December 29, 2002 Indicant.Net Weekly Update

Volume 12, Issue 5 ISSN 1526 6516 © The Indicant Stock Market Report

Inflation Again?

The economic outlook soured the past few weeks. This is occurring at a time of international tensions induced by Iraq and North Korea . These fundamental concerns conflict with recent technical bullishness that has since waned.

The mid-term election year phenomenon is still in tact, but poor fundamentals are challenging its perfect record. In addition, poor fundamentals are challenging bullish seasonality.

Economic fundamentals are not limited to just poor earnings and employment expectations. Although the Consumer Price Index and Producer Price Index are relatively tame, the threat of increasing inflation is growing in intensity. Oil prices are skyrocketing.

Influencing oil prices to the north is the threat of war with Iraq and Venezuela ’s potential reductions in supply. Increasing oil prices has induced other commodities to increase. Gold typically parallels inflationary expectations. Gold is also a defensive measure during times of political instability. Gold prices are also moving north in anticipation of military confrontation with Iraq and inflationary concerns.

Greenspan looks at the CRB Bridge Futures. As you will see when you view the charts, one has to ask the question, as to how long will he allow interest rates to remain at record low levels.

Click the following link to view the chart for gold, oil, and the CRB Bridge Futures.

http://www.indicant.net/Members/Updates/Economic/E03.htm

Nearly all commodity prices are up. To view the increasing Dow Jones Futures and the Dow Jones AIG Spot prices, click the following link.

http://www.indicant.net/Members/Updates/Economic/E04.htm

As you can see, those two commodity indexes are higher than their most recent peak prices. Take a closer look at those two charts. You will notice their declines during the second half of the nineties moved inversely to the profound bull market. You will also notice their recent increases moved inversely to the declining stock market.

You will notice the market does not move concurrently with interest rate adjustments. The market anticipates that, along with just about everything else from politics to earnings expectations.

The market will always react more to fundamentals than technical data. If the market believes the economy will continue to be weak with inflationary pressures, you can expect a new Quick-term Bear. The market may not honor the mid-term election year phenomenon. It may not honor normal seasonal patterns. The market’s behavior reflects economic fundamentals and business performance.

Supply and demand is always the ruler of things that have a price associated with it. If the war with Iraq begins, oil prices will move north. Reduced supply of petro from Venezuela will provide fuel to the inflationary spiral.

With all that, the market does not care about today or next week. If it senses a powerful economy six to nine months from now, it will move north. With increasing commodity prices, the market will not move aggressively to the north.

Likewise, the supply and demand for stocks is also equally influential on the stock prices. After the tax selling season ends in the next two days, we will see how much demand there is for stocks. Volume has been on the wane the past few weeks. This implies little demand for stocks, relative to supply. Some of this reduced demand is due to tax selling, which is not uncommon with the long running Quick-term Bear market we endured and some of us enjoyed during most of 2002.

The question is how long investors will continue earning less than a percent in money markets and CD’s with the potential for inflation. Although the stock market will not maintain a long-term bullish trend during periods of inflation, there could be enough short-term interest rate stimuli to drive the current Quick-term Bull to the north.

Low interest rates should drive more demand for stocks. Rising commodity prices and inflation will depress the stock market. However, rising commodity prices will need to worm their way into the Consumer Price Index. To date, that has not happened. Therefore, the immediate cycle should be a bullish stock market. If commodity prices continue to increase, the Quick-term Bull will find a top lower than the market’s prior peaks. That peak will occur when you see the Consumer Price Index begin its march to the north. You can expect that to happen if commodity prices continue to rise.

A few weeks ago, commodity prices appeared ready to cycle south. However, they have done the opposite. They have been elevated by worse case speculation; war and supply problems for oil. If those speculators are accurate, then you can expect this Quick-term Bull to be shallow and short-lived.

Stock Market Summary

After eking out a 1.0% gain two weeks ago, all eight indexes fell by an average of 1.8% last week.

The Quick-term Indicant is now up 2.2% since the Quick-term Bull signal on October 15, 2002. That is an annualized gain of 10.9%. The Quick-term Indicant has no underlying support from the Indicant Volume Indicator, Force Vectors, and Vector Pressure.

The Mid-term Indicant is up 2.1% since the Mid-term Bull signal an average of 9.9 weeks ago. The strongest Mid-term Bull is the Dow Jones Utilities, which is now up 6.6% since its Mid-term Bull signal on November 1, 2002. Three of the five indexes are now down since their respective bull signals

We will learn more about the stock market’s intended direction after the first of the year. Tax selling, along with pessimistic speculation has been depressing this Quick-term Bull market. The market’s behavior in early January will provide much needed clarity for the market’s longer-term intentions with respect to tax selling. Expectations with respect to Iraq and North Korea will be day by day.

Divergence versus Convergence

Although utilities softened last week, they are still the strongest of the equity sectors. Precious metals and oil service stocks continue gaining momentum. Nearly all other equities are weakening. The biotech/health sector is expressing the greatest degree of bearish behavior. Fear of war and terrorism continues to inflict damage to the young Quick-term bull market. Fear of crude oil shortages impose lackluster expectations from the stock market. However, all that pessimism can change quickly.

Economic Outlook

The U.S. Dollar continues to remain flat to weak against major world currencies. As long as interest rates remain low, expect that to continue. If oil shortages manifest, expect the greenback to erode further.

Oil prices and gold have moved further to the north in anticipation of oil shortages and other fear elements. This paradigm in fear has inflated many commodity prices. The CRB Bridge Futures continues moving north beyond its prior peaks. Gold and oil prices are also on new peaks in their current northward moving cycle.

Interest rates remain low, which will contribute to a further erosion of the U.S. Dollar.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20Econ.htm

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001. Twenty-nine weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Twenty-two weeks ago, it closed up 12.0% since the buy signal. Thirteen weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001. Last week it closed up 66.7%. The Mid-term Indicant continues to signal hold for this fund. As you can see the recent increase in this fund’s value has made a “U” shape since the Mid-term Buy signal nearly one year ago.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-seven weeks ago since the MTI buy signal in April 2001. Twenty-one weeks ago, it closed up 27.8%. Last week it closed up 51.5%. The Mid-term Indicant continues to signal hold for this fund. A few weeks ago, the Mid-term Indicant neared signaling sell for both of these funds. As stated last week, these two funds have rebounded due to increasing fears about the impending war with Iraq and oil shortages.

As you can see, the Fidelity Fear Fund has outperformed the Vanguard Fear Fund.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds require “avoid” signals for the market to embark upon a meaningful and lasting bull leg. The Mid-term Indicant continues to signal, “hold,” but appears to be nearing a sell signal. However, their bullish behavior continues to be obstinate.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#19

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. They are up and average of 2.2% (annualized at 10.9%) since the October 15, 2002 Quick-term Bull signals. Four weeks ago, the Quick-term Bull was up 9.5% (annualized at 74.8%). The Quick-term Bull has weakened considerably the past four weeks due to unsettling international events and economic projections. Also, tax selling is still inducing a depressing effect on the stock market.

The Dow is down 21.6% since the Short-term Indicant signaled bear on March 20, 2002. The NASDAQ Composite is down 68.1% since the Short-term Indicant signaled bear over two and a half years ago on March 30, 2000.

