February 28, 2005 Indicant.Net Weekly Update

Volume 02, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

Are We in the Early Stage of a 1970’s Market – Part II

The Indicant does not do three things. It is not intended to be entertaining. It is also does not attempt insight fear. It does not forecast the stock market. It informs so you can make money and avoid losing money in the stock market.

Although the Indicant does not forecast, it openly analyzes the stock market’s underlying themes. Just as a golfer exercises intense mental imaging before the shot, it is good to anticipate possible shifts in stock market direction. Getting use to a possible outcome before it actually occurs helps in ones ability to execution actions when the anticipated outcome unfolds. The calculating and cool generally outperform those with herky-jerky behavior.

There are periods when the market is addressing an underlying theme. Such themes threaten the current cyclical or trend direction of the stock market. When those themes become dominant or long-standing, the Indicant can be redundant. It is important to inform you of themes at the expense of boring you and/or becoming redundant. This is one of those times.

Last year the Indicant became concerned about a 1970’s type of market. The calendar year fourth quarter bull in 2004 softened that theme somewhat. Since early January, the market appears to be posturing itself for a potential 1970’s stock market expression. For those of you who have been asleep the past few weeks, click the following link for a review of what the 1970’s stock market looked like.

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-02-SP500-1972-1976.htm

As you can see from the above link, the S&P500 collapsed nearly 50% in the early 1970’s. Its rebound on the above chart helped those who “stayed the course.” But they did not make nearly as much money as those who avoided that 50% decline and then jumped back in at the bottom. The Indicant investor, of course, enjoyed avoiding the bearish inclinations in that period. The bear market was not through, though, as the rebound was followed by another bearish onslaught, but not nearly as severe as the OPEC generated bear of the first half of the 1970’s. A buyer and holder in the 1970’s did not make money, while the avoider who invested in interest bearing accounts made fortunes.

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-02-SP500-1976-1980.htm

It is no secret that the primary source of petroleum-based products is provided by those who do not like western societies. The free-living style of self-expression of those born and raised in western society appears repulsive to those who reside in the Middle East. It is no secret that most OPEC members view the west, their customer, with significant disdain. The Saudi’s attempt to balance things out in their effort to retain power. Much of that stems from FDR’s deal with the Saudi Kingdom, where the royal family would retain power in return for stable sources of oil. That deal was constructed in the 1940’s and has been faithfully executed for the most part since then. However, in the early 1970’s the Saudi’s joined the embargo with other OPEC members. That created a severe shortage of petroleum. This resulted in hyperinflation in the 1970’s.

Since that OPEC embargo in the early 1970’s, disdain and hatred for the West intensified. The Middle Eastern Wars in the early 1990’s and the current Iraqi conflict have added to this disdain. The burgeoning economy of China resulted in yet more demand for Middle Eastern oil. The laws of supply and demand are holding true even with the fake influence of OPEC. Competitive forces become irrelevant when the raw material source is drying up.

Sheik Yamani, who was the OPEC chief during much of the 1970’s and 1980’s was fired by the Saudi King after oil prices fell from $36 per barrel to less than $10 per barrel from 1981 to 1987. Sheik Yamani was calculating and knew his business. It was ruthless, but the designed intent was to get oil prices so low that it would drive the United States from being a major producer. That design also helped the birth of the greatest bull market of all time. The reduction in oil prices help propel world economies to new heights. This carried over in the 1990’s with the King’s intent to maintain stable oil prices.

The idea was to minimize international global competition for oil producers. The King learned from Sheik Yamani that recovery costs per barrel in the United States was in the low twenties. The King and OPEC allowed oil to fluctuate around that figure for over two decades. That led to uncertainty and, by design, held western capital investments in petroleum to a minimum. Consequently, development of new resources has been at a minimum for the last twenty-five years. Thus, the supply potential is also at a minimum while the demand for oil is escalating by historical levels. Much of this is from China, but the U.S. infrastructure has shifted back to assuming low oil prices. For example, the low oil prices of the 1980’s and 1990 led to the development of SUV’s. Now, those gas-guzzlers’s appeal is threatened.

During the 1980’s and 1990’s, the Saudi’s were calculating. They maintained a non-emotional discipline by holding oil prices in check. The burgeoning economy in China has now afforded them an opportunity to mistreat the west with higher prices. Higher oil prices are here to stay if new sources of energy are not developed.

The Athabasca Tar Sand oil in Northern Alberta is now enjoying increasing capital investments. That was discussed in some detail in last week’s report. That oil has a recovery cost of around $28 per barrel. That leaves plenty of profit margin at today’s forty to fifty dollar oil. There is more oil in those tar sands than in all of the Middle East. That increasing capital investment is what Sheik Yamani was trying to avoid. But the emotional-based middle eastern leadership will in the long-run be their own worse enemy. They are directing a course that will return them to camel travel only unless they adapt to honest competitiveness. That will require a serious study of Darwinian Law and understanding the message from the likes of Adam Smith and Thomas Jefferson. That scenario seems unlikely at this time.

It is believed that OPEC members are transforming from a calculating state of consciousness to one of emotion. In the final analysis, emotional based thinking falls prey to the calculating. That means that OPEC will eventually be weakened by the development of the tar sand oil. Until then, the equity markets in the western societies may have difficulty dealing with OPEC’s greed and hatred. That is why the current bull markets may be short-lived. This is not a forecast, as the Indicant does not do that. However, the possibilities and similarities to the 1970’s are increasing.

Those possibilities increased last week. At the expense of being redundant, a review of what happened last week is not out of order.

The link to rising oil prices is below. As you can see from the following link, oil prices continue to move upward. They are now into bullish domains for oil prices. The equity markets will not like that, if the current cycle continues to strengthen. Much of this is influenced by the natural laws of supply and demand. The salvation to the west may derive from the Athabasca Tar Sand Oil in Northern Alberta, Canada.

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

The link to the Federal Funds Rates, Discount Rates, Prime Rates, and Call Money charts is below. As you can see, the direction is not friendly for bull markets. Although the market has little experience with rising interest rates from record low levels, the direction at some point will depress any potential bullish enthusiasm. That is what occurred in the 1970’s.

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

As stated last week, it is true rates are at historically low levels, but the political establishment will not bias their behavior in favor of economic health when confronted by inflationary threats in presidential post election years. There is no political penalty for screwing the lives of millions to stave off inflationary threats. Post election years with a lame-duck president are not friendly to bull markets. The Fed Chief, like all those before Greenspan measure their legacies on inflation/deflation more than any other measure. They reason that people create the economy and while the Federal Reserve Board influences inflation/deflation. Therefore, in the spirit of performance objectives, the Fed Chief will be completely in charge of interest rates in this post election year. He will not be sensitive to a vote-getting economy.

OPEC is becoming more desensitized to concerns about the American economy. The East/West relationship continues to sour. That does not bode well for any support for declining oil prices in the immediate future or as long as OPEC is the largest supplier of petroleum.

Exxon’s stock price continues to skyrocket. As stated last week, it alone is what is holding up the Dow. That is one reason the Quick-term Indicant continues to signal bear for the Dow30, as most of the other members of that index are down since the early January Quick-term Bear signal. A link to Exxon-Mobil stock chart is below:

http://www.indicant.net/Members/Updates/MTI-Stks-DJIA/DS05.htm#28

Exxon’s skyrocketing stock price is eerily synchronous to the 1970’s type of market behavior. This is one reason why you can always make money in the stock market regardless of what the stock market is doing. Exxon and other energy-related stocks skyrocketed in the 1970’s while other stocks plummeted.

Look at the Oil Well Services Index. This index is comprised of the likes of Halliburton, Schlumberger, Baker, etc. It also continues to skyrocket. In the 1970’s those stocks increased by over a thousand percent, while general equities whipsawed through bull/bear cycles for no gain.

http://www.indicant.net/Members/Updates/MTI-Mkts-Index%20Options/I03.htm#18

State Street Global is up a whopping 187.5% since the Mid-term Indicant signaled buy in August 2002. It moved up an additional 12.5% last week alone. This particular fund is heavily invested in energy related equities.

