The FIFTI Index is a measure based on fifty opinions of independent investment advisors with free newsletters and web site market forecasts. FIFTI¹ is the acronym for Free Information From The Internet. It is one of the tools that www.investorsinternet.com uses to gauge the stock market's direction for its Members and Subscribers. Because the opinions are not those of financial professionals who may have a vested interest in being optimistic about the market rising, the FIFTI Index is more reactive to changes in the market place than many other surveys.

The refusal of the markets to rise as the holidays approach is causing anxiety about the short-term among the market experts. The percentage of bulls for this year's market shown by the FIFTI Index has dropped 8% from last week. The 8% has been distributed evenly between those who are neutral and those who are bearish on the stock market into the year end. The FIFTI Index now shows 33% bulls, 42% neutral and 25% expecting a drop into year end.

A similar change has also taken place in the medium term forecasts, where the bulls have dropped from 48% last week to 39% this week. Bears (32%) have increased 3% and neutral opinions are up 6% from last week.

It is the season for predictions about 2006, and the Composite FIFTI Index is showing a large increase in the number of bulls. This is because the more popular sites for the mass audiences, such as Business Week, Forbes, Fortune, MarketWatch, MoneyCentral.MSN and Smart Money, all report predictions for 2006 that range from a 5% to 32% rise for the markets in 2006. The majority of these forecasts are by Wall Street firms, not independent experts. We take out the bullish reports from these six magazines, and the opinions of some other funds and Wall Street firms, to produce the Independents' FIFTI Index. This shows percentages of 2006 bulls and bears equal at 45%. 10% weigh the pros and cons without committing to an up or down view for 2006.

Points raised by the independent investment advisors include a dropping put/call ratio, interpreted by some as bullish so long as it is falling and by others as a prelude to a market top. Low $VIX and $VXN - again bullish while falling but now at levels where markets top. Sentiment surveys that have such a high percentage of bulls that they are bearish. A breakdown in the Nasdaq's leadership is also regarded as a downward indicator.

On the plus side, the week before Christmas is typically a strong week for the market. The markets have not broken down and the economy is showing remarkable strength.

Longer term the major, intwined themes are the economy, inflation and the Federal Reserve, the consumer, the dollar, and the risk of an external event shocking the financial system.

Many, including major Wall Street firms, are expecting a slowing economy in 2006, while the bulls expect the strong economy to continue, aided by the Federal Reserve ceasing their rate increases. There is general consensus that the Fed's actions will depend a lot on inflation, where the argument of higher oil prices feeding inflation are countered by the recent figures showing drops in consumer and producer prices. Uncertainty is increased by the replacement of Greenspan by Bernanke.

Higher gasoline and heating oil prices coupled with slowdowns in the housing and refinance markets argue that the consumer will reduce spending but the bulls say that high employment and increasing wages will enable the consumer to keep shopping.

The fate of the dollar is another question with most predicting a fall when the Fed indicates interest rates will be raised no more and the rate differentials with other currencies narrow. Others saying the strong economy and foreign investors will keep the dollar strong in 2006. The $106.8 billion that foreign investors poured into the U.S. in October, coupled with large purchases of foreign stocks by U.S. investors, is quoted as a sign of problems to come. The bears point to foreign central banks diversifying reserves away from the dollar, but the bulls reason that there is no better place for other countries to put their money than the U.S.A.

Many who predict the future are saying that the risks are more likely to affect forecasts to the downside than the upside. The war in Iraq, Iran, North Korea, nuclear weapons, bird flu, pensions, another hurricane season and terrorist attacks are just some of the downside events that are on the radar screen at the moment. The Bank of England last week warned that risks are being underestimated by the financial community.

Nobody has a perfect crystal ball and forecasts for 2006 are guesses. Those who guess right will be lauded as prophets. Those who guess wrong will live to guess again at this time next year.

¹The FIFTI Index is based on Free Information From The Internet, and in particular, on advice provided by fifty independent newsletter and Internet site writers selected from the book "The Investor's Free Internet".