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

http://www.indicant.net/Non-Members/Back%20Issues/A%20Reports.htm

Mid-term Indicant Positions - Major U.S. Market Indices

All eight major indexes are up an average of 2.1% since their respective Mid-term Bull signals an average of 9.9 weeks ago. This annualizes to 11.1%. Four weeks ago, they were up an average of 8.0% (annualized at 70.4%).

The strongest bull continues to be the Dow Jones Utilities, which softened slightly last week. It is up 6.6% since its November 1, 2002 MTI Bull signal. The NASDAQ Composites and the NASDAQ100 are the second strongest bulls since their bull signals on October 18, 2002. Three indexes are now in negative territory since their bull signals on October 18, 2002. They are the Dow Jones Industrial Average, the S&P500, and S&P100. They are down 0.2%, 1.0%, and 1.3%, respectively.

The mid-term election year phenomenon is still in effect, although being challenged with the recent lackluster performance.

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

To view Mid-term Indicant charts for U.S. Market Indices, please click here.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-Mkts-US.htm

Mid-term Indicant Positions - International Markets

There were no new bull signals and one new bear signal.

The nineteen bull markets are up an average of 18.7% since the Mid-term Indicant signaled bull an average of 23.9 weeks ago for an annualized gain 40.9%, which is down from 55% four weeks ago.

In addition to the new bear, two international markets have been bears for an average of 8.6 weeks. They are down an average of 7.5%.  Click the following hyperlink to view the status and charts.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI%20Intl%20Mkts.htm

The Mid-term Volatility Index continues to battle. It continues bouncing around the long-term blue curve the past few weeks. The southerly direction of the green curve bodes well for the markets mid-term direction. As stated last week, resistance at the blue curve is a technical issue that cannot be ignored.

http://www.indicant.net/Members/Updates/MT%20Indexes/I03.htm#16

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were no buy signals and one sell signal. You received a report earlier this weekend about that.

The Indicant is now signaling hold for 73 of the seventy-six mutual funds it tracks. These funds with hold signals are up an average of 2.9% for an annualized gain of 12.4%, which is down from 34.8% three weeks ago. The average holding period is 12.0 weeks.

In addition to the sell signal, the Mid-term Indicant is avoiding two funds. They are down an average of 9.4% since their respective sell signals an average of 5.6 weeks ago.

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#22

Always remember never to keep more than 20% of your investment resources into a single mutual fund. Sector investing in mutual funds is an extremely good way to mix your investments.

Mid-term Indicant Positions - Indicant Selected Stocks

12-29-02

  December 22, 2002 Indicant.Net Weekly Update

Volume 12, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Santa or Saddam?

The market is slanting its behavior more and more toward a belief that the U.S. and Iraq will be going to war. This Quick-term Bull originated with tremendous power and gusto, but has waned considerably during the past three weeks on the news of Iraqi breeches. The underlying configurations are aligning themselves with what is appearing to be a very short-lived Quick-term Bull. The Quick-term Bulls throughout the Short-term and Mid-term Bears since early 2000 have generally been longer lasting with more vigor than what is now materializing.

We should enjoy a Santa Clause rally before the Christmas Holiday. That should put most of you in good position, as we enter the new year. However, all your gains can be wiped out if the market becomes convinced the war will start on January 27, 2003 , which is the current belief.

The stock market does not like the first few days of war. But, as soon as the outcome of the war is evident, then it reduces the war as irrelevant and moves in the direction imposed by economic and earnings expectations. So, gains wiped out after the beginning of the war could move dynamically to the north once the outcome is obvious. Obviating the outcome could take days or weeks.

George W. Bush is pretty much on the same time line as his father. The large caps peaked on January 14, 2000 . That group was the first that saw the economy cooling. The NASDAQ peaked a few weeks later on March 9, 2000 at 5048.62. That was when it was apparent that speculative earnings would not materialize and that most internet companies do not add to real economic wealth. Remember, real economic wealth is delivered in only three ways; manufacturing, extraction, and agriculture. The economy started cooling off in 1989 about two years after the “no new taxes” promise. George H. Bush raised taxes and then went to war and lost to Slick Willy and H.Ross Perot in 1992. Lessons learned, anyone?

Raising taxes and going to war in a softening economy will always generate one-term presidencies unless the incumbent can keep the war going into the election. Maybe George W. is thinking that way. Start the war later. Keeping it going will not be difficult because the war will be with terrorists and not a country.

The rest of the world has concluded victory is impossible in a conventional war with the U.S. However, they are concluding that acts of terrorism could bring down the free world’s way of life, which is the ultimate goal of all religious fanatics. If you can’t preach from the pulpit and have your way, then sneak around and insight fear by randomly killing innocent people. We are right and you are wrong is their theme. In essence their credo is, “if you do not agree with me, then you must die.”

George W. has a soft economy and appears headed for conventional war. Although it does not sound too good, politicians love the limelight that terrorism will provide them. However, that limelight will have a price. If there are many acts of terrorism successfully carried out, the current political leadership will be tossed out.

The quality of life around the globe is delivered only through commerce; not which bible is read. If commerce is down, the free world will not reelect incumbents. If fanatics continue to carry out terrorism, then commerce will be down. Not only will incumbents be tossed out, the entire political infrastructure will be challenged. Religious terrorists and political pulpits would have no chance against “freedom terrorists.” The battle for freedom has been a long slow battle and has been on the upswing for the past five hundred years or so. Freedom’s momentum has shifted too far to be brought down. However, if such a battle were to ensue, the market will languish until it was obvious that all things against free commerce have been eradicated from the “new world order.”

All bibles have been around for at least fifteen hundred years. The quality of life improved only after people were freed from oppression by political and religious tyranny. All bibles were available during the dark ages when people died of disease and starvation. Capitalists brought solutions through manufacturing, agriculture, and extraction. With that, the quality of life improved for all free societies with capitalists ideals. This is not intended to bad-mouth bibles, but the selection of which bible to read is a private issue, regardless of the ideals of religious fanaticism.

Stock Market Summary

In the face of war, the eight major indexes eked out a 1.0% gain last week. During the week, the markets came within less than 1.0% of the bearish yellow curve. A strong finish put the markets 1.9% above the bearish yellow curve. That position remains precariously close to returning to bearish status.

The Mid-term Bull remains in tact. The strongest Mid-term Bull is the Dow Jones Utilities. It is up 7.9% since the Mid-term Indicant signaled bull on November 1, 2002 . The seven remaining major indexes received their Mid-term Bull signal two weeks earlier on October 18, 2002 . Bullish favorability resides in the fact that an equity sector is moving north, even though it is the boring utility sector.

If the world were at peace and harmony, this Mid-term Bull would be up at least 10.0% as opposed to its current 4.0% gain since mid October and early November.

As stated last few weeks, this is a mid-term election year bull market. The incumbent president is in his first term and does not want to be a one-term president like his father. All legislation should be friendly to business and favor overall economic activity. The Quick-term and Mid-term Indicant models got you into this market ahead of most. When the others join, it will propel the market further to the north.

