Observations: The key statement from last report was simply 'this market may test its recent high levels again before finally pulling back'. This comment was made after seeing an overbought bullish sentiment level with our primary markets reading. At that time (12/6) the Dow was moving lower off highs at the 10,900 level, and was at 10,856. The market continued lower (to 10,755) but, as expected and indicated, the market is back testing those highs having closed at 10,875 on 12/16.

Sentiment is indicating the market will be hard pressed to reach and break through Dow 11k, let alone reach and sustain levels above that point.

Bullish   Bearish   Neutral

End-Sept '05  40.7%   25.7%   33.7%

Oct. '05  43.5%   28.1%   28.4%

Mid-Oct. '05  40.6%   34.3%   25.1%

Nov. '05  49.0%   21.8%   29.3%

Mid-Nov. '05  57.4%   17.0%   25.5%

Dec. '05  61.0%   13.8%   25.2%

Mid-Dec. '05  58.6%   16.8%   24.5%

Current bullish sentiment has moved off last reports overbought level and is now at a high neutral/weak overbought point. We'll reiterate that our data for this segment has usually been as early as a month and a half ahead of market tops, and we'll maintain the expectation that there is a greater chance of seeing a market top and pull back in early January 2006 versus prior to year end.

'Hope' has continued to drive this market, and hope for higher levels prior to year end may be waning. Even though we are not 'officially' in the overbought sentiment range with the current data, high sentiment levels continue to indicate overbought market conditions, and lower prices can be expected in the major averages.

Long term optimism remained basically unchanged (from 72.8% to a current level of 72.1%). These high, overbought levels indicate weak to neutral markets twelve months from now. Last report we pointed out the readings from November and December of 2004 at similar (high) levels, indicating a weak to neutral market for November and December 2005. The current readings indicate an even weaker market for Nov/Dec 2006.

Optimistic    Pessimistic

End-Sept '05  62.9%   37.1%

Oct. '05  59.1%   40.9%

Mid-Oct. '05  57.8%   42.2%

Nov. '05  60.0%   40.0%

Mid-Nov. '05  69.0%   31.0%

Dec. '05  72.8%   27.2%

Mid-Dec. '05  72.1%   27.9%

Basic Materials: Neutral
Sentiment remains neutral but trending higher in very small steps. The iShares Dow Jones US Basic Materials (IYM) is down 1 point since last report.

Consumer Cyclical: Neutral
Sentiment remains neutral and continues to move higher, now just a percentage point off an overbought reading. The iShares Dow Jones US Consumer Services (IYC) is up just over 1 point since last report.

Consumer Non-Cyclical: Neutral
Sentiment for the sector dropped from 6.2% to 2.2%. Although a significant move, sentiment remains neutral for the sector. The iShares Dow Jones US Cons Goods (IYK) is up less than 1 point since last report.

Energy: Neutral
We saw an oversold reading with last survey, but the market moved against that reading showing losses. We indicated at the beginning of this report that Exxon had given back 3%, and others including Chevron (CVX), BP (BP) and the Select Sector Spdr-Energy Index (^IXE) experienced similar losses. Against these lower prices, sentiment actually moved higher and is now at a neutral level.

Financials: Overbought
Sentiment from last report indicated we could expect lower prices in the sector. Since that time the Financial Select Spider (XLF) is down less than 1%, Wells Fargo (WFC) up less than 1%, Wachovia (WB) up less than 1%, American Financial Realty Trust (AFR) down less than 1%, Goldman Sachs (GS) down 4.7%, and Bear Stearns (BSC) is up 2%. Sentiment remains overbought and we'll expect to see lower prices moving forward.


Healthcare: Neutral
Sentiment can be considered trending lower but remains at a neutral level. The Amex Pharmaceutical Index (^DRG) is up 5.8% since last report and we may be missing the beginning of a positive move higher.

Services: Neutral
An extreme reading in the service sector remains elusive, and although sentiment is trending higher it remains neutral. There was very little price movement over the past two weeks in Wal-Mart (WMT), Home Depot (HD) Disney (DIS), and Target (TGT).

Technology: Neutral
Sentiment remains neutral and is trending lower. The Nasdaq is down since last report, and looks to be lacking any momentum for a positive year end push. Over the past two weeks Cisco has been basically flat, Microsoft and Intel are down slightly, while Sun Micro continues moving higher.

Transportation: Overbought
We stated in our last report that we would 'look for an overbought reading in the next few surveys'. This survey provided us with a weak overbought sentiment reading of 2.6%. Sentiment has been trending higher, and we'll expect lower prices moving forward. (The Dow Jones Transportation Average (^DJT) has (slowly) started moving lower and that can be expected to gain some steam and continue.)

Utilities: Neutral
We indicated it was a high risk move to expect higher prices based on the last sentiment reading, and high risk paid off as the DJ Utilities Avg. (^DJU) moved higher by 2%. The rest of us waited for confirmation of an oversold market, and not only did we miss out on the short term gains but we missed the confirmation by 0.02%. Utilities will remain neutral.

