As we approach the end of 2006, I hope most of you are enjoying this light volume push and are trading accordingly. This week, I gave 545 new signals for stocks and there was a pretty even distribution of new UPs (266) versus new DOWNs (279). Normally, I hesitate to make a lot of changes at the end of the year given the light volume of the holiday schedules, but these stocks appeared to be making directional changes that I could not ignore. Inevitably, the year end window dressing and the lingering Santa Claus rally will have messed up some of these signals so please evaluate all your trades with a lot of skepticism. There are many reasons to ignore my signals (taxes, diversification, fundamentals, technicals, etc.) and this would be a great time to recognize that I am wrong about 30% of the time.

My grinch-like view of the market has not warmed with holiday cheer or the abnormally high temps here in New York and I fully expect that we will see weakness at the beginning of 2007. I am seeing a tremendous number of charts where the price is holding up, but the underlying technicals are weakening. It is not uncommon for the delayed selling of winners (capital gain avoidance) and performance chasing to prop up the market but those incentives disappear starting next week. If I am wrong and new capital is put to work to extend this rally, I will reverse course. The HEDGEfolios Timing Indicator is currently telling me not to expect a strengthening market but that is always possible.

The global warming induced reduction to oil prices is one cold front away from disappearing. As I have previously written, I don’t enjoy watching our trading pits turn into meteorologists, but that is what we are faced with today. Any drop in temps and I have a feeling that geopolitical threats from Iran (and Korea I fear as well) will likely provide a long-side bias to oil. Yesterday’s crappy retail sales figures and the resulting bets on a Fed rate cut were not an unexpected bullish spin, but I think they got all they can get out of it. If the consumer is truly doing that poorly, the market will have to start taking the recession talk more seriously. Today’s new housing sales report was encouraging and I wonder whether the economists who saw no end in sight to the decline are willing to admit that there is at least some light at the end of the tunnel. Regardless of whether you believe government economic data or want to see housing declines push a Fed rate cut, a recession is tough to fight, especially with low real interest rates - just ask Japan. If we are already heading in that direction, one cut will not solve it immediately given the lagged effects of rate changes on the economy. As I keep suggesting to people who want lower rates to pump up the market, be careful what you wish for. We are on a very fine line here.

I hope you enjoy the rest of the year and wish you great luck with your investing in 2007. Take advantage of the FREE trial to HEDGEfolios and start it off right. This week, I will be spending a lot of time updating the EVALUATE section. I did not change the fundamental definitions in December due to some technology issues that I have since resolved. Going forward, EVALUATE will be much easier for me to crunch the 25,000+ variables that I use. I will also be working on a few new features that will be appearing on the site in the first quarter. Next week, I will be posting the 2006 performance summary for the HEDGEfolios universe of over 3000 stocks which I expect to come in around 27%. I will also be analyzing the performance of folios according to size and style (Large Cap, Mid Cap, Small Cap, Value, Blend, Growth and their various combinations). Additionally, I will be doing some posts in January which show the performance of UP signals vs. DOWN signals and these posts will coincide with Academic Highlight articles about the difficulties of short selling (one of my favorite topics!)

My posts will be limited until next week but if something meaningful happens, I’ll give my thoughts.

Tomorrow, I am making the pilgrimage to the New York metropolitan area (NY, NJ and CT) for the holidays. I’ll still be working every day the market is open but am certainly looking forward to some time with family and friends. In between the usual festivities, I have some media and customer meetings on my schedule for the 27th and 28th. So in case things get too busy, I drink too much egg nog and forget to send out holiday wishes…. I hope you have a Merry Christmas, Happy Hanukkah, Happy New Year or whatever celebration fits your life.

Investors in Northfield Labs (NFLD) were treated by a blood bath when the results of a Phase-3 study showed elevated levels of death for their PolyHeme blood substitute. Today’s 58% decline was obvious, but when I looked back at the chart, I couldn’t believe that I missed changing the signal last week. Something “not so funny” was going on with trading in these shares over the past few days and as early as last week. I have a feeling the SEC will be investigating last Friday’s trades, as well as Monday and Tuesday’s but there is a pretty natural defense. On Thursday, Northfield’s primary competitor got bad news that advisors to the FDA were not supporting a controversial clinical trial and I can understand that fearing a tougher regulatory environment might lead to some selling. Furthermore, you might assume that nervous NFLD investors might have extrapolated that the Biopure decision had to do with the yet-to-be-released results of Northfield’s similar study.