Divergence versus Convergence

The utilities, precious metals, and oil service stocks are gaining favor. The balance of equities are languishing. Fears of war and inflation are increasing. OPEC states they cannot satisfy demand with Venezuela and Iraq not supplying oil. If this recent divergence behavior turns into a trend, dump all your stocks and funds except those tied to energy and fear. We will keep you posted on this.

Economic Outlook

The U.S. Dollar is remaining flat to weakening against major world currencies. As long as interest rates remain low, expect that to continue. If oil shortages manifest, expect the greenback to erode further.

Oil prices and gold have moved further to the north in anticipation of oil shortages and other fear aspirations. This inflated many commodity prices, as well. The CRB Bridge Futures elevated beyond it prior peak. This behavior violates the symmetry of its prior cycles. This quite often can lead to a trend that is unfavorable to equity investing. We will keep our eye on it.

Interest rates remain low.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20Econ.htm

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Twenty-eight weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Twenty-one weeks ago, it closed up 12.0% since the buy signal. Twelve weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 56.4%. The Mid-term Indicant continues to signal hold for this fund.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-six weeks ago since the MTI buy signal in April 2001. Twenty weeks ago, it closed up 27.8%. Last week it closed up 46.2%. The Mid-term Indicant continues to signal hold for this fund. A few weeks ago, the Mid-term Indicant neared signaling sell, but as you can see, it is on the upswing again due to increasing fears about the impending war with Iraq and oil shortages.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds require “avoid” signals for the market to embark upon a meaningful and lasting bull leg. The Mid-term Indicant continues to signal, “hold,” but appears to be nearing a sell signal. However, their bullish behavior continues to be obstinate.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#19

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. They are up and average of 4.1% (annualized at 23.5%) since the October 15, 2002 Quick-term Bull signals. Three weeks ago, the Quick-term Bull was up 9.5% (annualized at 74.8%). The Quick-term Bull has weakened considerably the past three weeks due to political instability. Imagine if there were no politicians around the world to induce instability.

The Dow is down 19.6% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 67.7% since the Short-term Indicant signaled bear over two and a half years ago on March 30, 2000 .

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

http://www.indicant.net/Non-Members/Back%20Issues/A%20Reports.htm

Mid-term Indicant Positions - Major U.S. Market Indices

All eight major indexes are up an average of 4.0% since their respective Mid-term Bull signals an average of 8.9 weeks ago. This annualizes to 23.5%. Three weeks ago, they were up an average of 8.0% (annualized at 70.4%). The strongest bullish behavior the past two weeks was the Dow Utilities. It is the youngest bull and is up 7.9%, which is an improvement from two weeks ago, when it was down 0.4% since the Mid-term Bull signal on November 1, 2002 . All of the other major indexes received their Mid-term Bull signal on October 18, 2002 . The strongest bull is now the Dow Utilities while the NASDAQ100 has fallen into second place with a gain of 6.1% since the October 18, 2002 Mid-term Bull signal. It was up by 16.7% three weeks ago.

The market may have found bottom last October, but the Mid-term Bull is also weakening. However, a Santa Clause rally this coming week could really help you maintain your hold positions until more clarity is offered by international events.

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

To view Mid-term Indicant charts for U.S. Market Indices, please click here.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-Mkts-US.htm

Mid-term Indicant Positions - International Markets

There were no new bull signals and one new bear signal.

The twenty bull markets are up an average of 18.1% since the Mid-term Indicant signaled bull an average of 22.1 weeks ago for an annualized gain 42.6%, which is down from 55% three weeks ago.

In addition to the new bear, one international market is still a bear. It is China ’s ^HSI market index. It is down 12.5% since its bear signal 15.1 weeks ago. Click the following hyperlink to view the status and charts.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI%20Intl%20Mkts.htm

The Mid-term Volatility Index continues to battle. It has been bouncing around the long-term blue curve the past few weeks. The southerly direction of the green curve bodes well for the markets mid-term direction. However, resistance at the blue curve is a technical issue that cannot be ignored.

http://www.indicant.net/Members/Updates/MT%20Indexes/I03.htm#1

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were no buy signals and one sell signal. You received a report earlier this weekend about that.

The Indicant is now signaling hold for 74 of the seventy-six mutual funds it tracks. These funds with hold signals are up an average of 4.1% for an annualized gain of 19.7%, which is down from 34.8% two week ago. The average holding period is 9.0 weeks.

In addition to the sell signal, the Mid-term Indicant is avoiding only one fund. The ProFunds Ultra Short, (MF#22) is down 17.8%, which is up from 24.5% two weeks ago. The Mid-term signaled sell on October 18, 2002 . This fund moves inversely and disproportionately to the stock market. Just as many of you made from 25% to 70% on this particular fund in the 2002 bear market, it will be around for us when the next bear market hits. The chart on this fund is logarithmic, so you can more easily see its behavior along its bottom.

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#22

Always remember never to keep more than 20% of your investment resources into a single mutual fund. Sector investing in mutual funds is an extremely good way to mix your investments.

Mid-term Indicant Positions - Indicant Selected Stocks

12-22-02

December 15, 2002 Indicant.Net Weekly Update

Volume 12, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

The Quiet before the Storm – Part XII – Will It Stay Quiet?

He who hesitates is lost. As previously stated, George W. and pals were a little slow in tossing out murderous Saddam Hussein. This delay may cost George W. Bush the 2004 election. The emotions created by periodic war threats will depress the stock market, making it more difficult for companies to raise capital. This could continue to dampen the economy and Americans vote their pocket books.

The Republican party has now been damaged by purported segregationist statements by Trent Lott. This will not help George W. in the 2004 elections. The democrats will not let that go. This could dampen any Republican ability to “show us” just how friendly they are to capitalism.

Years ago, a political leader could attack without support from the rest of the world. Although Saddam Hussein has plenty of cold blooded murders on his resume, most of the political leadership around the world sees no wrong in that. Many of them are guilty of the same sort of crimes. Therefore, gaining consensus to oust a murderer with the vote from other murderers is a bit naïve on the part of George W. and pals.

Most international political leaders are at harmony with one another. Why do you think political leaders around the world got together years ago and stated their respective ambassadors had immunity from crimes they may commit? All political leaders have one common thread in their state of consciousness. They want to control others.

The issue is whether Iraq possesses weapons of mass destruction. That is what the politicians around the world hold as the only issue with respect to Saddam Hussein. Why? Because weapons of mass destruction could possibly kill them. If Hussein continues to kill his own people, world leaders see nothing wrong with that, just as one-hundred and forty years ago, 800,000 Americans died “preserving the union.” We have advanced since the Civil War. But, that advancement is due to economic advancements by capitalists. That is the only reason.

Most political leaders and religious fanatics around the globe place a higher priority on some cause that is higher than that of the individual. They de-emphasize individualism so they can advance their own individual causes without having to compete. U.S. politicians entered politics because they do not have to live within a budget that is funded by their individual effort. They prefer using other people’s money; especially when acquired through coercion, which is how the governments around the world garnish their money. Politicians enjoy their role in taking money from the people and then leading people to some higher cause.

Can the Republicans implement a flat tax? Can they do that with Trent Lott as the Republican leader in the Senate? The Republicans have an ace in the hole. Implementing a flat tax would cause the stock market to propel to the north, much like that of the late 1990’s. Individualism would be the order of the day. Rather than having just one Bill Gates, two-hundred more would surface. Rather than having one Michael Dell, thousands more would surface.