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF02.htm#9

Vanguard Energy is up a whopping 97.8% since the Mid-term Indicant signaled buy in April 2003. That buy signal was a few weeks slower than most of the buying spree of funds because the Indicant believed the impending bull market would be fueled by stable oil prices. Although there was some stability in the late 2002 and most of 2003, stable prices favoring a bull market has been replaced by a significant shift in trend. This fund moved up 7.6% just last week.

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF03.htm#18

As stated last week, the great bull market of 2003 was beautifully constructed with a convergent pattern with all sectors moving north. That symmetry broke down in 2004’s meandering market. Now, the primary bullish behavior the past few weeks has been limited to petroleum related sectors with a few exceptions.

Finally, gold prices skyrocketed in the 1970’s. Although that is not a prerequisite for a 1970’s type of market, it is worthy of close monitoring. Gold prices are still down from its historical high of over $800 per ounce. If rising oil prices penetrate the consumer price index, expect gold prices to skyrocket. One of our members suggested we track GLD, which is a gold exchange traded fund. We will not only track it, but will do so on a quick-term basis in a few more months for you. That will afford you the opportunity to invest in it internal to hold signals or buy puts on it internal to avoid signals. There will be more about that in a few weeks. We are making final adjustments to ensure our modeling beats buy and hold regardless of market conditions. So far, it looks good.

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

When you click the above chart, notice how oil prices and gold prices parallel one another.

Vanguard’s Gold and Precious Metals has outperformed Fidelity’s competitive product. Vanguard’s is up 147.0% since the Mid-term Indicant signaled buy in April 2001. This fund moved up by 6.0% just last week.

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

The Vanguard Fund hold position has not been threatened with a sell signal since then, while the Fidelity Fund was subjected to a sell signal in mid-2004.

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

The Fidelity Gold Fund is up by a mere 11.8% since the Mid-term Indicant signaled buy in August 2004. However, it did generate a gross profit in excess of 50% in the previous buy/sell cycle. It moved up a solid 2.8% last week, but not nearly as much as other related funds and commodities.

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

Additional threats are now confronting the Mid-term Bulls. Commodity prices are resuming an unhealthy pattern to the north. You will notice just below the oil and gold on the following link that two commodities are also skyrocketing. Their recent cyclical shift to the south was short-lived. It did not impact the current unfavorable trend.

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

Overall, do not get too concerned about this until all the Indicant models are signaling bear. The Indicant believes predicting market magnitude is impossible. It is the market’s direction that is important. It is just as important to avoid a mini-bear of 5%, as it is to avoid a major bear of 60% or more. You never know when a 5% bear will turn into a major bear. That is the importance of avoiding any bear in its earlier stages.

Weekly Buy/Sell Summary

The Mid-term Indicant generated two buy signals and seven sell signals for stocks. Again, there were no sell signals for funds, as most of them have been held since March 2003. This is a testament to the strength of this Mid-term Bull market.

In addition to the sell signals, the Mid-term Indicant is avoiding 61 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 29.9% since the Mid-term Indicant signaled sell an average of 53.7 weeks ago.

There were only 15 stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 28.7% since their respective sell signals an average of 43.9 weeks earlier. Two years ago, on March 1, 2003, the Mid-term Indicant was avoiding 127 stocks and funds that were down an average of 10.6% since their respective sell signals an average of 7.2 weeks earlier. There were seven sell signals and seven buy signals two years ago, ahead of the second buying spree that occurred in March 2003.

In addition to the buy signals this weekend, the Mid-term Indicant is currently signaling hold for 250 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 89.7%. That annualizes to 66.9%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 250 stocks and funds for an average of 69.8 weeks.

One year ago, the Mid-term Indicant was holding 275 stocks and funds out of the 296 for an average of 43.6 weeks. They were up 70.0% (annualized at 83.5%). The Mid-term Indicant was signaling hold for 155 stocks and funds two years ago on March 1, 2003. They were up by an average of 21.1% (annualized at 58.9%) since their respective buy signals an average of 18.6 weeks earlier.

Secular Market Blend

This paragraph is a repeat from the last several months with a few modifications reflecting recent secular influences. The current mid-term bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways; manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions changes, there will be modifications to it to maintain a proper frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. The early part of December was not consistent with the normal Santa Clause rally. However, bullish expressions resumed in late December 2004. Some quick-term attributes suggested there would be a Santa Clause rally and that is exactly what happened.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but five weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with a bullish response. But that bullish response was weak. All the Quick-term attributes remain biased with bearish tendencies. The bullish response to bearish enthusiasm consumed significant bullish energy. Thus, the Quick-term Indicant continues to signal bear. There are some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis, but the Mid-term Bull remains solid.

The presidential post election year is historically the most bearish year on the presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Short-term Indicant continues signaling bear. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your hold positions still appear safe.

The buy signals the past few weekends may very well be short-lived. Although we are still within bullish seasonality, the Quick-term attributes have not yet shifted significantly enough to signal bull. This may occur next week. If so, that will be another reason to be optimistic about your holdings. 1970 type fundamentals were increasingly apparent this past week with oil stocks rising rapidly while all other sectors continued their meandering ways.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons.

Stock and Fund Update

Click the following link to see sorted performance of stocks and funds with hold/avoid signals. In the past, we included them in this email message but now display them on the website. This is available to the public, while the specific buy and sell transactions are limited to members only.

http://www.indicant.net/Non-Members/Performance/Top-Bot.htm

Summary of Stocks and Funds with Buy and Sell Signals This past Week

To maintain appropriate security, you can see the Mid-term Indicant "buy/sell" signals for stocks and funds for this week by clicking the following link. It is in the member’s only section.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/Buy-Sell%20Summary%20This%20Week.htm

As repeatedly stated, do not hold more than 10% of your investment resources in a single stock and do not hold more than 20% of your investment resources into a single mutual fund. Also, never fall in love with a stock or fund. Only love the value of your portfolio. Never love its contents. Management stupidity can wreak havoc on any stock or fund at any time.

All update information can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

Several sectors moved from bearish domains to neutral last week, but lagged outlandish bullish expressions in the energy sector. Although that is a pattern of convergence, it divergence in position between energy and other sectors supports a continuing bearish bias.

As stated last week, your “new money” behavior should be consistent with bearish bias, even though several Indicant models continue to signal bull.

Economic Conditions – Inflation, Currency, Interest Rates

Commodity prices are no longer being obstinate. They are now skyrocketing. The equity markets will not like this. That will increase bearish confidence. The bull can contribute to the least worse case of a meandering market. However, the strongest of bulls cannot standup to inflation or deflation. Right now the threat is inflation and its serious nature is growing.

The U.S. Dollar remains weak, but continues to move above cyclical minimums. It will strengthen provided Greenspan continues increasing interest rates. Interest rates continue their slope to the northeast on the charts. However, they remain at historically low levels.

Overall, a looming threat in the short-term is Greenspan’s interpretation of the skyrocketing commodity prices. That alone can kill the current Mid-term Bull markets and set off profound bearish.

This paragraph remains unchanged from the past thirteen weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. Right now, the stock market is not being bothered by this unfavorable direction on a mid-term basis, while at the same time; equities will not take their suspicious eye off it. The recent bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and forty weeks ago since the MTI buy signal in April 2001. One-hundred and thirty-three weeks ago, it closed up 30.1%. Last week it closed up 147.0%, which is higher than the 75.9% reported 84-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 37.4%, which is significantly higher than 23.1% reported 84 weeks ago. This fund is up from its most recent peak on December 5, 2003 when it was up 117.3%. This fund moved north last week for the seventh week in a row. It has the 1970’s look to it.

