February
26, 2006 Indicant Weekly Stock Market Report
Volume 02, Issue 04 ISSN 1526 6516 © The
Indicant Stock Market Report
Dear Indicant
Members:
This Week’s
Report
This
Wounded Bull Resists Expiration – Part 3
Volume is
nose-diving. The NYSE and NASDAQ
Indicant
Volume Indicator’s are beginning a cycle of lethargic expressions.
This is somewhat seasonal. Lost interest in the stock market is common
with the increasing daylight hours and warming temperatures. The most
non-bullish rolling half is the May-October period, which correlates to
daylight savings time. A 1950 $10,000 Dow30 investment only made in this
period lost money as of October 2005.
The point of
interest right now is not the normally bearish May-October rolling half,
discovered by Mr. Hirsch of the Stock Trader’s Almanac in the 1980’s. The
point of interest is the approaching rolling bi-monthly period from March
through April. Historically, the DJIA March-April is the third most
bullish rolling bi-monthly period. However, it is the fifth most bearish
for the NASDAQ on a historical basis.
With the
Indicant Volume Indicator’s increasing lethargy, it is unlikely the
upcoming March – April rolling bi-monthly period will stimulate much
bullish or bearish energy. That is favorable to your long-term hold
positions if the choice is a meanderer or a bear. A meanderer or a bear is
unfavorable to any new investments in stock market equities since January.
Fundamentally,
there are some interesting conflicting directions. Commodity prices
continue to soften, which is typically bullish for stocks. The terrorists
groups are most likely raising funds by placing orders for oil commodities
just ahead of their terrorist acts. This bearish act raises them money.
They know that the news of attempted strikes against Saudi oilfields will
result in increasing oil prices. That is better than insider trading as
far as making money on a sure thing. Hopefully, the CIA will figure that
out and trace the money.
Even with last
week’s terrorist attempts at Saudi oil production, commodity prices appear
to be past their recent peak and moving south. That configuration conforms
to the designed intention of the Federal Reserve Board. The “measured
interest rate hikes” the past few years was designed to depress demand,
leading to price reductions. So far, so good.
The problem
here is the terrorists are figuring out a way to make money since they are
alienating their oil rich brethren. If they are successful in disrupting
the supply of crude, the Federal Reserve Board will counter with rapid
interest rate hikes. Rest assured, the stock market will not like either
event. The stock market despises three things; deflation, inflation, and
high interest rates. The controlling variable is interest rates. Interest
rates are designed to “regulate” the balance between inflation, deflation,
and economic health. The Fed will generally bias their behavior in favor
of the inflation/deflation tolerance band.
The demand
supply ratio for stocks is influential on stock prices. The declining
Indicant Volume Indicator suggests reducing demand for stocks.
Fundamentally, that makes sense. Interest rates are rising. Terrorists
threaten the supply of crude and thus demonstrate the potential for
inflationary spirals. Who will aggressively buy stocks with that sort of
paradigm?
Technically,
the mid-term presidential election year, which is underway, generally
finds a market bottom. So far this year, there is no pronounced cyclical
bottom to find. There needs to be a bearish cycle of some significance
between now and October for history to repeat itself.
Now, we all
know there is some naiveté in the expectation of history repeating itself.
The problem is the logic supporting this historical observation and thus
the expectation of historical conformance.
The market is
influenced by hundreds of variables. The most pronounced is the supply and
demand for stocks. People vote their pocket book. That is why the most
pronounced bullish swings occur during presidential pre-election years.
The economy must be in good shape by Election Day. The market looks ahead
and thus the reason for presidential pre-election year bullishness.
Conversely,
the market understands that politicians do not care too much about
economic conditions just after the election. That is why the post election
year is non-bullish. The market understands political bias favors wealth
redistribution and other forces that move against the principles of
capitalism. Thus, 180-year tradition of bearish behavior in the post
election year. That configuration typically leads to a bottom in the
mid-term election year. A $10,000 investment in 1832 stocks only in
presidential post election years is now less than $8,758. It is the only
year in the four year cycle that loses money. That is because most
politicians never really worked or developed a business in their careers.
They, for the most part, are believers of social cause. The most dangerous
period for these folks gaining power is right after they gain that power.
It is amazing
the stock market was mildly bearish in 2005’s post election year. Even
more amazing is that mild bearishness occurred just after the election of
a lame duck president. Fundamentally, the market should have been much
more bearish with rising energy costs, rising interest rates, and fallout
from Enron types of voodoo bookkeeping. Even yours truly expected a 1970’s
type of bearish configuration with the rising oil prices. The other
variable in the 1970’s that did not occur this time around was price
freezing by the Federal government. If that occurred, there is no way the
market would hold up.
The Indicant
Volume Indicator is an excellent tool to gauge the supply and demand for
stocks. You have to look at only two things to figure that out. If the
Indicant Volume Indicator is rising during Quick-term bull cycles, the
demand for stocks exceeds the supply. That occurred in 2003, when the
Quick-term Indicant signaled bull for most of that year with a robust
Indicant Volume Indicator. Conversely, rising Indicant Volume Indicator
during bearish cycles reveals supply exceeding demand.