Can the Republicans stop the growth in government? There are many fine people in government, but the system they work for produces nothing. The economic molecules of people are doing one of two things. They are producing or they are consuming. Supply side economics gained popularity during the Regan administration. This economic doctrine added many more producers to our society. The ratio of producers to consumers increased and helped propel the stock market to historical highs.

Supply side economics is nearly twenty-five years old. When Newt Gingrich and Bill Clinton produced a “do-nothing” government during the 1990’s, the stock market propelled even higher. Although the market is down from prior phony peaks, it is still at historical highs and reflecting the power of supply side economics.

To describe the nature of politicians can be humorous. Al Gore said he invented the internet. Al Gore campaigned that he and Bill Clinton caused the stock market to shoot through the roof. Al Gore refused to believe the reality of Florida vote counts. Bill Clinton said, “I did not have sex with that woman.” George H. Bush referred to supply side economics as voodoo economics. Trent Lott is purported to support segregation.

Even with all the stupidity of U.S. politicians and their international brethren, the stock market moves higher in mid-term election years. Bad news on any given day can drive the market south and then two days later wipe out those losses with additional gain. The Quick-term Bull has not enjoyed that behavior in the past two weeks. There is one more full week remaining before the end of the year. This Quick-term Bull needs a Santa Clause rally and we expect it to be delivered in a very powerful way within the next two weeks.

Stock Market Summary

Last week, we said this Quick-term Bull was merely taking a well needed rest. This young bull has now had plenty of rest and needs to display some vigor. As stated in yesterday’s preliminary report, some Vector Pressure has now dipped into negative territory. The NASDAQ100 Index was up 20% at one time and has now lost more than half that gain. But, most of the recent dips in stock prices have held up above their respective green curves. In the recent Quick-term Bulls, stock prices dipped rather quickly below their green curves. Although many stocks have lost over 75% of their initial Bull Spurt, they still appear strong.

As stated last week, this is a mid-term election year bull market. The incumbent president is in his first term and does not want to be a one-term president like his father. All legislation should be friendly to business and favor overall economic activity. The Quick-term and Mid-term Indicant models got you into this market ahead of most. When the others join, it will propel the market further to the north.

Divergence versus Convergence

This paragraph is the same as last week, as this condition has not changed. During the predicted pause in the market, nearly all sectors behaved in congruent fashion. Most of them went down the past two weeks. As long as the market continues little discrimination among sectors, this bull has breadth. All good and lasting bull markets start with breadth.

Economic Outlook

The dollar is not showing any strength on a Mid-term Indicant basis. However, the recent interest rate cuts by Greenspan did not erode the value of the greenback from its already weak position. When he starts the next cycle of jacking up interest rates, the dollar will strengthen. Unfortunately, without some major “political” event, such as a flat tax and massive privatization of government, the stock market will not return to previous highs for several years. The current generation of investors got burned in the last bull/bear cycle and they will not be eager to increase the demand for stocks and thus propel the market to new heights. Many say it is better to earn 1.0% in your money market than lose your money in the stock market. But greed will kick in, as this bull moves higher and many will enter into the stock market. It will not be as robust, but certainly profitable. More and more will enter in the later stages of the bull and again those folks will lose their money.

Commodity prices rose this past week, but still appear near Mid-term cyclical peaks. Greenspan is banking on them cycling to the south during the next few months. The only commodity that is weakening is oil. As previously stated, Saudi Arabia is in a political quagmire and needs to maintain a healthy supply of oil and keep prices down. The privatization of Russian oil and increasing capitalism in Russia will help keep a lid on oil prices. That should provide a healthy influence on declining prices in other commodities. If Greenspan does not jack up interest rates, expect the stock market to express bullish joy.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20Econ.htm

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Twenty-seven weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Twenty weeks ago, it closed up 12.0% since the buy signal. Eleven weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 55.8%. The Mid-term Indicant continues to signal hold for this fund. After a softening cycle, this fund rebounded significantly with the weapons inspection program in Iraq . Fear returned to the emotional side of the stock market the past two weeks, which is detected in this funds performance. If fear continues to be popular, expect the stock market to continue softening.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-five weeks ago since the MTI buy signal in April 2001. Nineteen weeks ago, it closed up 27.8%. Last week it closed up 45.6%. The Mid-term Indicant continues to signal hold for this fund, but appears to be nearing a sell signal. As you can see, this fund is not quite a robust on fear as its Fidelity counterpart.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds require “avoid” signals for the market to embark upon a meaningful and lasting bull leg. The Mid-term Indicant continues to signal, “hold,” but appears to be nearing a sell signal. However, their bullish behavior continues to be obstinate.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#19

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. They are up 3.5% (annualized at 21.4%; down from last week’s 45.5%) since the October 15, 2002 Quick-term Bull signals. Two weeks ago, the Quick-term Bull was up 9.5% (annualized at 74.8%). If you have not yet invested, wait for the Force Vectors to move north again. They appear to be bottoming, but unfortunately at an inflection point. We will keep a close eye on that next week.

The Dow is down 20.3% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 67.7% since the Short-term Indicant signaled bear over two and a half years ago on March 30, 2000 .

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

http://www.indicant.net/Non-Members/Back%20Issues/A%20Reports.htm

Mid-term Indicant Positions - Major U.S. Market Indices

All eight major indexes are up an average of 3.0% since their respective Mid-term Bull signals an average of 7.9 weeks ago. This annualizes to 19.8%. Two weeks ago, they were up an average of 8.0% (annualized at 70.4%). The strongest bullish behavior last week was the Dow Utilities. It is the youngest bull and is up 4.7%, which is an improvement from last week when it was down 0.4% since the Mid-term Bull signal on November 1, 2002 . All of the other major indexes received their Mid-term Bull signal on October 18, 2002 . The strongest bull is the NASDAQ Composite. It is up 5.8% The NASDAQ100 is the second strongest bull. It is up 5.2% compared to being up by 16.7% two weeks ago.

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

To view Mid-term Indicant charts for U.S. Market Indices, please click here.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-Mkts-US.htm

Mid-term Indicant Positions - International Markets

There were no new bull signals and no new bear signals.

The twenty-one bull markets are up an average of 15.9% since the Mid-term Indicant signaled bull an average of 20.5 weeks ago for an annualized gain 40.5%, which is down from 55% two weeks ago.

One international market is still a bear. It is China ’s ^HSI market index. It is down 14.4% since its bear signal 14.1 weeks ago. Click the following hyperlink to view the status and charts.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI%20Intl%20Mkts.htm

The Volatility Index is a relatively new bear, but the bull in it put up a battle the past three weeks. It is now up 12.5% since the MT Bear signal. Last week it was up 25.0% since the bear signal three weeks ago. Normally, the Mid-term Indicant would have signaled bull, but seasonal forces suggest this bull woll be short-lived. Remember, the Volatility moves inversely to the stock market.

Although the QT and MT Bull markets are now weakening, we still believe the Mid-term Volatility Index is headed south. This southerly movement should drive the market north over the next few weeks.

http://www.indicant.net/Members/Updates/MT%20Indexes/I03.htm#16

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were no buy signals and no sell signals. You received a report earlier this weekend about that.