The Fidelity Gold Fund #28 is up 11.8% (annualized at 22.5%) since the Mid-term Indicant signaled buy on August 20, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.9% gross profit. As stated the past several months, if Greenspan gets aggressive in his fight against inflation, this fund will most likely not provide the nice profit it did on the last buy/sell cycle. This fund moved north the past three weeks after moving south the previous two weeks. It also is beginning to express a 1970’s type of behavior.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 187.5% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 73.1%. Vanguard Energy #18, VGENX, is up 97.8% (annualized at 50.9%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 64.4% (annualized at 51.8%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 76.1% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 49.0%.

These funds are up significantly the past six weeks. That is consistent with a 1970’s type of market. As stated last week, if the Chinese economy heats up again, expect these energy related funds to continue their bullish march.

The Gold Index is up 7.7% since the Mid-term Indicant signaled bull on July 9, 2004. This index has basically been flat for nearly three quarters of a year. It is uncommon for this index to not express bullish behavior with rising oil prices. However, the high oil prices have not yet impregnated the consumer price index. When that happens, the gold index and other gold related securities should move to the north.

As repeatedly asked, is this the 1970’s all over again? The remainder of this paragraph will remain unchanged until such time conditions change. So far, it does not look that way, but increasing bullish expressions in the energy sector will lead to more bearish expressions in general equity markets. This may continue in this presidential post election year. Again, forecasting the market is okay for hallway conversations, but never give your broker instructions based on a forecast. The Indicant will keep you posted on the market’s cyclical and trend inclinations. There is definite behavior supporting a 1970’s type of theme.

These funds and the gold and silver index should convey the market’s perception of terrorism, inflation, and the economy. As long as they are in solid hold/bull positions, there remains some pessimism regarding the future of the economy.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for about eight weeks. As stated the past few weeks, that is a long period of survival in the midst of the heart and soul of bullish seasonality. It was met with bullish resistance when the indices approached the bearish yellow curve. That was a favorable response with respect to your hold positions. The longer this Quick-term Bear survives the better chance for greater breadth than normal quick-term bears in bull markets. This will continue to be monitored until it expires. Most quick-term bears do not survive too long during bullish seasonality. It was on the verge of expiration three weeks ago, but the potential burgeoning bull expended too much energy preventing complete bearish dominance. There is simply not enough bullish energy for a new Quick-term Bull to dominate the market at this time.

Read the daily emails for more about the Quick-term Indicant. It is still a Quick-term Bear.

Please review the daily reports for more details regarding the Quick-term Indicant.

To view the Quick-term Indicant charts, please click the following hyperlink:

http://www.indicant.net/Members/Updates/STI-Mkts/QT.htm

The NASDAQ Indicant Volume Indicator continues declining with recent bullish and bearish expressions. This is not favorable to an expectation of strong bullish sentiment. As stated last week, it is also supportive of continued meandering behavior. The declining Indicant Volume Indicators are an indication there is no strong support for a long-lasting Quick-term Bear. However, keep your eye on this. The Quick-term attributes can change quickly. Prior to this shift in direction there was increasing bearish sentiment on a quick-term basis, but that has since been dampened.

http://www.indicant.net/Members/Updates/STI-Mkts/IVI.htm

The Dow is now up 3.5% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 0.7% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears. Again, too much bullish energy was consumed to fend off bearish dominance.

To view the Short-term Indicant charts, please click the following hyperlink:

http://www.indicant.net/Members/Updates/STI-Mkts/STI.htm

A link to the Dow’s Short-term Indicant table is as follows:

http://www.indicant.net/Non-Members/Tours/STI%20Tour/ST-Table%20DJIA1995-2002.htm

A link to the NASDAQ’s Short-term Indicant table is as follows:

http://www.indicant.net/Non-Members/Tours/STI%20Tour/ST-Table%20NAS1995-2002.htm

Perspectives

This paragraph is unchanged from last week. The indices have retracted from their bullish breakout lines. They are not yet threatening their respective breakdown lines. Although there is a Quick-term Indicant Bear in progress, the perspectives reveal no deep bears on the immediate horizon. The small caps continue resisting bearish influences and has recently been engaging its breakout line, which is bullish for that particular group of stocks. The Quick-term modeling requires consistent signaling and thus cannot signal bull even though one of the indices is expressing bullish behavior in the face of the Quick-term Bear.

Read your daily emails.

To view the Perspective Charts (Quick-term Indicant, please click the following.

http://www.indicant.net/Members/Updates/STI-Mkts/QTP.htm

Refer to the daily reports for more information about the Quick-term Indicant.

For more information about the Quick-term Indicant, refer to last week’s daily reports.

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

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

The eight major indices are up an average of 28.2% since the Mid-term Indicant signaled bull an average of 70.8 weeks ago. That annualizes to 20.7%. The Dow Transports is the strongest bull. It is up 64.1% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 27.2% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 43.6% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 49.9% since the Mid-term Indicant bull signal on August 16, 2003. Five of the eight major indices continue as red bulls. Just when the survivability of these bulls were in question four weeks ago, they responded with a bullish fervor in the face of the Quick-term Bear. Again, that is a testament to the strength of this Mid-term Bull market. However, they are being threatened with the potential of rising inflation and interest rates.

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

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

Mid-term Indicant Positions – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 114.9% since the Mid-term Indicant signaled bull an average of 101.7 weeks ago for an annualized gain of 58.7%, which is less than the 72.9% reported 88 weeks ago. International indices are up the past five weeks.

The lone bear is up 5.4% since the Mid-term Indicant signaled bear seven weeks ago.

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

February 20, 2005 Indicant.Net Weekly Update

Volume 02, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Are We in the Early Stage of a 1970’s Market

As most of you know, the Indicant has been concerned about the market mirroring the 1970’s bear market. There is no technical reason driving this theme. It is entirely fundamental.

Rising oil prices parallel those of the 1970’s when much of the price rise was driven by a controlling market. The OPEC organization abandoned competition. The cartel dictated prices. Those prices peaked in 1981 when worldwide consumption for oil declined for about five years. The Russian supply lines helped keep a lid on oil prices in the 1990’s.

Low energy costs promulgated the great bull market in the 1990’s, regardless of what the political establishment says. Politicians had absolutely nothing to do with the 1990’s bull market except for the animosities between a Republican House and a Democratic president. Bulls find more freedom to express themselves when the executive and legislative branches of government are from different parties. Now, the executive and legislative branches of government are from the same parties, favoring a bearish bias.

The combination of a presidential post election year, which is the most bearish on the four-year cycle and the same parties represented in the executive and legislative branches of government provide the stock market bear greater freedom to express itself. That has nothing to do with the 1970’s but that influence on a bearish bias has over a hundred years of historical support.

Rising capitalism around the globe and especially in China will prevent any rapid drop in oil prices. The recent increases in oil prices and other commodities will eventually influence the consumer price index in an unfavorable direction. That will force Greenspan to become extremely aggressive in raising interest rates, much like Paul Volker’s record high rates of the 1970’s. Although it is improbable that contemporary interest rates will match those of the late 1970’s, the unfavorable direction should be unsettling to equities.

The link to rising oil prices is below.

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

The link to the Federal Funds Rates, Discount Rates, Prime Rates, and Call Money charts is below. As you can see, the direction is not friendly for bull markets. Although the market has little experience with rising interest rates from record low levels, the direction at some point will depress any potential bullish enthusiasm.

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

Yes, it is true the rates are at historical levels, but the political establishment will not bias their behavior in favor of economic health when confronted by inflationary threats in post election years. There is no political penalty for screwing the lives of millions to stave off inflationary threats. Post election years with a lame-duck president are not friendly to bull markets. The Fed Chief, like all those before Greenspan measure their legacies on inflation/deflation more than any other measure. They reason that people create the economy and they, alone, influence inflation/deflation. So, in the spirit of performance objectives, the Fed Chief will be completely in charge of interest rates in this post election year. He will not be sensitive to a vote-getting economy.

OPEC is becoming more desensitized to concerns about the American economy. The East/West relationship continues to sour. That does not bode well for any support for declining oil prices.

