Macro Outlook

It seems like the holidays go on forever: It all started the week before Halloween with my middle daughter's birthday party. And just when you thought it was finally all over and real life could resume, President Ford's official state funeral closes the market for one more day. 

It's going to make for an easy slide back into the week, but a frenetic finish for same, as the great group brain absorbs… 

The Institute for Supply Management's December report on the manufacturing sector (expected to come in flat at 50); 

The Federal Open Market Committee's Dec. 12 meeting minutes; 

November construction data, spending, and factory orders;

December auto sales figures;

December retail sales figures;

The ISM's December service sector report;

And finally, the Labor Department's report on December non-farm payroll and unemployment rate reports. 

More on how all this will soak in tonight. 

Although I was hoping for the markets to be open today, it gives us one extra day to reassess 2006's economic performance.

Overall, we saw a 16.28% gain on the Dow Jones Industrial Average. We also saw a gain of 8.98% on the Nasdaq and 13.62% on the S&P. 

Most importantly (and of important interest to me) the Russell-2000 (RUT) rose 16.59% during the course of 2006, more than any of the afore mentioned indices. 

This provides a great starting point for the January Effect, which pushes the value of small cap stocks and the Russell-2000 up. This should forge new ground for the RUT above its long-term resistance of $800. 

Material Profits

Over the last week of the year, oil dropped back down into the bottom of its trading range, gold continued its December rise, and natural gas slipped below its support at $7.50 per thousand cubic feet (or mcf).

Agricultural grains like corn, oats, and wheat continue to trade at high levels heading into this New Year, as is ethanol. Orange juice and cotton are up as well.

The commodities "boom" isn't busted... but it's certainly wise to employ some sector rotation strategies.

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