The Indicant is now signaling hold for 75 of the seventy-six mutual funds it tracks. The 75 funds with hold signals are up an average of 3.7% for an annualized gain of 19.6%, which is down from last week’s 34.8%. The average holding period is 9.9 weeks.

The Mid-term Indicant is avoiding only one fund. The ProFunds Ultra Short, (MF#22) is down 16.11%, which is up from 24.5% last week. The Mid-term signaled sell on October 18, 2002 . This fund moves inversely and disproportionately to the stock market. Just as many of you made from 25% to 70% on this particular fund in the 2002 bear market, it will be around for us when the next bear market hits. The chart on this fund is logarithmic, so you can more easily see its behavior along the bottom.

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#22

Always remember never to keep more than 20% of your investment resources into a single mutual fund. Sector investing in mutual funds is an extremely good way to mix your investments.

Mid-term Indicant Positions - Indicant Selected Stocks

12-15-02

  December 8, 2002 Indicant.Net Weekly Update

Volume 12, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

The Quiet before the Storm – Part XI – Will It Stay Quiet?

As is the case in the world of politics, there is sometimes a conflict between doing the right thing and manipulating events for reelection. The quagmire facing George W. and pals is they were unable to pull off the war in time for the recent November elections. As it turned out, the Republicans gained control of the House and Senate anyway.

Now the Republicans have control of the executive and legislative branches of government. Their campaign message leading up to the 2004 elections must include something to the extent, “see how much better off you are.” If they cannot produce such a theme, welcome Hillary to the White House.

To win the reelection, Republicans need a robust economy or a war. Politicians and government can never have a positive influence on the economy. Their only influence on the economy can be negative. Therefore, all politicians can do is undo their prior damage. If they do this, then they can take credit for how great they are. They wish to boast, just as Slick Willy (Bill Clinton) and Sore Gore (Al Gore) tried to claim credit for the 1990’s robust economy. People are getting smarter and they are seeing through the façade.

George W. Bush has a problem. Politicians prefer war on the day of the election. They know the voters will not toss them out when consistent leadership is required. That is a guaranteed victory. The expansion of the electronic media in Vietnam brought war closer to home and all of its ugliness. This has forever changed the political management of war. Politicians can no longer stretch wars out until election day.

If principles force a war in the immediate future, then George W. Bush will be forced to end it as soon as possible due to the pressures of electronic media. A war in 2003 would dampen economic activity. If the war ended in late 2003, George W. Bush’s popularity would continue on a high note. However, it will quickly wane if economic conditions soured. Americans vote their pocket book, except during times of war.

The Republicans have two years to do something great for this country. They have generally managed to do that or portray a perception of that. That is why the mid-term election year phenomenon is an accurate predictor of bull markets. That phenomenon is what you are witnessing right now. In the first down week since the Quick-term and Mid-term Indicant signaled bull, you will notice very few stocks and funds fell below the green curve. The market had to decline to set the stage of the Santa Clause rally.

Current political leadership has an opportunity to leave a legacy of the grandest proportions since Abe Lincoln, who more or less did what Saddam Hussein did to his next-door neighbor, Kuwait , twelve years ago. The only difference this time is oil. We had to make certain we kept the number of suppliers of crude higher. That war was fought on principle – that is, we want oil. Abe wanted to keep the country in tact.

What is the opportunity for current political leadership?

A single page income tax form and a flat tax would add millions of productive hours of capacity. If they did this next month, that would be great. A robust economy would move forward thus guaranteeing George W. Bush’s reelection bid. The Republicans would gain two more years of complete power. After implementing a single page flat tax form, they could then privatize some of the services the government provides. All of the other services could be abolished, as most are useless. Remember, if you are not competing, you are not performing. Although there are many good people in government who take the job of public service serious and do a good job, the overall system is suspect due to a lack of competitive elements.

Republicans could change the laws whereby Senators are elected to only two-year terms and limit terms to only one time every ten years. The ex-Senators would then re-enter private life and relearn living within a budget. That would eliminate pork barrel spending. Career politicians are not good for the economy.

By the 2008 elections, everyone in the U.S. would be living like a millionaire. The Dow would hit 100,000 and the NASDAQ about 50,000. Remember, real economic wealth is delivered in only three ways; manufacturing, extraction, and agriculture. The NASDAQ serves those three broad economies, but directly in it. You would have to tolerate only a 50,000 NASDAQ with those two new laws. The Democratic Party, as it stands today would be a fading memory.

If you wanted to see the Dow hit 200,000, then automatically imprison public accounting firms, lying CEO’s, and lazy directors to fifty years in prison for any false income statements and balance sheets. There is absolutely no excuse for false income statements and balance sheets. Debits are on the left and credits are on the right. Sales are cash receipts or invoices to low risk collection accounts. Anticipated sales are merely forecasts and have no business being anywhere near the income statement. If you are paid six figures to work for someone, then that is all you should do at least sixty to eighty hours per week.

Stock Market Summary

The stock market is merely pausing. The young bull needs a rest and it is well deserved. The Quick-term Bull is no longer a red bull, but still a vibrant bull. About 30% of the gains up through last week were washed out with last week’s pause. Another week or two of lackadaisical performance would not be surprising. We are within weeks of a Santa Clause rally and it should be robust.

Remember, this is a mid-term election year bull market. The incumbent president is in his first term and does not want to be a one-term president like his father. All legislation should be friendly to business and favoring overall economic activity. The Quick-term and Mid-term Indicant models got you into this market ahead of most. When the others join, it will propel the market further to the north.

Divergence versus Convergence

During the predicted pause in the market, nearly all sectors behaved in congruent fashion. Most of them went down during the past week. As long as the market continues little discrimination among sectors, this bull has breadth. All good and lasting bull markets start with breadth. After the initial surge, then certain sectors roll through their rough times without much detriment to the overall market.

Economic Outlook

There was little change this past week. Interest rates have bottomed on the new cycle. They are now moving horizontally, but at historically low levels.

The CRB Bridge Futures turned north last week, but still hovering at what appears to be a cyclical peak. As we have stated many times in the past, Greenspan looks at this particular commodity. His interest rate cut about a month ago leads to a belief that this particular commodity, as well as other commodities will fall. He is apparently more concerned about the economy than inflation. If he were a commodity trader, he would be short selling for the next few months. As previously stated, it would be extremely bullish if commodity prices expressed a downturn symmetrical to prior cycles. If commodity prices rise, then this bull market will not last too long as Greenspan will have to elevate interest rates.

Oil prices rebounded last week, but its bounce to the north was into the face of a cyclical slide. It takes on the appearance of trying to ski uphill. If it continues cycling to the south, then the bull in the market will snort joy.