Look at what happened last week. The first thing is Exxon’s continuing stock price increase. It alone is what is holding up the Dow. That is one reason the Quick-term Indicant continues to signal bear for the Dow30, as most of the other members of that index are down since the early January Quick-term Bear signal. A link to Exxon-Mobil stock chart is below:

http://www.indicant.net/Members/Updates/MTI-Stks-DJIA/DS05.htm#28

As you can see, Exxon has skyrocketed the past few weeks. That is synchronous to the 1970’s type of market behavior.

Look at the Oil Well Services Index. This index is comprised of the likes of Halliburton, Schlumberger, Baker, etc. It is also skyrocketing in price. The link is below:

http://www.indicant.net/Members/Updates/MTI-Mkts-Index%20Options/I03.htm#18

State Street Global is up a whopping 175% since the Mid-term Indicant signaled buy in August 2002. This particular firm is heavily invested in energy related equities.

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF02.htm#9

Vanguard Energy is up a whopping 90.2% since the Mid-term Indicant signaled buy in April 2003. That buy signal was a few weeks slower than most of the buying spree of funds because the Indicant believed the impending bull market would be fueled by stable oil prices. As you can see, the market anticipated the rise in oil prices and treated those of you who bought on this signal very well indeed.

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF03.htm#18

The great bull market of 2003 was beautifully constructed with a convergent pattern with all sectors moving north. That beautiful symmetry broke down in 2004’s meandering market. Now, the primary bullish behavior the past few weeks has been limited to petroleum related sectors with a few exceptions.

Finally, gold prices skyrocketed in the 1970’s. Although that is not a prerequisite for a 1970’s type of market, it is worthy of close monitoring. Gold prices are still down from its historical high of over $800 per ounce. If the rising oil prices penetrate the consumer price index, expect gold prices to skyrocket.

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

When you click the above chart, notice how oil prices and gold prices parallel one another.

Vanguard’s Gold and Precious Metals has outperformed Fidelity’s competitive product. Vanguard’s is up 141% since the Mid-term Indicant signaled buy in April 2001.

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

The Vanguard Fund hold position has not been threatened with a sell signal since then, while the Fidelity Fund was subjected to a sell signal in mid-2004.

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

The Fidelity Gold Fund is up by a mere 9% since the Mid-term Indicant signaled buy in August 2004. However, it did generate a gross profit in excess of 50% in the previous buy/sell cycle.

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

As stated in several prior weekly reports, there is a new threat confronting OPEC and Russian oil. The Athabasca Tar Sands in northern Alberta Canada. There is more oil there than in all of the Middle East. Capital investing in tar sand oil amounted to $11-billion from 1996 through 2000. That grew to $42 billion in 2000-2001, approx. U.S. oil production has been in steady decline since the early 1980’s, which was the design of Shiek Yamini of Saudi Arabia in the early 1980’s. He reasoned that $21 oil and below would drive the U.S. from swing nation status to a non-participant. It worked for the most part. Even when oil would move up, capital investing was meek as price stability was elusive for well over twenty-five years.

Tar sand oil’s current estimated breakeven point is around $28/barrel. So with $40 plus oil prices, capital investment and delivery methods of that oil will continue to grow. That source will be made more available to the U.S. and from a friendlier source in Canada.

With the exception of tar sand oil, though, the markets are forming an eerie similarity to the 1970’s. You should monitor this closely, as the 1970’s was not friendly to buy and hold positions in stocks, except for those related to the petroleum sector. To help you remain cautious, click the following links to the 1970’s.

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-01-DJI-1972-1976.htm

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-01-DJI-1976-1980.htm

Those two great bear legs, both approaching 40% declines were accompanied with record high prices in petroleum related securities. For example, Halliburton stock rose by over 1,000% in the 1970’s while the market was basically flat during that time. There is always money to be made in the stock market, regardless of its direction.

Weekly Buy/Sell Summary

The Mid-term Indicant generated one buy signal and two sell signals for stocks. Again, there were no sell signals for funds, as most of them have been held since March 2003. This is a testament to the strength of this Mid-term Bull market.

In addition to the sell signals, the Mid-term Indicant is avoiding 61 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 29.6% since the Mid-term Indicant signaled sell an average of 52.9 weeks ago.

There were only 15 stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 27.9% since their respective sell signals an average of 42.7 weeks earlier. Two years ago, on February 22, 2003, the Mid-term Indicant was avoiding 130 stocks and funds that were down an average of 8.2% since their respective sell signals an average of 6.2 weeks earlier. There were five sell signals and 51 buy signals two years ago, ahead of the second buying spree that occurred in March 2003.

In addition to the buy signal this weekend, the Mid-term Indicant is currently signaling hold for 256 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 86.2%. That annualizes to 65.3%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 256 stocks and funds for an average of 68.6 weeks.

One year ago, the Mid-term Indicant was holding 281 stocks and funds out of the 296 for an average of 43.1 weeks. They were up 67.6% (annualized at 82.6%). The Mid-term Indicant was signaling hold for 110 stocks and funds two years ago on February 22, 2003. They were up by an average of 28.3% (annualized at 54.0%) since their respective buy signals an average of 28.8 weeks earlier.

Secular Market Blend

This paragraph is a repeat from the last several months with a few modifications reflecting recent secular influences. The current mid-term bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways; manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions changes, there will be modifications to it to maintain a proper frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. The early part of December was not consistent with the normal Santa Clause rally. However, bullish expressions resumed in late December 2004. Some quick-term attributes suggested there would be a Santa Clause rally and that is exactly what happened.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but four weeks ago, bearish behavior revealed greater aggression. All the Quick-term attributes remain biased with bearish tendencies. However, Quick-term bearish attributes have weakened the past three weeks. The bullish response to bearish enthusiasm consumed significant bullish energy. Thus, the Quick-term Indicant continues to signal bear. There are some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis, but the Mid-term Bull remains solid.

The post election year is historically the most bearish year on the presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Short-term Indicant continues signaling bear. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your hold positions still appear safe.

The buy signals the past few weekends may very well be short-lived. Although we’re still within bullish seasonality, the Quick-term attributes have not yet shifted significantly enough to signal bull. This may occur next week. If so, that will be another reason to be optimistic about your holdings. 1970 type fundamentals were increasingly apparent this past week with oil stocks rising rapidly while all other sectors continued their meandering ways.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons.

Stock and Fund Update

Click the following link to see sorted performance of stocks and funds with hold/avoid signals. In the past, we included them in this email message but now display them on the website. This is available to the public, while the specific buy and sell transactions are limited to members only.

http://www.indicant.net/Non-Members/Performance/Top-Bot.htm

Summary of Stocks and Funds with Buy and Sell Signals This past Week

To maintain appropriate security, you can see the Mid-term Indicant "buy/sell" signals for stocks and funds for this week by clicking the following link. It is in the member’s only section.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/Buy-Sell%20Summary%20This%20Week.htm

As repeatedly stated, do not hold more than 10% of your investment resources in a single stock and do not hold more than 20% of your investment resources into a single mutual fund. Also, never fall in love with a stock or fund. Only love the value of your portfolio. Never love its contents. Management stupidity can wreak havoc on any stock or fund at any time.

All update information can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

Last weeks movement revealed increasing divergent behavior, which is non-bullish. Actually, it is increasing in favor of bearish bias. General equities weakened slightly after expressing a strong bullish behavior three weeks ago. The Internet sector also weakened and has a bearish bias. Technology remains neutral. Energy is the only sector with continuing bullish sentiment. Overall, this divergent pattern is non-bullish.

As stated last week, your “new money” behavior should be consistent with bearish bias, even though several Indicant models continue to signal bull.

Economic Conditions – Inflation, Currency, Interest Rates

Commodity prices continue to be obstinate in their inflationary bias. After a few weeks of expressing deflationary directional behavior, some of them shifted back to the north. This reversal in direction will support Greenspan’s alignment with anti-inflationary policies. That favors increased aggressiveness in jacking up interest rates.

The U.S. Dollar remains weak, but continues to move above cyclical minimums. It will strengthen provided Greenspan continues increasing interest rates. Interest rates continue their slope to the northeast on the charts. However, they remain at historically low levels.

