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Market dogma states that the final trading week of the year is a strong one for stocks, with the lingering upward pressure of bullish Santa Claus factors temporarily offsetting the fear-of-heights that currently nags some investors and traders. Tax-loss selling is over, burned bears are likely in hibernation and generally good spirits prevail, at least until the hangover kicks in.

As reported last week by

market writer Joshua Krongold, the



S&P 500

have risen in the year's final week in 14 of the last 23 years, while the


has done it 19 times over the same period. The average gain on the blue-chip indices has been 1.5%, while the Nasdaq has generally been up about 2%.

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The coming week, however, is no cakewalk when it comes to economic indicators, and the market is still coping with the implications of mad cow disease, the first U.S. case of which was detected last week in Washington state. Traders hoping to phone-in the next few days could get a busy signal.

In the latest mad cow news, federal officials said on Sunday that the meat linked to the investigation was distributed to eight states and Guam. Originally the meat had been thought to have been distributed to four states. U.S. investigators also are now said to believe the infected animal found Tuesday in Mabton, Wash., was one of a herd imported two years ago from Alberta, Canada, and was probably about 6 years old. The Agriculture Department has quarantined two of the infected cow's offspring and is focusing on two livestock markets in Washington where other members of its herd might have been brokered. Meanwhile, officials of the Chicago Mercantile Exchange are weighing expanding the price-trading band in which beef futures trade on Monday to allow for wider swings when trading opens.

Breaking developments in the story will be a factor for the overall market in the coming week, but not the only one. Tuesday is a particularly busy day for canned market news as the Conference Board releases an updated reading on consumer confidence, the Chicago Purchasing Managers publishes its manufacturing index, and the National Association of Realtors weighs in on sales of pre-owned homes.

At 10,325 on the Dow, 1096 on the S&P and 1973 on the Nasdaq, stocks are currently hovering near 19-month highs and are poised to finish their first up year since the bubble burst in early 2000. Blue-chips are, on average, up about a quarter from where they began last January, while the gain in technology and small-caps is pushing 50% on their main indices.

The rally is something to savor for most investors after three lean years but it continues to captivate and/or confound those who seek to profit from the downside, as evidenced by last week's report on Nasdaq short interest. Some 4.71 billion Nasdaq-traded shares were sold short as of Dec. 15, up 3.3% from 4.56 billion a month earlier, while the number of days of average volume the total represented shot up to 2.65 from 2.40. Notably, the uptick in short selling -- in which traders sell borrowed shares in the hope of replacing them with cheaper ones -- occurred during a period in which the Nasdaq slipped.

Bears could gather further momentum if, as expected, consumer confidence slides in the report coming out Tuesday. A consensus of economists is predicting the reading will come in around 91.0, down from 91.7 in November, but the number is notoriously volatile and after optimistic forecasts for holiday shopping proved wrong, it's possible trading positions are lining up behind a disappointment.

How meaningful a predictor for stocks has the Conference Board's confidence number been of late? A back-of-the-envelope analysis suggests not a terrible one. The index jumped from 81.7 to 91.7 between October and its last update on Nov. 25, a date that marked the beginning of a 45-point appreciation on the S&P 500. The index edged up 4 points in the period covered by the Oct. 28 announcement, a reading that was followed by precisely a 4-point gain on the S&P over the next month.

But confidence tumbled from 81.7 in August to 76.8 on Sept. 28, a move that failed to presage the S&P's 50-point gain over the next month. More broadly, the index's significance as a forward looking indicator is squirly. Consumer confidence was hovering in the high-80s in October 2002 before diving to 60 last April. An investor who took his cue only from last fall's level could arguably have foreseen 2003's raging bull, but it would have taken nerves of steel to ignore the subsequent implosion in the Conference Board number if this were his only trading cue.

Undoubtedly very few investors are employing such a unilateral strategy and for those with diverse tastes, the coming week's other indicators should be bullish. Economists think the purchasing managers index will come in at 62 for December, down about 2 points from November's blowout number but still a comfortable 12 points above the level that demarcates contraction and expansion.

Existing-home sales are also seen robust, holding steady at an annual rate of 6.35 million units following another month of tame rate movement in the U.S. Treasury market. Wednesday's day-early report on first-time jobless claims is also expected to continue a trend of modest improvement.

While commodities and bond markets close early Wednesday and bond dealers get another half day Friday, U.S. stock markets are open for full sessions on the days before and after New Year's. All the markets are, of course, closed on Thursday.