The dollar continues to hold in a weakening pattern against major world currencies. The bull market will not care about this, so long as the hold pattern continues to exist.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20Econ.htm

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Twenty-six weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Nineteen weeks ago, it closed up 12.0% since the buy signal. Ten weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 44.1%. The Mid-term Indicant continues to signal hold for this fund. This fund had been softening, but there is enough fear at this time to fuel a modest rebound. If the current Quick-term Bull becomes more explosive, expect this fund to drop in value.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-four weeks ago since the MTI buy signal in April 2001. Eighteen weeks ago, it closed up 27.8%. Last week it closed up 44.4%. The Mid-term Indicant continues to signal hold for this fund, but appears to be nearing a sell signal.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds require “avoid” signals for the market to embark upon a meaningful and lasting bull leg. The Mid-term Indicant continues to signal, “hold,” but appears to be nearing a sell signal. However, their bullish behavior continues to be obstinate.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#19

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. They are up 6.5% (annualized at 45.5%) since the October 15, 2002 Quick-term Bull signals. Last week the Quick-term Bull was up 9.5% (annualized at 74.8%). If you have not yet invested, wait for the Force Vectors to move north again. We will keep you posted on that.

The Dow is down 18.3% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 66.3% since the Short-term Indicant signaled bear over two and a half year ago on March 30, 2000 .

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

http://www.indicant.net/Non-Members/Back%20Issues/A%20Reports.htm

Mid-term Indicant Positions - Major U.S. Market Indices

All eight major indexes are up an average of 5.3% since their respective Mid-term Bull signals an average of 6.9 weeks ago. This annualizes to 40.0%. Last week they were up an average of 8.0% (annualized at 70.4%). The weakest Mid-term Bull is the Dow Utilities. It is the youngest bull and is down 0.4%. The strongest bull is the NASDAQ100. It is up 11.5% compared to being up by 16.7% last week.

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

To view Mid-term Indicant charts for U.S. Market Indices, please click here.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-Mkts-US.htm

Mid-term Indicant Positions - International Markets

There were no new bull signals and no new bear signals.

The twenty-one bull markets are up an average of 18.0% since the Mid-term Indicant signaled bull an average of 19.5 weeks ago for an annualized gain 48.2%, which is down from 55% last week.

One international market is still a bear. It is China ’s ^HSI market index. It is down 13.8% since its bear signal 13.0 weeks ago. Click the following hyperlink to view the status and charts.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI%20Intl%20Mkts.htm

The Volatility Index is a relatively new bear, but the bull in it put up a battle the past two weeks, rising over 25.0% since the bear signal two weeks ago. Normally, the Mid-term Indicant would have signaled bull. The strength of the Quick-term and Mid-term Bull markets prevents this. The Mid-term Volatility Index is headed south, driving the overall stock market north.

http://www.indicant.net/Members/Updates/MT%20Indexes/I03.htm#16

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were no buy signals and no sell signals. You received a report earlier this weekend about that.

The Indicant is now signaling hold for 75 of the seventy-six mutual funds it tracks. The 75 funds with hold signals are up an average of 6.0% for an annualized gain of 34.8%. The average holding period is 8.9 weeks, compared to 22.7 weeks reported on October 18, 2002 when only ten funds were being held.

The Mid-term Indicant is avoiding only one fund. The ProFunds Ultra Short, (MF#22) is down 24.5% since the Mid-term Sell signal on October 18, 2002 . Remember that fund moves inversely and disproportionately to the stock market. Just as many of you made from 25% to 70% on this particular fund in the 2002 bear market, it will be around for us when the next bear market hits. This chart on this fund is logarithmic, so you can more easily see its behavior along the bottom. The problem for that fund is that it is nowhere near its bottom if the current bull market continues.

One mutual fund changed its name last week. VGSUX (Vanguard Utilities) was changed to VDIGX (Dividend Investment Growth).

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#22

Always remember never to keep more than 20% of your investment resources into a single mutual fund. Sector investing in mutual funds is an extremely good way to mix your investments.

Mid-term Indicant Positions - Indicant Selected Stocks

12-08-02

December 1, 2002 Indicant.Net Weekly Update

Volume 12, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

The Quiet before the Storm – Part X – Will It Stay Quiet?

Many interesting news releases will be published this month. With the Force Vectors peaking and a required seasonal pause/decline in the market prior to the Santa Clause rally, expect a bit of a roller coaster ride. That sounds like a forecast and is not official. The Indicant does not forecast the market. It only identifies direction. There are a few upcoming events worthy of mention.

The Idiots of Iraq

December 8, 2002 will be a major news day. Iraq is to reveal weapons of mass destruction then. If Iraq expresses obstinacy, expect a disappointed stock market on that day. It will be an emotional response and any losses will be wiped out with greater gains within weeks of the emotional outburst. Remember, wars do not cause long-term stock market crashes, although they can depress the magnitude of a bull market.

Retail Sales

Holiday sales data will start rolling in. So far, it does not look good. Retail sales are the conclusion of the economic supply chain. Bear markets are often preceded by declining retail sales. If retail sales are horribly low, you can expect a huge dip in the market. The Quick-term Indicant will advise you if the dip has any permanency to it. Technically, it would be an interesting study to evaluate reduced retail sales against the mid-term election year phenomenon. It is unlikely depressed retail sales would add honey to the bear in the market, since the market typically likes to anticipate economic behavior six to nine months into the future. The market misses its mark every day and knows it. That is why its snaky image is reflected on the charts.

Business Investments

Economic data on business investments and manufacturing activity will roll in. If retail sales are off and this category is down, the market will most likely take a dive a day before the news. Remember, the old adage, buy on the rumor and sell on the news. In this case, the opposite may occur; sell on the rumor and buy on the news, depending on what news is anticipated and what news is actually delivered. A lot of “third cousins” get privy to the news before it gets to be news. That is why you see some weird looking market behavior before major events. If the news is negative, the market will soon recover because of the mid-term election year phenomenon and bullish seasonality.

Tax-Loss Selling

Tax-loss selling is being reported as a potential depressant to the stock market. The bear market of 2002 will definitely generate tax-loss selling. The question is, how much. The poor souls that are compelled to do that are on the wrong end of the seasonal cycle, if they don’t exercise those sort of trades in September, which is at the tail end of bearish seasonality. If you want a tax loss selling strategy, sell on September 30 and buy back October 31. We work hard to prevent you from having to think of such thoughts.

The tax-loss selling “crowd” typically does their tax loss selling in November-December and then miss out on the early stages of the seasonal bull. The early stages of bull rallies are typically more dynamic than later stages. The crowd is not allowed to participate in such phenomena. That phenomenon is backed by mathematical reality. For every winner, there has to be more losers. That is how the system works. That is why you will never see the Indicant be mass-marketed. The Indicant spends 80% of its resources on research and development. Others spend 80% of their resources on marketing and promotion. They eventually saturate to the crowd and ultimately kill their golden goose. To understand this better, see the movie, A Beautiful Mind. Think about the theories of the professor. It provides clues to this phenomenon.

The NASDAQ peaked on March 9, 2000 at 5048.62. The Short-term Indicant signaled bear on March 30, 2000 at 4572.83. Although there have been several Quick-term Bull/Bear cycles between March 30, 2000 and October 10, 2002, some big money folks and institutions implemented their tax loss selling in prior to December 2000. The NASDAQ closed down 51% from its peak or at 2470.52 on December 29, 2000.