Since early
2004, the supply and demand for stocks has been near equilibrium. The
result of equilibrium is a meandering market. The only significant bullish
expressions in 2004 and 2005 occurred in the annual heart and soul of
bullish seasonality. Even mild bearishness between now and October will
afford historical concurrence that the market finds a bottom in
presidential mid-term election years. So, do not be surprised at continued
meandering behavior until the next “heart and soul” of bullish seasonality
starts later this year. However, remember, this is not a forecast. You
must keep your eye on the various Indicant models.
Weekly
Buy/Sell Summary
The Mid-term
Indicant generated no buy signals and two sell signals for stocks and
funds.
In addition to
the sell signals, the Mid-term Indicant is avoiding 53-stocks and funds of
the 345 tracked by the Indicant. The avoided stocks and funds are down an
average of 8.7% since the Mid-term Indicant signaled sell an average of
21.5-weeks ago.
There were
61-stocks and funds avoided at this time last year. The avoided stocks and
funds one year ago were down an average of 29.9% since their respective
sell signals an average of 53.7-weeks earlier. Two years ago, on February
28, 2004, the Mid-term Indicant was avoiding only 15-stocks and funds that
were down an average of 28.7% since their respective sell signals an
average of 43.9-weeks earlier. Three years ago on February 22, 2003, there
were 130-avoided stocks and funds. They were down 9.2% from their
respective sell signals an average of 6.2-weeks earlier.
Although there
were no buy signals this weekend, the Mid-term Indicant is signaling hold
for 290 of the 345-stocks and funds tracked by the Indicant. The stocks
and funds with hold signals are up an average of 114.8%. That annualizes
to 64.5%. The Mid-term Indicant has been signaling hold for these
290-stocks and funds for an average of 92.6-weeks.
One year ago
on February 25, 2005, the Mid-term Indicant was holding 250-stocks and
funds out of the 320 tracked at that time for an average of 69.8-weeks.
Those 250-stocks and funds were up 89.7% (annualized at 66.9%). The
Mid-term Indicant was signaling hold for 275-stocks and funds of the 296
tracked two years ago on February 28, 2004. They were up by an average of
70.0% (annualized at 83.5%) since their respective buy signals an average
of 43.9-weeks earlier. There were 110-stocks and funds with hold signals
on February 22, 2003 since their buy signals an average of 26.8-weeks
earlier. They were up 28.3% (annualized at 54.9%).
Quick/Short-term Indicant Stock Market Report Punch Line Update
NYSE
Indicant Volume Indicator:
Lethargy gaining momentum, coupled with other attributes suggesting
bearish bias, suggests meandering behavior with bearish bias.
NASDAQ
Indicant Volume Indicator:
Lethargic cycle unfolding. No support for bullish behavior.
DJIA
Short-term Indicant: Signaling
bear since February 7, 2006.
NASDAQ
Short-term Indicant: Signaling
bear since February 3, 2006.
Consolidated Quick-term/Short-term Indicant ETF:
Bullish bias; long-term hold signals strong.
Short-term
Indicant: ETF: Weakening
bullish bias.
Quick-term
Indicant ETF: Weakening bullish
bias.
Quick-term
Bearish Yellow: Strong
non-bearishness, preventing immediate dynamic bearishness of sustainable
duration.
Quick-term
Bullish Red: Red bulls are
still high in number and solid for hold positions.
Quick-term
and Short-term Conflicts:
Majority bullish harmony, but not complete consensus.
Robust
Force Vectors: Several starting
to move south, suggesting bearish bias.
Vector
Pressure Position: Slight
positive pressure (bullish attribute being threatened).
Short-term
Indicant Breakout (Bullish) Configuration:
None are contacting breakout.
Short-term
Indicant Breakdown (Bearish) Configuration:
Non-bearish bias continues.
Vector
Pressure Crossings Put Option Activity:
No buy signals today.
Vector
Pressure Crossings Call Option Activity:
No buy signals today. No activity for several weeks now.
Writing
Covered Call Options: Not
recommended.
Overall
Quick-term Market Bias:
Decreasing bullishness; strong non-bearish support.
Overall
Short-term Market Bias:
Decreasing bullishness; strong dynamic non-bearish support.
Quick-term/Short-term Indicant Stock Market Report Details
Like the past
several days, volume was again low today and basically supports flatness.
The
Indicant Volume Indicator continues to lose robustness. As stated the
last several days, there is no excitement in supporting either bullish or
bearish aspirations on a quick-term basis.
The Dow Jones
Industrial Average is up 2.9% since the
Short-term Indicant signaled bear on February 8, 2006. The NASDAQ is
up 1.1% since the Short-term Indicant signaled bear February 3, 2006. The
Short-term Indicant for these two major market indices continues with a
bearish bias, although mildly so. Click here to see the
Short-term Indicant’s history.
SQI Report Card (Consolidated Short/Quick), Status, and Charts
There were no
buy signals and no sell signals today. Although there were no buy signals,
the SQI is signaling hold for 30-ETF’s. They are up 66.2% (annualized at
34.2%) since their respective buy signals an average of 99.4-weeks ago.
