year more often than not, with the S&P 500 showing a negative return about 60% of the time when it closes poorly to end the year. The following day, however (the 2nd trading day in January) has been the most consistently positive day of the entire year as you can see from this page of the Seasonality section of the site.

With our intraday guides now either in or very close to extreme oversold territory, seeing some additional weakness to kick off the year should lead to a quick rebound. I continue to believe that even if that does play out, further short-term rallies will be just that - short-term - and we will see a rather sharp move lower over a couple-week period during January given the intermediate-term sentiment condition and January's habit of suffering quick declines.

I'm looking forward to the new year, and new trading opportunities. Hopefully we can all spot some good setups over the coming months and make 2007 our best year yet. Thank you for all the support and fantastic suggestions this year, and here's hoping you and your loved ones have a most healthy and prosperous New Year!

ApproachingTheBell

12/29/06 3:25 PM EST

Stocks have drifted lower into the final few minutes of the year, with some isolated spasms not enough to shake them out of the decline from the morning highs.

Unlike around many month-end moves, a poor limp to end the year does not typically translate into an immediate rebound. Out of the 18 years that have seen the S&P 500 close lower on the last day of the year, the first trading day of the new year was positive 7 times.

I do expect to see a rally attempt sometime in the first few days of the year (particularly if our intraday indicators continue their march into oversold territory), but if so it should be temporary and a good short- to intermediate-term selling opportunity.

LunchtimeLull

12/29/06 12:25 PM EST

We've settled into typical pre-holiday trading, as traders filter out to take advantage of the extremely rare four-day respite.

There is very little going on in terms of changes from the morning session, and I don't anticipate that changing through the close. We might get some fits and starts towards the very close as last-minute orders get executed, but anticipating a directional bias from that is an exercise in complete guesswork.

MidMorningOutlook

12/29/06 10:15 AM EST

Good Friday morning...With the NYSE and Nasdaq announcing that they will be closed for business on Tuesday, and the bond market closing early today, there are some traders scrambling more than they thought they would be this morning.

When the bond market is closed, we don't often see big moves in equities as very large traders often key off both markets and don't like to put money to work when they can't see what the other one is doing, so any move we see today is likely to occur before the early afternoon. For what it's worth (and that's not much lately), seasonality-wise the last trading day of the year has had a relatively negative bias, particularly going into the last 1/2 hour of trading.

Our shortest-term measures had hit a grossly overbought extreme by Wednesday's close, and the pattern after those kinds of readings has been a week or so of choppy trading when we're in the context of a strong longer-term uptrend. As I noted yesterday, though, I'm not too keen on looking for an exact repeat of that pattern given the crosscurrents we face at the very end of the year (and very beginning of a new year). That's doubly the case given the market will be closed Tuesday so we'll be seeing more adjustments than usual. I've backed off pressing any bets here, but still believe that any short-term rally we see through the first few days of the New Year will be temporary.

All the best,

Jason Goepfert

President and CEO

Sundial Capital Research, Inc.

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