There was no seasonal bullish bounce in late 2000. The crowd kept wishing and hoping on a wing and prayer the bull market was not over. That is because big money kept on selling and the “crowd” kept on believing the NASDAQ was going to turn around. Guest after guest on CNBC pontificated that the market had bottomed and the turnaround was in order. The crowd kept buying and by the end of 2000, the fat cats were in cash and the poor 401K folks kept believing, “geese, these stock prices are sure good buys.” After all, PMC Sierra must have looked attractive at $100 since it once was priced at $245. The crowd bought at $100. More jumped on the bandwagon at $50. Even more bought at $25. It is unbelievable the crowd bought even more at $10. The stock eventually find bottom at $3.86.

Remember, a stock’s former peak price should always be considered irrelevant. Target pricing is a stupid concept. Direction is everything. It is nearly impossible to differentiate a cycle from a trend. We believe in charts, empiricism, but more importantly try to relate to your frame of reference. Never hold a frame of reference at a peak price. Financial experts talk about investment objectives. Good ones can really help you. But the stock market could care less what your objectives are. One must learn to go with the wind and buy low and sell high, regardless of what one’s objectives are.

Big money jumped back in just after September 11 and helped propel the Quick-term rally in late 2001. The best time to buy is just after a catastrophe. Voodoo bookkeeping, whining CEO’s, academic credentialism and excesses in cronyism killed that Quick-term Bull in early 2002. The Quick-term bear that followed was a steep one. The NASDAQ100 Quick-term Bear Market was down over 50% from April 2002 through early August 2002. There was a little surge in August 2002, whereby the Quick-term Indicant reluctantly signaled bull. That bull was short-lived as it was influenced by the anticipated mid-term election year phenomenon, as opposed to the old reliable force vectors and the Indicant Volume Indicators. That is why we use a combination of hard math and words to describe the market for you. It is not uncommon for us to advise you if we believe a Quick-term Bull will be short-lived, which was the case in the August spurt north.

The market enjoys tricking investors. When the masses catch on to a model, the market will do the opposite. That is why the Indicant holds its membership to a minimum and is esoteric about it current and future predictive market models. It is amazing the number of stock market predictive products that are mass marketed. Those folks either don’t understand the reality of the phenomena of commonality or just want to make big bucks fast at your expense. If you buy a mass produced market package, it may work for a short-time, but as soon as a critical crowd mass catches on, it will quit working. The phenomena of commonality has always prevailed and will continue to do so.

Intel Mid-quarter Update

Intel will release its mid-quarter update next week. Intel is tied to several categories. Intel was once a young and vibrant company. Arrogance was followed by lethargy and their bottom line is more or less insignificant. That is because their efficiencies and productivity is down as a fallout from their arrogance and lethargy. Sales volume is the key to predicting economic activity. Intel was and will continue to be at the forefront in product development. Intel’s strong suit is not in the area of productivity. They are the General Motors of the high tech world.

Companies excelling in marketing and product development are okay investments. Their continuing increasing sales volume generates significant economies of scale to absorb their overhead and capacity. In other words, high volume hides many problems. You saw what happened when sales volume flattens or declines. Intel, like most big companies, have a lot of fixed costs and when volume turns south, volume does not absorb those expenses. Losses mount by a rate far exceeding their reduced sales volume.

To offset reduced sales volume, several companies invented voodoo bookkeeping during the Clinton years, when they saw their “political” leader say it is okay to lie. When the recession started in early 2000, many attempted to hide their inabilities to cut costs or continue expanding sales. Their belief the NASDAQ was well on its way to 20,000, which went the other way, generated some sort of weird shock wave throughout corporate America. They were concerned more about their stock prices rather than just running the business and doing the right thing. Some like Enron’s Fastow was in a rush to garnish $45 million without the required and corresponding work effort to amass that sort of wealth. He is going to prison and hopefully for life.

If Intel’s upcoming mid-quarter report is bearish, expect the market to react negatively. Intel is a Dow30 and a NASDAQ100 stock. Although the stock market will find Intel’s numbers interesting this coming week, the direction of the market will be based primarily on what it perceives Intel’s numbers will be in July-September 2003.

Never make investment decisions on what analysts say. They always lag the stock price, as their analysis seems to be based on today’s fundamentals. The market addressed today’s fundamentals six to nine months ago. Sometimes the market is wrong and sometimes it is right. The analysts’ reports are pure hype. Click the below link for proof.

http://www.indicant.net/Ordering/OrderPageGraphicsLinks.htm#Reason%20#2.%20Indicant%20outperforms%20high%20priced%20security%20analysts.

The Market Never Goes from San Diego to Maine on a Straight Line.

We have enjoyed several consecutive up weeks. You know, and even I know, that will not continue. Some of you are up over a 100% since the Mid-term Indicant buying signals from mid-October, depending on which stocks you bought. You will most likely watch your gains suffer somewhat in the next few weeks. But, they should rebound to even higher gains at least through mid-January 2003.

Dips in the market will be followed by bigger gains, as long as the Quick-term Indicant’s Vector Pressure remains in bullish domain. Major crashes do not occur when the Quick-term Bull is a red bull and the Vector Pressure is positive. Also, the mid-term election year phenomenon will continue to lead the way. George W. Bush and pals will be very friendly to the ideals of capitalists the next two years. The bull in the stock market loves that idea. Regardless of whether or not the mid-term election year phenomenon continues, we are in the bullish seasonality pattern. If that does not work, the Quick-term Indicant, Mid-term Indicant, and Long-term Indicant are all saying bull right now. When and if they signal bear, who cares? A bear is a bear, regardless of one’s theories.

The only sore spot is the Short-term Indicant, which outperformed buy and hold by 16% from 1928 through 1998. The Short-term Indicant obviously has out-performed buy and hold since March 30, 2000 by over 60% by virtue of the tremendous decline the past two and a half years. The Short-term Indicant out-performed buy and hold by 80% from 1929 through 1933. The Short-term Indicant is a little slow signaling bull but real fast at signaling bear. Since it out performs buy and hold by a significant amount, we are not about to abandon it. It more or less confirms the market’s behavior. When it signals bull or bear, that means the market is really committed to its current direction.

Thirteen of the Indicant Selected Stocks are up by 50% or more since the Mid-term Indicant’s buy signals the past few weeks. They are as follows:

Inktomi Corp. Bought 10/25/02. Up 273.2%

Nortel Networks. Bought 10/18/02. Up 207.9%

CGMI. Bought 10/18/02 Up. 182.4%

CNET Networks. Bought 10/18/02. Up 162.1%

Broadvision. Bought 10/25/02. Up 133.5%

Ariba. Bought 10/25/02. Up 99.5%

Qwest Communications. Bought 10/11/02. Up 99.2%

Corning. Bought 11/8/02. Up 84.6%

Novell. Bought 10/11/02. Up 68.4%

Sprint PCS. Bought 11/8/02. Up 57.4%

Lucent. Bought 11/2/02, Up 55.3%

Halliburton. Bought. 8/9/02. Up 55.1%

Hydrogenic. Bought 10/18/02. Up 54.1%

Notice the absence of biotech firms, but there is a nice sprinkling of a several industry groups in the above stocks.

Seventeen of the NASDAQ100 stocks are by at least 50% since their recent buy signals. They are as follows:

Nextel Comms. Bought 8/16/02. Up 105.2%.