However, that’s a stretch. Usually, when one competitor in a head-to-head race falls back(BPUR), people have a propensity to assume the other guy (NFLD) has a better chance of winning big. In the world of first-in-class drugs with huge market potential, that is even more common. In this case, you have to believe that the selling on Friday, Monday and Tuesday was natural supply and demand based solely on BPUR’s bad luck and having nothing to do with information on a study that had not been released to the investing public until after Tuesday’s close. Focus all you want on today’s blood-letting, but I am more intrigued by the 33% decline from last Monday’s open until Tuesday’s close. The other reason I am disappointed about not changing the signal had to do with not listening to Roger Nusbaum’s post from last week (click here and then read his followup post here). Excellent work Roger! Certainly better than mine. By the way, Northfield says that it still intends to submit the drug for FDA approval.  As for biotechs, I hope you are not surprised that these stocks can and do, put a hurt on your portfolio from time to time.  Just check recent action in NUVO and NEOL and you will see that NFLD is not alone.  If you are speculating (investing is the wrong word) in a biotech that has one drug in its pipeline, you should never forget what happened in these stocks.

Bah, humbug! I know I have been acting like a Stock Scrooge lately and my posts have reflected an increasingly negative tone. That’s not so easy in a market that is in love with itself, but like Ebenezer, I don’t feel bad about being “unloved and alone.” Since October 16th, I have given 2 new DOWN signals for every one new UP signal and as you can see from the HEDGEfolios Timing Indicator, I have an increasingly bearish bias. Meanwhile, the market keeps heading higher and yet, I am not any more bitter than usual. It scares me to think of what is likely on the way, but all I can do is report what I am seeing. So far, I have been visited by the “Ghost of Ignorant Markets Past” and the images I was shown of inverted yield curves didn’t cheer me up. They made me more resolved. I was visited by the “Ghost of Ignorant Markets Present” and the images I see of rising energy prices, inflating debt levels, and geopolitical tensions didn’t shake me out of my nightmare either. I’d really love to see the “Ghost of Markets Future” but that hasn’t happened. Sooner or later, this market will decline and when everyone is finally as scared as I am today, you can expect Steinhardt Scrooge to transform into a much nicer fellow, similar to how I was six months ago. Until then, you’ll be stuck with me pointing out the absurdly positive spin and ignorance of negative data.  Bah, humbug!

CNBC is a great brand and there has been a big push over the past few months to expand it even further. The new studio was followed by new sound effects and graphics that were more than a bit annoying. New, new, new - I get the whole push to make financial media new, exciting and hip. I can only imagine the amount of money the network must have spent on focus groups and surveys to tell them how to leverage the brand they have built. When the new lineup of hosts from Squawk Box to Fast Money showed up, I just kept watching and simultaneously wondered - “where the hell is Ron Insana?” It’s their network and I admire the marketing effort, but is creating a new index called the FTSE CNBC Global 300 an effort to fill a critical void in financial info and the markets? Or is it just another way to cash in by eventually sponsoring an ETF with the same name? Now we have the new CNBC.com and while I still use Moneycentral, I suspect that the website investment and the non-stop on-air plugs will eventually brainwash me to put it in my favorites list. It does look pretty good and I am sure they were out to enhance the investing success of their viewers. Or maybe it was just a way to use the brand to try and get people to sign up for CNBCplus “for only $9.95 per month. That’s a 33% Savings!” Scroll down to the fine print that says the regular price is $14.95. What a bargain!!! Are you going to sign up? GE/NBC can do whatever they want with the CNBC brand. As long as they don’t look too cheap and totally forget about financial journalism, I’ll still watch.

After today’s PPI release, I was amazed at the strength of the permabulls’ hold on this market. A CNBC guest commented that “Everyone knows now that the data stinks.” Did we just figure that out? Most economists, investors and portfolio managers were convinced by last week’s CPI data and I cannot remember anyone suggesting that there was even a one basis point error. Yet, when the PPI data does not follow the Goldilocks scenario - it gets slandered and largely discarded. As I have previously written, our market is data dumbpendent and on days like today, I really hoped we would decide to start weaning ourselves from this nonsense. But nope - the tactic was to just throw out the data and wait for the next piece that fits the bullish case. The PPI was painted as nothing more than a reversal of October and according to Steve Liesman, he saw nothing that would convince him that we have inflation or that housing will not continue to decline. Maybe we should just let economists draft the reports based upon what they think should be in there and save all the taxpayer money spent to collect and distribute government data. Santa’s rally sleigh is not being pulled by reindeer this year, but the flying bulls are doing a great job!

Bird Flu has apparently flown the proverbial coop - at least as far as the market is concerned. I was looking through some of the factors that affected the market adversely this year and began to wonder where the pandemic went. In April and May, it seemed like it was a matter of days before we were going to see people dropping like flies (make that birds.) I am not trying to make light of such a disaster and hopefully we are slightly more prepared now for all the hysteria that was being tossed around. However, I just hate things that go from Page 1 to nothingness without any explanation.