This paragraph remains unchanged from the past twelve weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. Right now, the stock market is not being bothered by this unfavorable direction on a mid-term basis, while at the same time; equities will not take their suspicious eye off it. The recent bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and thirty-nine weeks ago since the MTI buy signal in April 2001. One-hundred and thirty-two weeks ago, it closed up 30.1%. Last week it closed up 141.1%, which is higher than the 75.9% reported 83-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 36.1%, which is significantly higher than 23.1% reported 83 weeks ago. This fund is up from its most recent peak on December 5, 2003 when it was up 117.3%. This fund moved north last week for the sixth week in a row. It has the 1970’s look to it.

The Fidelity Gold Fund #28 is up 9.2% (annualized at 18.2%) since the Mid-term Indicant signaled buy on August 20, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.9% gross profit. As stated the past several months, if Greenspan gets aggressive in his fight against inflation, this fund will most likely not provide the nice profit it did on the last buy/sell cycle. This fund moved north the past two weeks after moving south the previous two weeks. It also is beginning to express a 1970’s behavior.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 175.0% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 68.7%. Vanguard Energy #18, VGENX, is up 90.2% (annualized at 47.4%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 59.6% (annualized at 48.8%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 68.4% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 44.6%.

These funds are up the past five weeks. That is consistent with a 1970’s type of market. If the Chinese economy heats up again, expect these energy related funds to continue their bullish march.

The Gold Index is up 4.8% since the Mid-term Indicant signaled bull on July 9, 2004. This index has basically been flat for nearly three quarters of a year. It is uncommon for this index to not express bullish behavior with rising oil prices. However, the high oil prices have not yet impregnated the consumer price index. When that happens, the gold index and other gold related securities should move to the north.

As repeatedly asked, is this the 1970’s all over again? The remainder of this paragraph will remain unchanged until such time conditions change. So far, it does not look that way, but increasing bullish expressions in the energy sector will lead to more bearish expressions in general equity markets. This may continue in this presidential post election year. Again, forecasting the market is okay for hallway conversations, but never give your broker instructions based on a forecast. The Indicant will keep you posted on the market’s cyclical and trend inclinations. There is definite behavior supporting a 1970’s type of theme.

These funds and the gold and silver index should convey the market’s perception of terrorism, inflation, and the economy. As long as they are in solid hold/bull positions, there remains some pessimism regarding the future of the economy.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for about seven weeks. That is a long period of survival in the midst of the heart and soul of bullish seasonality. It was met with bullish resistance when the indices approached the bearish yellow curve. That was a favorable response with respect to your hold positions. The longer this Quick-term Bear survives the better chance for greater breadth than normal quick-term bears in bull markets. This will continue to be monitored until it expires. Most quick-term bears do not survive too long during bullish seasonality. It was on the verge of expiration two weeks ago, but the potential burgeoning bull expended too much energy preventing complete bearish dominance. There is simply not enough bullish energy left for a new Quick-term Bull to dominate the market at this time.

Read the daily emails for more about the Quick-term Indicant. Right now it is still a Quick-term Bear.

Please review the daily reports for more details regarding the Quick-term Indicant.

To view the Quick-term Indicant charts, please click the following hyperlink:

http://www.indicant.net/Members/Updates/STI-Mkts/QT.htm

The NASDAQ Indicant Volume Indicator continues declining with recent bullish and bearish expressions. This is not favorable to an expectation of strong bullish sentiment. It is also supportive of continued meandering behavior. The declining Indicant Volume Indicators are an indication there is no strong support for a long-lasting Quick-term Bear. However, keep your eye on that as it is a quick-term attribute and can change quickly. Prior to this shift in direction there was increasing bearish sentiment on a quick-term basis, but that has since been dampened.

http://www.indicant.net/Members/Updates/STI-Mkts/IVI.htm

The Dow is now up 3.0% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 1.0% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears. The possibility of signaling a Short-term Bull cycle was muted last week. Again, too much bullish energy was consumed to fend off bearish dominance.

To view the Short-term Indicant charts, please click the following hyperlink:

http://www.indicant.net/Members/Updates/STI-Mkts/STI.htm

A link to the Dow’s Short-term Indicant table is as follows:

http://www.indicant.net/Non-Members/Tours/STI%20Tour/ST-Table%20DJIA1995-2002.htm

A link to the NASDAQ’s Short-term Indicant table is as follows:

http://www.indicant.net/Non-Members/Tours/STI%20Tour/ST-Table%20NAS1995-2002.htm

Perspectives

This paragraph is unchanged from last week. The indices have retracted from their bullish breakout lines. They are not yet threatening their respective breakdown lines. Although there is a Quick-term Indicant Bear in progress, the perspectives reveal no deep bears on the immediate horizon. The small caps continue resisting bearish influences and has recently been engaging its breakout line, which is bullish for that particular group of stocks. The Quick-term modeling requires consistent signaling and thus cannot signal bull even though one of the indices is expressing bullish behavior in the face of the Quick-term Bear.

Read your daily emails.

To view the Perspective Charts (Quick-term Indicant, please click the following.

http://www.indicant.net/Members/Updates/STI-Mkts/QTP.htm

Refer to the daily reports for more information about the Quick-term Indicant.

For more information about the Quick-term Indicant, refer to last week’s daily reports.

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

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

The eight major indices are up an average of 26.8% since the Mid-term Indicant signaled bull an average of 69.8 weeks ago. That annualizes to 20.0%. The Dow Transports is the strongest bull. It is up 59.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 26.6% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 41.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 48.4% since the Mid-term Indicant bull signal on August 16, 2003. Five of the eight major indices continue as red bulls. Just when the survivability of these bulls were in question three weeks ago, they responded with a bullish fervor in the face of the Quick-term Bear. Again, that is a testament to the strength of this Mid-term Bull market.

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

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

Mid-term Indicant Positions – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 112.3% since the Mid-term Indicant signaled bull an average of 100.7 weeks ago for an annualized gain of 57.9%, which is less than the 72.9% reported 87 weeks ago. International indices are up the past four weeks.

The lone bear is up 1.1% since the Mid-term Indicant signaled bear six weeks ago.

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

February 13, 2005 Indicant.Net Weekly Update

Volume 02, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Short Cycles Continued

On a quick-term basis, nearly all sectors and industry groups are cycling in a bearish direction in spite of the recent bullish response. This is one reason the current Quick-term Bear has not expired. The recent bullish response to bearish expressions came close to replacing the current Quick-term Bear, but that response consumed too much energy to allow the birth of a new Quick-term Bull.

The only sectors cycling north are consumer products, energy, and utilities. Gold is not racing to the north. It has been in a quick-term bearish direction for nearly three months now. Although that movement has not been robust, it has been consistently moving down along a 15 degree slope with little variation in its movement.

The market appears to be anticipating inflationary pressures or rapidly rising interest rates. The unknown variable is how the market will respond to increasing interest rates from historically low levels. So far, the market is configuring little tolerance for many more rate hikes. The recent interest cycles offer the potential of an increasing and long lasting trend that is responsible for this bearish configuration. The market does not like that.

The southerly moving sectors have not been aggressive, but they are in the majority. That divergent pattern is generally non-bullish. They have not yet impacted the Mid-term Indicant Bulls. However, it is recommended that no new money be plowed into stocks. The current quick-term cycle is to the south.

The Indicant staff have made strides in plotting Force Vectors and Vector Pressure on a two dimensional plane. It is hoped they will be published to the web site in a few months. Also, a Fast-Term trading model was developed that currently beats buy and hold by well over 100% in a time span that is faster than the quick-term model. These shorter cycles, once made available to the web will allow you to see much of is written about the past few weeks. As you can tell, the short cycles are not supporting a sustained bullish movement at this time. You will be able to see this in a matter of weeks.

Weekly Buy/Sell Summary

The Mid-term Indicant generated eleven buy signals and no sell signals for stocks. Again, there were no sell signals for funds, most of them have been held since March 2003. This is a testament to the strength of this Mid-term Bull market.

