SANTA CLAUS RALLY CONTINUES -- NASDAQ CLOSES OVER 2000 -- FINANCIALS, HEALTHCARE, AND TECHS LEAD RALLY

FINANCIALS HAVE STRONG DAY... The Santa Clause rally refers to the usual stock market rally that takes place between Christmas and New Years. So far the market is following its usual end-of-year script. The market had a strong Monday with all major stock indexes hitting new highs for the year. For the first time in several weeks, small caps and the Nasdaq were the strongest performers. Financial stocks also had a strong day. Chart 1 shows the Bank Index hitting a new high after breaking out last week. Brokers had an even stronger day. Chart 2 shows the Broker/Dealer Index surging to a seven-week high. It's usually a good sign for the market when financials are rallying.

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NASDAQ BREAKS 2000 BARRIER... The Nasdaq Composite Index finally cleared the 2,000 barrier today. In so doing, it resumed its major uptrend and put all of the major stock indexes back in sync on the upside. Today's upside breakout by the Nasdaq puts it in position to challenge its early 2002 peak at 2098. Although it received less media attention, the S&P 500 crossed the 1100 barrier for the first time this year. In addition, the Russell 2000 Small Cap Index hit a new high for the year. Other market groups showing strong gains today were Basic Materials and Healthcare. Biotechs and Pharmaceuticals continue to climb after their recent bullish breakouts.

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