IBD General Market

12/15/2006

Stocks opened strongly Friday morning, but faded to close with meager gains.

The consumer price index was flat in November, even after factoring out volatile food and energy costs. Meanwhile, production at factories, mines and utilities grew more than expected last month.

The Nasdaq gapped up as the market cheered the reports, rising as much as 0.7% in the early going.

But the major indexes weakened the rest of the session. The Dow rose 0.2% while the Nasdaq and S&P 500 finished with 0.1% gains.

The composite turned back after hitting 2470, a level where it met resistance in late November.

Volume spiked up, although that's to be expected on a quadruple witching expiration of options and futures.

The trading week was generally good for market leaders, despite Friday's flat conclusion.

A number of top-rated stocks continued bullish moves or rebounded from support at their 10-week or 50-day averages.

Steel Dynamics (STLD) was among those, despite a sell-off in steel stocks Tuesday after Nucor issued a profit warning. Research In Motion (RIMM) rallied smartly off its 50-day line.

In today's IBD 100, many of the stocks at proper buy points are of this sort — making new gains after pulling back to intermediate moving averages.

The IBD 100 inched up less than 0.1% on Friday. For the week, it advanced 0.5%.

That breaks a recent trend. Since November, each week that the IBD 100 rose, it outperformed the S&P 500. Still, the highly rated stocks that suffered were mostly smaller, thinner names.

The S&P, Nasdaq and NYSE composite were up for the week on higher volume. Whether on a daily or weekly basis, an increase on higher volume is positive.

It was a more meaningful week for the S&P 500, which hit its highest levels since November 2000.

The NYSE composite is at record highs, helped partly by a resurgence in energy stocks.

The Nasdaq is still off its Nov. 24 high. Some of its big-cap technology components have been resting in recent weeks.

Google, (GOOG) Cisco System's (CSCO) Apple Computer (AAPL) and others that make up a sizable portion of the Nasdaq and Nasdaq 100 have slipped or consolidated.

The Nasdaq is not the only index hitting resistance.

Small caps finished lower for the week, as the S&P 600 lost 0.2%. The index met resistance around 407, about the same level where selling emerged in early May.

It's a similar story for the midcap S&P 400, which is finding resistance around 820.

It would be favorable for the market if the Nasdaq in particular — which has reclaimed its role as the leading market gauge — can pierce through its resistance.

This week, the market has several inflation figures to watch.

Producer prices and personal income and spending reports are due out. Also getting a look will be the index of leading indicators and the final third-quarter GDP reports.