ETF SENTIMENT LEGEND

Exchange Traded Funds (ETFs) - Index Coverage

Sector	Oct. '05	Mid-Oct. '05	Nov. '05	Mid-Nov. '05	Dec. '05	Mid-Dec. '05
Dow Jones Industrial Average (Dow 30)	5.7%	6.3%	7.0%	6.1%	7.7%	7.4%
S&P 500	14.5%	13.3%	10.2%	10.9%	11.8%	9.7%
Nasdaq 100	11.7%	12.3%	16.9%	23.4%	23.0%	16.7%
Internet Stock Index	2.1%	0.4%	2.9%	4.2%	1.6%	2.7%
Russell 2000 (Small-Cap Stock Index)	14.1%	11.2%	13.1%	12.8%	13.7%	15.2%
European Stock Index (Germany, France, UK, etc.)	1.4%	2.1%	2.9%	1.3%	0.6%	0.8%
Nikkei 225 (Japanese Stocks)	14.5%	13.3%	9.6%	10.6%	11.2%	13.6%
Asian Stock Index (China, Hong Kong, Korea, SE Asia)	11.0%	14.7%	12.1%	14.1%	12.5%	12.1%
Commodity CRB Index	12.7%	7.0%	7.0%	5.1%	5.8%	7.4%
Gold/Silver Index	9.2%	16.1%	16.0%	8.7%	9.3%	11.7%
Treasury Bond & Note Futures	1.1%	1.8%	1.3%	1.9%	1.0%	1.6%
Equity REITS (US Real Estate)	2.1%	1.4%	1.0%	1.0%	1.9%	1.2%

Nasdaq 100: Neutral
Sentiment is trending lower but remains neutral (similar to tech sector sentiment). The Nasdaq 100 Trust Shares (QQQQ) is down 2.4% since last report, and sentiment looks to be lining up to indicate the bottom of this market.

Russell 2000: Neutral
Sentiment remains neutral as the RUT moved 2% lower over the past two weeks. We mentioned in our last report that we 'may be missing out on some gains' but sentiment remained accurate and saved us from realizing losses with the recent lower prices.

European Stock Index: Oversold
We had two consecutive surveys with oversold sentiment levels, and high risk takers had already realized 3% gains prior to last reports oversold confirmation. Over the last two weeks another 2.6% was added as the streetTRACKS Dow Jones Euro STOXX 50 (FEZ) continued moving higher. Sentiment remains oversold, so look for the gains to continue.


Asian Stock Index: Oversold
Sentiment remained lower and moved to a weak oversold level. Although this was the second of two consecutive low readings, we're a bit hesitant based on the prior surveys data indicating uncertainty. The ETF's in this category that we track are EPP, EWH, EWS, EWY, EWT, and we would expect higher prices to be met with some resistance.

Commodity CRB Index: Neutral
Sentiment indicated gains could be expected and over the past week the CRB moved higher by just 0.9%. Sentiment has now moved higher as attention to the commodities has been strong and even slight moves like 0.9% are gaining fast attention. We're back to a neutral level.

Gold/Silver Index: Neutral
Again, we would have thought that this category would have shot higher based on the recent attention Gold prices are seeing in the mainstream media. And although sentiment did move up, it remains neutral. But this is the ETF category, not the commodity reading, and the Gold Bugs Index (^HUI) continues to give investors little to be excited about. The index moved higher by only 1% over the past two weeks.

Tbond and Note Futures: Neutral
Sentiment has moved higher but remains neutral.

Equity REITS: Oversold
We expected higher prices to continue after last report. We already realized gains of 3.6% from the Mid-Nov report, but over the past two weeks the iShares DJ US Real Estate (IYR) market took back 0.3%. That isn't a great deal to be concerned with as sentiment indicates higher prices can be expected.

Africa: Oversold
Sentiment for the region is limited to a range of 0% to 1.2%, and moves in sentiment can be tight. We saw an oversold reading of 0% in mid-Nov, and then saw a 4.3% gain in the iShares MSCI South Africa Index (EZA). Last report we saw sentiment move to a neutral level. We're now back to a 0% oversold reading and we'll look for higher prices in the EZA.


Australia: Neutral
Sentiment has moved slightly higher but remains neutral. The All Ordinaries is up less than 1% over the past two weeks.

Canada: Neutral
Sentiment remains neutral. The TSX continues higher.

China/Asia: Neutral
We expected to see higher prices after last report and over the past two weeks the Hang Seng (^HSI) is up 1.3%, and the Shangai Composite (^SSEC) is up 4%. Sentiment, however, has moved higher and into a neutral level.

Europe: Neutral
We had already seen decent gains after the oversold reading from the mid-November report, and over the past two weeks added to those gains with an additional 1% in the German Dax (^GDAXI), and gains under 1% in the French CAC (^FCHI). It looks like the market may have topped out as sentiment moved higher and into a neutral level.

India: Oversold
Sentiment was trending lower and we're now at an oversold level of 4.5%. We'll look for higher prices moving forward with India BSE 30 (^BSESN). (We just missed a 6.5% gain over the past two weeks, but sentiment indicates more can be expected.)


Japan: Overbought
As the Nikkei was moving higher, so was sentiment. But the market may have recently topped. We had an overbought reading a few surveys back that we negated as it was weak (low), and there was no trend associated with it. But we now have that same reading again - 20.4%. We've now had higher readings for three consecutive surveys and, although we'll look for an overbought confirmation with next survey, we'll also issue a high risk outlook of a greater chance of lower prices moving forward.

Middle East: Oversold
Another high risk sentiment reading (see mid-Nov. report), as sentiment has moved lower indicating higher prices can be expected in the Israel TA-100 (^TA100), and the Egypt CMA (^CCSI). The rest of us can wait for confirmation as sentiment has recently indicated uncertainty.

Russia: Neutral
We expected to see higher prices after last report and over the past two weeks the Russian ASP MT Index, Rb (ASPMT) has provided 3.2% gains. Sentiment is now at a neutral level and we'll take the decent gains off the table.

South America: Overbought
We expected an overbought reading with this survey as data was trending higher. The current level is at a new 52 week extreme high of 8.7%. We'll expect to see lower prices in the Brazil Bovespa (^BVSP) moving forward. (The market may have recently topped at 33,629 on 12/14).

Observation:

Treasury Bonds: Neutral
Sentiment remains neutral.

Corporate Bonds: Neutral
Sentiment remains neutral.

Municipal Bonds: Neutral
Sentiment remains neutral.