Last fall and this spring, we had constant tv, radio, internet and print coverage, we had Congress politicizing, we had the administration developing action plans, we had over $7 billion in appropriations, we had blue ribbon infectious disease conferences, and we even had a made-for-tv ” special” on ABC called “Fatal Contact: Bird Flu in America.”  Fortunately, the paranoia-induced media hype was a lot more contagious than the actual disease has been, but along the way, the markets got played. Investors were trying to figure out how to position their portfolios for the impending doom to avoid stocks that would get whacked and to find a few stocks that would benefit. Major brokerage firms (anonymous because I find it embarrassing) were offering up advice like this…”We believe the imminent arrival of bird flu in the United States will bring this potentially devastating disease back into the limelight… We believe investors should consider a basket of stocks to inoculate their porfolio from this source of risk.” Overall, the whole mess was probably a contributor to the market selling off in May. But then geopolitical and oil worries took over and the bird flu thankfully vanished from the market. Since then, I am not sure that the world or the market is much safer. I wish that this experience would have taught a few lessons about not overreacting and putting your money at risk, but I doubt it.

Ticker Sense started to publish the results of the first annual survey of financial bloggers they consider to be “the web’s best.” Because I participate in their weekly market sentiment poll and I have a very high regard for their work, I thought I’d give Ticker Sense a quick plug and give you a brief explanation. If you look over their posts on the 2007 outlook, you might notice that I am mentioned as a participant but curiously, my responses are missing from the highlighted charts. It’s not a mistake on their part - I just abstained from all but two questions (my favorite investing book and my opinion of the importance of financial bloggers.) Those were the only two I knew the answers to! You see, I really don’t believe in forecasts for the S&P 500 a year from now, or the price targets for gold or oil in December 2007, etc. I know a lot of people like this stuff but I often rip on the absurdity of these pursuits so it should come as no surprise that I did not submit any guesses. I have a pretty good feeling for the general direction of the market over an indefinite time period (see the HEDGEfolios Timing Indicator) but I really don’t have a clue as to a specific price one year from now. I also cannot tell you which sectors will do better than others in 2007 or whether Large Caps will outperform Small Caps or whether Value is a better bet than Growth. Other than my commentary in this section, the database portion of HEDGEfolios gives you the ability to find stocks that meet your criteria and suggests entry and exit points for over 3000 stocks and ETFs. Those two things will help you build and manage your portfolio in up or down markets. I am not sure how you can make money from reading financial guesses but I know it’s enjoyable for a lot of investors. If that applies to you, please click on the link to Birinyi’s Ticker Sense.

Absent a 13% decline in the next two weeks, the January Barometer was correct this year, which of course is evidence of nothing in my opinion. But for all you believers out there toting around your Stock Trader’s Almanac, I wanted to acknowledge your win. Since you also probably believe in the “Sell in May and Go Away” theory, I am sorry you missed out on the 5.1% gain from May to November. And how do you explain the Second Year of the Presidential Cycle being so good this year or that an AFC team won the Super Bowl last year? Regarding 2007, I am sorry that Global Warming will likely ruin this year’s white Christmas in Boston. And the dominance of the NFL by the AFC division this year isn’t making that Super Bowl Indicator look too encouraging again. I do hear that keeping your fingers crossed works well and to improve your chances, don’t break any mirrors next January.

Our market has a fascination with bubbles.

• Do we have a Private Equity bubble?
• Was there a bubble in commodities last year?
• Is the housing bubble popped?
• Are higher oil prices a bubble or just a reflection of global growth?
• Is there a debt bubble?
• If the Chinese currency bubble is devalued how will our economy react?

It seems we have so many bubbles going on that Don Ho would be envious. Just like his famous song, as these bubbles grow they “make us happy, make us feel fine, make us warm all over with a feeling that we’re gonna love them ’til the end of time.” But after the most recent stock market bubble popped in 2000, we know they don’t last forever. As a consequence, investors and commentators love to spend time on a bubble search. If you find a bubble when it is still tiny, you should invest as early as possible and enjoy the wild profits available during its expansion. But finding baby bubbles is not that easy and the bubbles we end up hearing in financial media are nearing their peak. So as you contemplate the next bubble, evaluate its stage and proceed accordingly.

Historically, bubbles are not kind to long term investors but they are great for short term speculators with either the capital or hype to extend the fantasy. The realities for the majority of investors are that bubbles are typically followed by very painful losses and on an economic scale, they are usually followed by recessions. The Tulip bubble, the Mississippi bubble (France), the 1920’s US stock market bubble, the 80’s Japanese stock market bubble, and the 90’s US stock market bubble all had recessions on the back end. Cheap debt, high liquidity and increasing risk tolerance are the factors that I think are most relevant but take a look at this article and see how many preconditions for bubbles are currently being met in the overall market and individual asset classes. Maybe it will help you on your bubble search.