I2 Technologies. Bought 11/2/02. Up 88.3%

Atmel. Bought 11/2/02. Up 87.7%

Nvidia. Bought 10/18/02. Up 82.2%

BEA Systems. Bought 10/11/02. Up 80.4%

Ciena Corp. Bought 10/25/02. Up 80.2%

Juniper Networks. Bought 10/25/02. Up 75.8%

Imclone. Bought 10/25/02. Up 68.2%

Vitesse Semicon. Bought 11/2/02. Up 68.2%

Broadcom. Bought 11/8/02. Up 62.4%

Citrix Systems. Bought 10/25/02. Up 62.3%

RF Micro Devices. Bought 10/25/02. Up 58.0%

Sanmina. Bought 11/2/02. Up 54.8%

Genzyme. Gen. Bought 8/2/02. Up 54.1%

Xilinx. Bought 10/11/02. Up 51.6%

TMP Worldwide. Bought 10/25/02. Up 50.3%

Sun Micro Systems. Bought 10/25/02. Up 50.0%

Some of these stocks will not be up that much in the next five to eight months. A couple of them will continue moving to the north. Some not on the above list will be much higher than even these if the Quick-term, Mid-term, and Long-term Bull markets remain in tact.

Notice that one of the NASDAQ100 leaders is a biotech firm, Genzyme. That fulfills the desire for convergence in a general bull market.

There is nothing on the immediate horizon that suggests these stocks will crash. However, a few will ultimately fall. Make certain you maintain your stop losses and diversify your stock portfolio.

Divergence versus Convergence

As stated the past few weeks, stock prices are in a convergence pattern. There is little discrimination on any of the sectors tracked by the Indicant at this time. Fuel Cell stocks are moving north. Oil field service stocks are somewhat mixed, but Halliburton is up 55.1% since the Mid-term Indicant signaled buy on August 9, 2002. However, others are down since that period. Biotech stocks are moving in a generally northerly direction, but only Genzyme is participating in a leadership position in this bull cycle. But all in all, there is little sector discrimination at this time.

Economic Outlook

As stated last week, as money leaves the bond markets, stock prices will move to the north. The bond market will move south and corresponding interest rates will move north. Some interest rates are bottoming along the current cycle south. There is not much room left to hit zero.

You will hear arguments from intellectuals about how the market will not like increasing interest rates, which will happen, if and when, the economy heats up. A few months ago that was my conclusion, void of the intellectualism, of course. But, rates have fallen, so that theory has yet to be subjected to reality. Even though the Indicant had you out of most of the bear cycle in 2002, interest rates have fallen while the stock market fell. Will a mirror image reoccur in the future with an increasing market and rising interest rates? That scenario is believed to be highly unlikely and thus all the commentary about a secular bear market continuing. If it becomes vogue to believe this secular bear market will continue, then expect bullish behavior. Remember, it is mathematically impossible for the crowd to be right.

Nothing has changed from last week. The remainder of this paragraph remains the same as last week. Many of the inflation-oriented commodities continue taking on the appearance of cyclical peaks. As stated last week, that bodes well for cyclical downturns and relieving Greenspan from inflationary pressures. The CRB Bridge Futures is indicative of that behavior. It has turned south, but still lacks commitment in that direction. If it forms a new southerly cycle that is symmetrical to that of the past two cycles, then we should enjoy about six months of Greenspan relaxing.

The heat is still on the Saudis and the remainder of this paragraph is the same as last week. Oil prices continue to express cyclical downward behavior. Political pressure is being exerted on the Saudis. George W. Bush even has his pal, Russia’s Premier Putin, doing this. Putin recently pointed out that most of the 911 hijackers were Saudis. This type of pressure should act as a depressant on oil prices.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20Econ.htm

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001. Twenty-five weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Eighteen weeks ago, it closed up 12.0% since the buy signal. Nine weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001. Last week it closed up 31.2%. The Mid-term Indicant continues to signal hold for this fund, but it is softening. If the current Quick-term Bull becomes more explosive, expect this fund to drop in value.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-three weeks ago since the MTI buy signal in April 2001. Seventeen weeks ago, it closed up 27.8%. Last week it closed up 38.4%. The Mid-term Indicant continues to signal hold for this fund, but appears to be nearing a sell signal.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds will have “avoid” signals for the market to embark upon a meaningful and lasting bull leg. Right now, they are still signaling, “hold,” but appear to be nearing a sell signal.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#19

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. They are up 9.5% (annualized at 74.8%) since the October 15, 2002 Quick-term Bull signals. The Short-term Indicant showed an interest in becoming a bull again this past week. Prior to a couple of weeks ago, it had been over six months since the Short-term Indicant showed any points. The fact that some bullish energy in this model is showing some interest is encouraging for those of you who prefer bull markets.

The Dow is down 16.0% since the Short-term Indicant signaled bear on March 20, 2002. The NASDAQ Composite is down 65.0% since the Short-term Indicant signaled bear over two and a half year ago on March 30, 2000.

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

http://www.indicant.net/Non-Members/Back%20Issues/A%20Reports.htm

Mid-term Indicant Positions - Major U.S. Market Indices

All eight major indexes are up an average of 8.0% since their respective Mid-term Bull signals an average of 5.9 weeks ago. This annualizes to 70.4%. The weakest Mid-term Bull is the Dow Utilities. It is the youngest bull and is up only 1.8%. The strongest bull is the NASDAQ100. It is up 16.7%.

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

To view Mid-term Indicant charts for U.S. Market Indices, please click here.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-Mkts-US.htm

Mid-term Indicant Positions - International Markets

There were no new bull signals and no new bear signals.

The twenty-one bull markets are up an average of 19.5% since the Mid-term Indicant signaled bull an average of 18.3 weeks ago for an annualized gain 55.3%.

One international market is still a bear. It is China’s ^HSI market index. It is down 12.0% since its bear signal 12.0 weeks ago. Click the following hyperlink to view the status and charts.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI%20Intl%20Mkts.htm

The Volatility Index is a relatively new bear, but the bull in it put up a battle last week, rising over 12.5%. The direction is clear and that is south. That bodes well for a bullish stock market. As predicted, the residual bull is putting up a battle before the bear completely overcomes it. That battle will depress the stock market somewhat, but that will only make the rebounds during December that much stronger.

http://www.indicant.net/Members/Updates/MT%20Indexes/I03.htm#16

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were no buy signals and no sell signals. You received a report earlier this weekend about that.

The Indicant is now signaling hold for 75 of the seventy-six mutual funds it tracks. The 75 funds with hold signals are up an average of 8.2% for an annualized gain of 53.7%. The average holding period is 7.9 weeks, compared to 22.7 weeks reported on October 18, 2002 when only ten funds were being held.

The Mid-term Indicant is avoiding only one fund. The ProFunds Ultra Short, (MF#22) is down 30.8% since the Mid-term Sell signal on October 18, 2002. Remember that fund moves inversely and disproportionately to the stock market. Just as many of you made from 25% to 70% in the bear decline this year, it will be around for us when the next bear market hits. This chart on this fund is logarithmic, so you can more easily see its behavior along the bottom. The problem for that fund is that it is nowhere near its bottom if the current bull market continues.

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#22

Always remember never to keep more than 20% of your investment resources into a single mutual fund. Sector investing in mutual funds is an extremely good way to mix your investments.

Mid-term Indicant Positions - Indicant Selected Stocks

12-01-02

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