Although there were no sell signals, the Mid-term Indicant is avoiding 62 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 30.1% since the Mid-term Indicant signaled sell an average of 51.9 weeks ago.

There were only 13 stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 27.0% since their respective sell signals an average of 42.5 weeks earlier. Two years ago, on February 14, 2003, the Mid-term Indicant was avoiding 174 stocks and funds that were down an average of 8.3% since their respective sell signals an average of 5.2 weeks earlier. There were eight sell signals two years ago, ahead of the second buying spree that occurred in March 2003.

In addition to the buy signals this weekend, the Mid-term Indicant is currently signaling hold for 247 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 88.1%. That annualizes to 65.9%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 247 stocks and funds for an average of 69.5 weeks.

One year ago, the Mid-term Indicant was holding 281 stocks and funds out of the 296 for an average of 41.7 weeks. They were up 68.5% (annualized at 85.6%). The Mid-term Indicant was signaling hold for 106 stocks and funds two years ago on February 15, 2003. They were up by an average of 26.1% (annualized at 50.2%) since their respective buy signals an average of 27.1 weeks earlier.

Secular Market Blend

This paragraph is a repeat from the last several months with a few modifications reflecting recent secular influences. The current mid-term bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways; manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions changes, there will be modifications to it to maintain a proper frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. The early part of December was not consistent with the normal Santa Clause rally. However, bullish expressions resumed in late December 2004. Some quick-term attributes suggested there would be a Santa Clause rally and that is exactly what happened.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but three weeks ago, bearish behavior revealed greater aggression. All the Quick-term attributes remain biased with bearish tendencies. However, Quick-term bearish attributes have weakened the past two weeks. The bullish response to bearish enthusiasm consumed significant bullish energy. Thus, the Quick-term Indicant continues to signal bear.

The post election year is historically the most bearish year on the presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Short-term Indicant continues signaling bear. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your hold positions still appear safe.

The buy signals this weekend and last may very well be short-lived. Although we’re still within bullish seasonality, the Quick-term attributes have not yet shifted significantly enough to signal bull. This may occur next week. If so, that will be another reason to be optimistic about your holdings.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to any fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons.

Stock and Fund Update

Click the following link to see sorted performance of stocks and funds with hold/avoid signals. In the past, we included them in this email message but now display them on the website. This is available to the public while the specific buy and sell transactions are limited to members only.

http://www.indicant.net/Non-Members/Performance/Top-Bot.htm

Summary of Stocks and Funds with Buy and Sell Signals This past Week

To maintain appropriate security, you can see the Mid-term Indicant "buy/sell" signals for stocks and funds for this week by clicking the following link. It is in the member’s only section.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/Buy-Sell%20Summary%20This%20Week.htm

As repeatedly stated, do not hold more than 10% of your investment resources in a single stock and do not hold more than 20% of your investment resources into a single mutual fund. Also, never fall in love with a stock or fund. Only love the value of your portfolio. Never love its contents. Management stupidity can wreak havoc on any stock or fund at any time.

All update information can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

Last weeks movement revealed some slight divergent behavior, which is non-bullish. General equities weakened slightly after expressing a strong bullish behavior two weeks ago. The Internet sector also weakened and has a bearish bias. Technology remains neutral. Energy is the only sector with continuing bullish sentiment. Overall, this divergent pattern is non-bullish.

As stated last week, your “new money” behavior should be consistent with bearish bias, even though several Indicant models continue to signal bull.

Economic Conditions – Inflation, Currency, Interest Rates

Commodity prices continue to be obstinate in their inflationary bias. They continue holding at near cyclical peaks. As stated last week, they will race through the CPI. If that occurs, Greenspan will accelerate both the timing and magnitude of interest rate hikes.

The U.S. Dollar remains weak, but continues to be coming off prior cyclical minimums. It will strengthen provided Greenspan continues increasing interest rates. Interest rates continue their slope to the northeast on the charts. However, they remain at historically low levels.

This paragraph remains unchanged from the past eleven weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. Right now, the stock market is not being bothered by this unfavorable direction on a mid-term basis, while at the same time; equities will not take their suspicious eye off it. The recent bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and thirty-eight weeks ago since the MTI buy signal in April 2001. One-hundred and thirty-one weeks ago, it closed up 30.1%. Last week it closed up 134.2%, which is higher than the 75.9% reported 82-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 34.5%, which is significantly higher than 23.1% reported 82 weeks ago. This fund is up from its most recent peak on December 5, 2003 when it was up 117.3%. This fund moved north last week for the fifth week in a row.

The Fidelity Gold Fund #28 is up 7.6% (annualized at 15.6%) since the Mid-term Indicant signaled buy on August 20, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.9% gross profit. As stated the past several weeks, if Greenspan gets aggressive in his fight against inflation, this fund will most likely not provide the nice profit it did on the last buy/sell cycle. This fund moved north last week after moving south the previous two weeks.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 167.0% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 66.0%. Vanguard Energy #18, VGENX, is up 83.3% (annualized at 44.2%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 56.6% (annualized at 47.0%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 63.6% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 42.0%.

These funds are up the past four weeks. That is consistent with a 1970’s type of market. If the Chinese economy heats up again, expect these energy related funds to continue their bullish march.

The Gold Index is up 3.3% since the Mid-term Indicant signaled bull on July 9, 2004. This index has basically been flat for over half a year. It is uncommon for this index to not express bullish behavior with rising oil prices. However, the high oil prices have not yet impregnated the consumer price index. When that happens, the gold index and other gold related securities should move to the north.

As repeatedly asked, is this the 1970’s all over again? The remainder of this paragraph will remain unchanged until such time conditions change. So far, it does not look that way, but increasing bullish expressions in the energy sector will lead to more bearish expressions in general equity markets. This may continue in this presidential post election year. Again, forecasting the market is okay for hallway conversations, but never give your broker instructions based on a forecast. The Indicant will keep you posted on the market’s cyclical and trend inclinations.

These funds and the gold and silver index should convey the market’s perception of terrorism, inflation, and the economy. As long as they are in solid hold/bull positions, there remains some pessimism regarding the future of the economy.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for about six weeks. That is a long period of survival in the midst of the heart and soul of bullish seasonality. It was met with bullish resistance when the indices approached the bearish yellow curve. That was a favorable response with respect to your hold positions. The longer it survives, the better chance for greater breadth than normal quick-term bears in bull markets. This will continue to be monitored until it expires. Most quick-term bears do not survive too long during bullish seasonality. It was on the verge of expiration last week, but the potential burgeoning bull expended too much energy preventing complete bearish dominance. There is simply not enough bullish energy left for a new Quick-term Bull to dominate the market at this time.

Read the daily emails for more about the Quick-term Indicant. Right now it is still a Quick-term Bear.

Please review the daily reports for more details regarding the Quick-term Indicant.

To view the Quick-term Indicant charts, please click the following hyperlink:

http://www.indicant.net/Members/Updates/STI-Mkts/QT.htm

The NASDAQ Indicant Volume Indicator continues declining with recent bullish expressions. This is not favorable to an expectation of strong bullish sentiment. The NYSE Indicant Volume Indicator finally lost robustness. The declining values in the Indicant Volume Indicators are an indication there is no strong support for a long-lasting Quick-term Bear. Prior to this shift in direction there was increasing bearish sentiment on a quick-term basis, but that has since been dampened.

http://www.indicant.net/Members/Updates/STI-Mkts/IVI.htm

The Dow is now up 3.1% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 0.1% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears. The Short-term Indicant is near signaling bull for both indices. Although there was no significant bearish response to recent bullish behavior, the Short-term Indicant did not signal bull last week. Again, too much bullish energy was consumed to fend off bearish dominance.

