Major U.S. indices like the Nasdaq and Dow began an intermediate downtrend in December. Normally, an intermediate correction will last at least eight weeks. Occasionally, a half cycle occurs–usually when long-term cycles have sustained momentum. It appears that just such a situation is currently underway. The downturn that normally would have been expected to last through January is apparently over and major averages are breaking to new 52-week highs.

The best way to illustrate present conditions is with a chart. The black line on the chart below is the daily S&P 500 price activity. Notice that the index appears to be ready to launch a new advance. The gold line is the Nasdaq, and it shows similar pattern. I drew the two red lines on the chart to help you more easily see the previous two intermediate corrections. Each lasted eight to 10 weeks. The bottom portion of the chart is a Moving Average Convergence Divergence (MACD). Notice on this tool how the blue line is breaking above the brown line? That is a sign of positive momentum.

Normally an intermediate advance lasts about 12 weeks. It is difficult to know if this one will last that long, or if it will be truncated because of the abbreviated preceding down cycle. In any case, this is a welcome development. It shows the market has underlying strength and a bullish bias–things we have rarely seen over the past five years. Investors who moved out of the markets in December might want to get back in to take advantage of this upward momentum. Short-term cycles are overbought, meaning we should see a minor correction over the next couple of sessions. That will provide a convenient entry point for investors who want to jump back into the market.

Last week I promised a complete rundown of 2005 performance for exchange-traded funds (ETFs). I’ve included that information below. These results come from Morningstar. I would have included them in a table, but some people are still using mail servers that won’t support that kind of technology. So I’ve made it as simple as possible and just included the name of the fund, followed by its 2005 return. There really aren’t any big surprises. The most glaring observation is probably that U.S. equity funds generally did not perform well in 2005. The only real exceptions were energy and biotech. Foreign stocks were the big winners for the year.