To view the Short-term Indicant charts, please click the following hyperlink:

http://www.indicant.net/Members/Updates/STI-Mkts/STI.htm

A link to the Dow’s Short-term Indicant table is as follows:

http://www.indicant.net/Non-Members/Tours/STI%20Tour/ST-Table%20DJIA1995-2002.htm

A link to the NASDAQ’s Short-term Indicant table is as follows:

http://www.indicant.net/Non-Members/Tours/STI%20Tour/ST-Table%20NAS1995-2002.htm

Perspectives

This paragraph is unchanged from last week. The indices have retracted from their bullish breakout lines. They are not yet threatening their respective breakdown lines. Although there is a Quick-term Indicant Bear in progress, the perspectives reveal no deep bears on the immediate horizon.

Read your daily emails.

To view the Perspective Charts (Quick-term Indicant, please click the following.

http://www.indicant.net/Members/Updates/STI-Mkts/QTP.htm

Refer to the daily reports for more information about the Quick-term Indicant.

For more information about the Quick-term Indicant, refer to last week’s daily reports.

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

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

The eight major indices are up an average of 27.1% since the Mid-term Indicant signaled bull an average of 68.8 weeks ago. That annualizes to 20.5%. The Dow Transports is the strongest bull. It is up 59.6% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 26.7% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 41.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 48.6% since the Mid-term Indicant bull signal on August 16, 2003. Five of the eight major indices are red bulls. Just when the survivability of these bulls were in question two weeks ago, they responded with a bullish fervor. Again, that is a testament to the strength of this Mid-term Bull market.

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

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

Mid-term Indicant Positions – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 109.8% since the Mid-term Indicant signaled bull an average of 99.7 weeks ago for an annualized gain of 57.3%, which is less than the 72.9% reported 86 weeks ago. International indices are up the past three weeks.

The lone bear is up 1.9% since the Mid-term Indicant signaled bear five weeks ago.

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

February 06, 2005 Indicant.Net Weekly Update

Volume 02, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Economic Fundamentals and the Short Cycles

The Quick-term Indicant is already behaving like those of 2004 with lazy meandering behavior to the southeast. The market recoiled the past two weeks with a bullish spurt in response to aggressive bearish behavior. Right now, the market is up since the Quick-term Indicant signaled bear early last month. This bullish spurt has protected the longer-term viability of the current Mid-term bulls.

The volume surge in early January on bearish expressions triggered an early bear signal. That bear signal was uncharacteristic relative to historical norms. January is the last month of the heart and soul of bullish seasonality on a historical basis. January is historically one of the most bullish months that is a continuation of the fourth quarter bullishness of the prior year.

That volume surge has since subsided. The NASDAQ’s Indicant Volume Indicator turned back to the south since the market turned bullish two weeks ago. That typically suggests the bullish movement is without long-term conviction. Keep in mind this is from a quick-term perspective based on recent events. Quick-term Bull and Bear legs do not always need high volume to sustain their direction, but high volume early in the cycle obviates the market’s intention. The obviousness is no longer providing us that clarity.

The Mid-term perspective holds that the market is still up significantly from the bull signals in October 2002, again in March 2003, and a few new signals in 2004. Your investment dollars in the stock market at those times are doing just fine. You are up by double and triple digit amounts since then. However, the issue now is what to do with new money?

What was a little unusual was how the Utilities skyrocketed last week. It is interesting that the utilities have been among the most bullish group of stocks since the bull and buy signals in October 2002 and March 2003. The utilities are perceived as boring, but they have been behaving similar to NASDAQ tech stocks of the late 1990’s. If you bought in October 2002 and March 2003 you are enjoying some pretty nice dividends along with double and triple digit capital gains. There is nothing on the immediate horizon suggesting these stocks will move to the south. It is interesting though that those stocks skyrocketed last week from already high levels. Their configurations are decidedly bullish.

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

What is more amazing is how the Transports kicked back to the north the past two weeks. The Utilities and Transports continually endure higher operating costs with higher fuel charges. Some stocks in these industries can pass through their higher operating costs on to their customers. That protects their profit margins. Other companies are stuck with the thinning margins from the higher fuel costs. Just when fuel costs come under control and profit margins stabilize, the market will most likely do the opposite of expectation and that is falter. This is a classic case of contrarian investing and climbing a wall of worry.

It is encouraging that the Transports and Utilities resumed their bullish behavior the past two weeks relative to your hold positions. That means the Mid-term Bull is nowhere near collapsing, which is common in post election years. Historical norms can and do fall victim to expectations from time to time.

This coming week will be interesting as several of the Indices crossed above their Quick-term and Mid-term bullish red curves. Will they find comfort at that position? Will they succumb back to a bearish bias? The Quick-term attributes now only possess slightly bearish bias configurations, as opposed to strong bearish bias two weeks ago.

There is a conflicting mix of economic fundamentals confronting the market. The CPI, Consumer Price Index, continues to mount inflationary pressures. If that continues, it will be justification for Greenspan aggression to continue to hike rates. The market is not concerned about what Greenspan will do next month or the next quarter. It is concerned about his inclinations about six to eight months from now. That is one reason for the Quick-term Indicant’s meandering behavior this year and last year.

http://www.indicant.net/Members/Updates/Economic/E-CPI.htm

On the other hand, rising productivity continues to help ease inflationary pressures from the Producer Price Index. Falling producer prices can indeed hurt profit margins. However, it will provide some justification for Greenspan to be more passive with his future rate hikes. Unfortunately, Greenspan’s bias will be aligned with the CPI more so than the PPI.

http://www.indicant.net/Members/Updates/Economic/E-PPI.htm

The Quick-term Indicant is being bothered by these conflicting economic fundamentals. Falling producer prices should eventually permeate the consumer price index. The market’s behavior the past two weeks supports this, while its behavior in January supports the bearish theme. The market was expecting Greenspan to be more aggressive with rate hikes to fend of inflation. The CPI is the end result of all the economic dynamics. Right now, it is heading in the wrong direction with rising prices.

The bullish response to the Quick-term Bear is indeed encouraging. That has helped protect the long-term viability of the Mid-term Indicant bulls now underway. As long as those bulls remain in tact your longer-term hold positions are relatively safe. Let’s wait until next week to see if the market is comfortable being above the bullish red curve. If it finds comfort there, the numerous buy signals this past weekend will hold up well. If the market finds discomfort and resorts again to bearish expressions, expect many of those same stocks to incur sell signals later this coming week.

Weekly Buy/Sell Summary

The Mid-term Indicant generated nineteen buy signals and two sell signals for stocks. Again, there were no sell signals for funds. This is a testament to the strength of this Mid-term Bull market.

In addition to the sell signals, the Mid-term Indicant is avoiding 71 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 28.6% since the Mid-term Indicant signaled sell an average of 50.7 weeks ago.

There were only 12 stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 27.4% since their respective sell signals an average of 41.6 weeks earlier. Two years ago, on February 8, 2003, the Mid-term Indicant was avoiding 150 stocks and funds that were down an average of 8.9% since their respective sell signals an average of 5.4 weeks earlier. There were 32 sell signals two years ago, ahead of the second buying spree that occurred in March 2003.

In addition to the buy signals this weekend, the Mid-term Indicant is currently signaling hold for 228 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 97.0%. That annualizes to 68.3%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported nearly two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 228 stocks and funds for an average of 73.9 weeks.

One year ago, the Mid-term Indicant was holding 281 stocks and funds out of the 296 for an average of 40.7 weeks. They were up 67.5% (annualized at 86.2%). The Mid-term Indicant was signaling hold for 112 stocks and funds two years ago on February 8, 2003. They were up by an average of 24.5% (annualized at 51.2%) since their respective buy signals an average of 24.9 weeks earlier.

Secular Market Blend

This paragraph is a repeat from the last several months with a few modifications reflecting recent secular influences. The current mid-term bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways; manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions changes, there will be modifications to it to maintain a proper frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. The early part of December was not consistent with the normal Santa Clause rally. However, bullish expressions resumed in late December 2004. Some quick-term attributes suggested there would be a Santa Clause rally and that is exactly what happened.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but two weeks ago, bearish behavior revealed greater aggression. All the Quick-term attributes remain biased with bearish tendencies.

The post election year is historically the most bearish year on the presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Short-term is now signaling bear. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your hold positions still appear safe.

The buy signals this weekend may very well be short-lived. Although we’re still within bullish seasonality, the Quick-term attributes have not yet shifted significantly enough to signal bull. This may occur next week. If so, that will be another reason to be optimistic about your holdings.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to any fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons.

Stock and Fund Update

Click the following link to see sorted performance of stocks and funds with hold/avoid signals. In the past, we included them in this email message but now display them on the website. This is available to the public while the specific buy and sell transactions are limited to members only.

http://www.indicant.net/Non-Members/Performance/Top-Bot.htm

Summary of Stocks and Funds with Buy and Sell Signals This past Week

To maintain appropriate security, you can see the Mid-term Indicant "buy/sell" signals for stocks and funds for this week by clicking the following link. It is in the member’s only section.

http://www.indicant.net/Members/Updates/All%20Update%20Forms/Buy-Sell%20Summary%20This%20Week.htm

As repeatedly stated, do not hold more than 10% of your investment resources in a single stock and do not hold more than 20% of your investment resources into a single mutual fund. Also, never fall in love with a stock or fund. Only love the value of your portfolio. Never love its contents. Management stupidity can wreak havoc on any stock or fund at any time.

All update information can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

There was convergent movement last week with many bullish moving sectors. That is somewhat encouraging, although many still reside in bearish or neutral domains. The energy sector continues to lead the way with bullish fervor. However, most of the other sectors act as if they are wanting to catch up. Watch the Quick-term Indicant. If it signals bull, there will be an increased probability this rally is not merely a technical one.

As stated last week, your “new money” behavior should be consistent with bearish bias, even though several Indicant models continue to signal bull.

Economic Conditions – Inflation, Currency, Interest Rates

Commodity prices are obstinately holding at near their cyclical peaks. Sooner or later they will race through the CPI. When that happens Greenspan will accelerate hikes in interest rates.

The U.S. Dollar remains weak, but continues to be coming off prior cyclical minimums. It will strengthen provided Greenspan continues increasing interest rates. Greenspan did just that this past week. Interest rates continue their slope to the northeast on the charts. However, they remain at historically low levels.

This paragraph remains unchanged from the past ten weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. Right now, the stock market is not being bothered by this unfavorable direction on a mid-term basis, while at the same time; equities will not take their suspicious eye off it. The recent bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and thirty-seven weeks ago since the MTI buy signal in April 2001. One-hundred and thirty weeks ago, it closed up 30.1%. Last week it closed up 129.6%, which is higher than the 75.9% reported 81-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 33.5%, which is significantly higher than 23.1% reported 81 weeks ago. This fund is up from its most recent peak on December 5, 2003 when it was up 117.3%. This fund moved north last week for the fourth week in a row.

The Fidelity Gold Fund #28 is up 4.3% (annualized at 9.3%) since the Mid-term Indicant signaled buy on August 20, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.9% gross profit. As stated the past several weeks, if Greenspan gets aggressive in his fight against inflation, this fund will most likely not provide the nice profit it did on the last buy/sell cycle. This fund moved south the past two weeks.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 161.1% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 64.2%. Vanguard Energy #18, VGENX, is up 78.7% (annualized at 42.2%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 51.2% (annualized at 43.3%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 59.0% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 39.5%.

These funds were up the past three weeks. That is consistent with a 1970’s type of market. If the Chinese economy heats up again, expect these energy related funds to continue their bullish march.

The Gold Index is down 0.8% since the Mid-term Indicant signaled bull on July 9, 2004. This index has basically been flat for over half a year. It is uncommon for this index to not express bullish behavior with rising oil prices. However, the high oil prices have not yet impregnated the consumer price index. When that happens, the gold index and other gold related securities should move to the north.

As repeatedly asked, is this the 1970’s all over again? The remainder of this paragraph will remain unchanged until such time conditions change. So far, it does not look that way, but increasing bullish expressions in the energy sector will lead to more bearish expressions in general equity markets. This may continue in this presidential post election year. Again, forecasting the market is okay for hallway conversations, but never give your broker instructions based on a forecast. The Indicant will keep you posted on the market’s cyclical and trend inclinations.

These funds and the gold and silver index should convey the market’s perception of terrorism, inflation, and the economy. As long as they are in solid hold/bull positions, there remains some pessimism regarding the future of the economy.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for over a month. That is a fairly long period of survival in the midst of the heart and soul of bullish seasonality. The longer it survives, the better chance for greater breadth than normal quick-term bears in bull markets. This will continue to be monitored until it expires. Most quick-term bears do not survive too long during bullish seasonality. It is on the verge of expiration. If Monday’s market is bullish, expect the Quick-term Indicant to signal bull.

The market’s resistance to bearish dominance strengthened the past two weeks. Force Vectors are continue moving north and are now in bullish domains. This configuration suggests a discontinuance of bearish dominance.

Vector Pressure direction is also moving north. That supports some bullish resistance to bearish dominance. Five of the eight indices have now moved into bullish domains. These attributes continue supporting a bearish bias, but with major resistance to outright bearish dominance on a quick-term basis.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. Later this year, the Indicant should be able to display a two dimensional representation of these so you can see them. Upon completion, we should be able to provide quick-term perspectives on stocks and exchange traded funds.

Please review the daily reports for more details regarding the Quick-term Indicant.

To view the Quick-term Indicant charts, please click the following hyperlink:

http://www.indicant.net/Members/Updates/STI-Mkts/QT.htm

The NASDAQ Indicant Volume Indicator is now declining with recent bullish expressions. This is not favorable to an expectation of strong bullish sentiment. The NYSE Indicant Volume Indicator continues to move robustly. Much of its recent movement accompanied bearish expressions, which supports a bearish bias. Overall, the market is not obviating a commitment to either bull or bear at this time. However, one or the other could occur, their cycles would most likely be short-lived.

http://www.indicant.net/Members/Updates/STI-Mkts/IVI.htm

The Dow is now up 2.4% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is up 0.3% since the Short-term Indicant signaled bear on January 11, 2005. Now both indices are Short-term Bears. The Short-term Indicant is near signaling bull for both indices. If there is not a bearish response next week, expect this to shift to bull.

To view the Short-term Indicant charts, please click the following hyperlink:

http://www.indicant.net/Members/Updates/STI-Mkts/STI.htm

A link to the Dow’s Short-term Indicant table is as follows:

http://www.indicant.net/Non-Members/Tours/STI%20Tour/ST-Table%20DJIA1995-2002.htm

A link to the NASDAQ’s Short-term Indicant table is as follows:

http://www.indicant.net/Non-Members/Tours/STI%20Tour/ST-Table%20NAS1995-2002.htm

Perspectives

This paragraph is unchanged from last week. The indices have retracted from their bullish breakout lines. They are not yet threatening their respective breakdown lines. Although there is a Quick-term Indicant Bear in progress, the perspectives reveal no deep bears on the immediate horizon.

Read your daily emails.

To view the Perspective Charts (Quick-term Indicant, please click the following.

http://www.indicant.net/Members/Updates/STI-Mkts/QTP.htm

Refer to the daily reports for more information about the Quick-term Indicant.

For more information about the Quick-term Indicant, refer to last week’s daily reports.

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

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

The eight major indices are up an average of 26.9% since the Mid-term Indicant signaled bull an average of 67.8 weeks ago. That annualizes to 20.6%. The Dow Transports is the strongest bull. It is up 58.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 25.8% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 41.2% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 48.6% since the Mid-term Indicant bull signal on August 16, 2003. Five of the eight major indices are red bulls. Just when the survivability of these bulls were in question last week, they responded with a bullish fervor. The Utilities were explosively bullish last week.

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

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

Mid-term Indicant Positions – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 108.1% since the Mid-term Indicant signaled bull an average of 98.7 weeks ago for an annualized gain of 56.9%, which is less than the 72.9% reported 85 weeks ago. International indices were up the past two weeks.

The lone bear is up 1.9% since the Mid-term Indicant signaled bear four weeks ago.

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

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