• iShares S&P Latin America 40 Index 54.59
• iShares MSCI South Korea Index 53.89
• iShares MSCI Brazil (Free) Index 52.66
• iShares MSCI Mexico (Free) Index 43.82
• BLDRS Emerging Markets 50 ADR Index 40.80
• Energy Select Sector SPDR 40.17
• Vanguard Energy VIPERs 39.05
• iShares Goldman Sachs Natural Resour 35.98
• iShares Dow Jones US Energy 34.67
• iShares MSCI Emerg Mkts Index 32.62
• Biotech HOLDRs 31.29
• iShares S&P Global Energy Sector 29.47
• iShares MSCI Canada Index 27.53
• iShares MSCI South Africa Index 25.88
• iShares MSCI Japan Index 24.34
• iShares S&P/TOPIX 150 Index 23.95
• iShares MSCI Austria Index 21.13
• BLDRS Asia 50 ADR Index 18.08
• streetTRACKS Gold Shares 17.76
• Utilities HOLDRs 17.33
• iShares MSCI Australia Index 16.68
• Utilities Select Sector SPDR 16.37
• iShares Morningstar Mid Growth Index 15.94
• iShares Cohen & Steers Realty Majors 14.57
• iShares Dow Jones US Utilities 14.54
• streetTRACKS Wilshire REIT Fund 14.50
• iShares MSCI Singapore (Free) Index 14.28
• Vanguard Mid Cap VIPERs 13.97
• Vanguard Utilities VIPERs 13.87
• iShares MSCI Pacific ex-Japan 13.57
• iShares Goldman Sachs Semiconductor 13.38
• iShares FTSE/Xinhua China 25 Index F 13.33
• iShares MSCI EAFE Index Fund 13.33
• iShares S&P MidCap 400 Growth Index 13.23
• iShares MSCI Netherlands Index 12.98
• iShares MSCI Switzerland Index 12.97
• iShares S&P MidCap 400 Index 12.88
• PowerShares Dynamic Market 12.76
• iShares Russell Midcap Value Index 12.54
• MidCap SPDRs 12.50
• iShares Russell Midcap Index 12.48
• Vanguard REIT Index VIPERs 11.94
• iShares Russell Midcap Growth Index 11.74
• iShares S&P Global Financials Sector 11.60
• iShares S&P MidCap 400 Value Index 11.59
• iShares Morningstar Mid Value Index 11.30
• Broadband HOLDRs 11.02
• iShares Dow Jones Transportation Ave 10.87
• Vanguard Extended Market Index VIPER 10.46
• iShares MSCI Sweden Index 10.32
• iShares MSCI France Index 10.13
• iShares S&P Europe 350 Index 9.84
• Semiconductor HOLDRs 9.84
• iShares MSCI Germany Index 9.64
• PowerShares Dynamic OTC 9.56
• iShares Morningstar Mid Core Index 9.56
• BLDRS Developed Markets 100 ADR Inde 9.18
• iShares S&P SmallCap 600 Growth 9.00
• iShares Dow Jones US Real Estate 8.94
• streetTRACKS DJ Wilshire Small Cp Gr 8.79
• iShares MSCI EMU Index 8.77
• Vanguard Small Cap Growth VIPERs 8.66
• iShares NYSE Composite Index 8.64
• iShares Lehman 20+ Year Treas Bond 8.61
• streetTRACKS Dow Jones Euro STOXX 50 8.45
• Vanguard Health Care VIPERs 8.20
• streetTRACKS Dow Jones STOXX 50 7.97
• iShares MSCI Belgium Index 7.90
• iShares Dow Jones US Healthcare 7.66
• BLDRS Europe 100 ADR Index 7.58
• iShares S&P SmallCap 600 Index 7.53
• Rydex S&P Equal Weight 7.41
• iShares MSCI Hong Kong Index 7.31
• Vanguard Small Cap VIPERs 7.25
• Vanguard Value VIPERs 7.22
• iShares S&P Global Healthcare Sector 6.81
• iShares Morningstar Large Value Inde 6.71
• iShares Russell 1000 Value Index 6.64
• iShares Russell 3000 Value Index 6.59
• streetTRACKS Total Market ETF 6.54
• Health Care Select Sect SPDR 6.41
• iShares Russell 1000 Index 6.34
• Vanguard Total Stock Market VIPERs 6.31
• Financial Select Sector SPDR 6.20
• Vanguard Small Cap Value VIPERS 6.09
• iShares Morningstar Small Core Index 6.09
• iShares Russell 3000 Index 6.08
• Vanguard Large Cap VIPERs 6.03
• iShares Dow Jones US Total Market In 6.00
• iShares S&P SmallCap 600 Value Index 6.00
• iShares MSCI United Kingdom Index 5.91
• iShares Dow Jones US Financial Secto 5.72
• iShares S&P 500 Value Index 5.63
• Vanguard Financials VIPERs 5.53
• Vanguard Industrials VIPERs 5.48
• iShares S&P 1500 Index 5.32
• streetTRACKS DJ Wilshire Large Cap V 5.32
• iShares Morningstar Small Growth Ind 5.28
• iShares Russell 3000 Growth Index 5.06
• Vanguard Growth VIPERs 5.02
• iShares S&P 500 Index 4.87
• SPDRs 4.82
• iShares Russell 1000 Growth Index 4.75
• iShares MSCI Taiwan Index 4.62
• iShares MSCI Spain Index 4.56
• iShares Morningstar Small Value Inde 4.52
• iShares Russell 2000 Index 4.46
• iShares Russell 2000 Value Index 4.36
• iShares S&P Global 100 Index 4.29
• iShares Dow Jones US Basic Materials 4.13
• Materials Select Sector SPDR 4.08
• iShares Dow Jones US Industrial 4.06
• iShares Russell 2000 Growth Index 4.02
• iShares S&P 500 Growth Index 3.99
• Vanguard Consumer Staples VIPERs 3.76
• iShares Morningstar Large Core Index 3.49
• iShares NYSE 100 Index 3.45
• iShares S&P Global Technology Sector 3.43
• Vanguard Materials VIPERs 3.42
• iShares Morningstar Large Growth Ind 3.15
• Vanguard Information Technology VIPE 2.99
• streetTRACKS DJ Global Titans 2.97
• Consumer Staples Select Sector SPDR 2.84
• iShares Dow Jones Select Dividend In 2.81
• iShares Dow Jones US Technology 2.77
• streetTRACKS Morgan Stanley Technolo 2.76
• Industrial Select Sector SPDR 2.74
• streetTRACKS DJ Wilshire Lg Cap Grow 2.69
• iShares Lehman 7-10 Year Treasury 2.64
• iShares Lehman TIPS Bond 2.50
• “”"DIAMONDS Trust, Series 1″”" 2.47
• iShares Nasdaq Biotechnology 2.44
• iShares Goldman Sachs Networking 2.34
• iShares Lehman Aggregate Bond 2.28
• Vanguard Telecom Services VIPERs 2.00
• streetTRACKS DJ Wilshire Small Cap V 1.93
• Fidelity Nasdaq Composite Index Trac 1.89
• iShares MSCI Italy Index 1.88
• iShares Lehman 1-3 Year Treasury Bon 1.53
• iShares Goldman Sachs Technology Ind 1.52
• iShares Dow Jones US Cons Goods 1.52
• NASDAQ 100 Trust Shares 1.49
• iShares GS $ InvesTop Corp Bond 1.18
• iShares S&P 100 Index 1.03
• PowerShares HighYield Dividend Achie 0.99
• Technology Select Sector SPDR -0.31
• iShares MSCI Malaysia (Free) Index -0.58
• Regional Bank HOLDRs -0.59
• SPDR O-Strip -2.16
• iShares Dow Jones US Consumer Servic -2.33
• iShares Dow Jones US Telecom -2.58
• PowerShares Gldn Dragon Halter USX C -3.29
• Pharmaceutical HOLDRs -3.71
• Vanguard Consumer Discretionary VIPE -4.10
• iShares Goldman Sachs Software Index -5.53
• Consumer Discretionary SPDR -6.57
• iShares S&P Global Telecommunication -6.72
• Internet Architecture HOLDRs -6.98
• Internet HOLDRs -7.68
• Telecom HOLDRs -9.63
• B2B Internet HOLDRs -10.88
• Internet Infrastructure HOLDRs -15.80

Have a great weekend.