The SQI is not avoiding any of the ETF’s at this time.
The SQI model is the one that most of you will prefer for your trading
decisions. It generates fewer signals than the other two models and
represents consistencies in the Quick-term and Short-term outlooks for the
specific ETF’s. It also beats buy and hold on a regular basis, although
there is only seven years of proof. The quality of that proof is high
since this period includes a powerful bull and bear. The model sours a
little during meandering markets with an excessive number of signals from
time to time. Research toward perfecting continues.
Short-term Indicant Report Card, Status, and Charts
There were no
buy signals and one sell signal. Although there were no buy signals, the
Short-term Indicant is signaling hold for 29-ETF’s. They are up an average
of 70.4% (annualized 36.7%) since the STI signaled, buy, an average of
98.6-weeks ago. Although there were no sell signals today, the Short-term
Indicant is avoiding one EFT. It is down 0.2% since its sell signal last
Friday.
Keep in mind,
the Short-term Indicant is much more active in buying/selling than the
Consolidated model, above. The Quick-term Indicant, which follows, is even
more active.
Quick-term Report Card, Status, and Charts
There were no
buy signals and no sell signals today. Although there were no buy signals,
the Quick-term Indicant is signaling hold for 30-ETF’s. They are up 37.4%
(annualized at 36.3%) since the QTI signaled buy an average of 53.1-weeks
ago.
Quick-term Indicant Bull/Bear Health Report
All 30-ETF’s
are above their respective bearish yellow curves by average of 11.1%. That
is up from yesterday. This attribute remains with strong non-bearish
configurations, which suggests no immediate dynamic bearishness with
sustainable duration.
Twenty-four
ETF’s are above their respective bullish red curves by 2.6%. The number of
ETF’s with red bull status is up by one from Thursday. This attribute
remains with a significant bullish bias.
That does not
mean the market is going to rise more. It means prior bullish behavior has
a high probability of holding its current position.
Keep in mind
as long as there is one Red Bull, other than contrarian sectors, the
market will not move into a deep bearish slide. It can meander and even
dip to the south, but red bulls protect against nasty protracted deep
bearish declines. Contrarian indices are those such as Gold, Energy, and
other sectors that respond well to inflation or economic chaos.
Short-term Indicant Bull/Bear Health Report
The above
heading is linked to the Short-term Indicant table. This paragraph is
repeated daily as a reminder of accurately interpreting the charts. By
clicking the charts on the table you can review potential contact with the
breakdown lines (bearish) and potential contact with breakout lines
(bullish). It is extremely bearish when several ETF’s are contacting their
respective breakdown lines. The breakdown lines are the yellow lines
(bearish). The breakout lines are the red ones (bullish). Close proximity
to breakout implies an increased probability of an actual breakout
occurring. It is certainly bullish and you will want to be in a hold
position for those few days a year when the breakout occurs. Conversely,
significant contact with yellow (breakdown) suggests “avoid” positions are
best.
Four of the
30-ETF’s are contacting their breakout lines (bullish). Bullish bias
remains. There was a slight gain in bullish intensity with an increase in
the number making contact.. Keep in mind the non-bearish attributes are
protecting against dynamic bearish dominance.
The average
distance from breakout contact is 1.7% which is 0.4% more bullish than
yesterday. Bullish bias continues but that bias continues to weaken.
The average
distance from the price and breakdown is 24.3%, which is 0.5% .more
non-bearish from yesterday. None of the ETF’s are contacting their
respective breakdown lines. That is exceedingly non-bearish. The
probability of immediate contact remains low and thus a significant
non-bearish bias prevails. Although the market can be bearish in the
immediate future, this non-bearish bias mitigates threats of dynamic
bearishness. Contact with the breakdown line will induce bearish
dominance.
Overall,
there is more gravitational force from bullish domains than bearish
domains on a Short-term Indicant basis. The Short-term perspective remains
bullish for these ETF’s and the overall stock market. As stated the last
few days, now that the heart and soul of bullish seasonality has
concluded, do not be surprised at reduced bullishness and an increase in
bearish expressions in the next few weeks. However, none of the Quick-term
and Short-term attributes support that prognosis at this time. The
prognosis is based on historical standards, but wait until The Indicant
Stock Market Report advises of historical conformance.
Conflicts
Between the Short-term and Quick-term Indicants
Bullish
harmony prevails, but it is not complete with one ETF being avoided at
this time. This disharmony is minor.
ETF Robust
Force Vector Configurations
You can scan
the
Quick-term Indicant for Exchange Traded Funds table and click on the
charts to observe Force Vector configurations. Scroll down each of the
charts, where a quick link has been added to take you to the next series
of Quick-term ETF charts. Use you back arrow on your browser in the event
you want to return to the previous page.
Force Vectors
are for the most part are moving north. This suggests meandering to
bearish behavior in the near future. You will notice none of them are
rigid. Many have wavy patterns, which confirms no conviction in either a
bullish or bearish commitment.
Twenty of the
30-ETF’s are in bullish domains, which is down from 29 on February 17. Ten
are in bearish domains, which remains as a bullish bias, but that bias has
weakened the past several days.
Force
Vector’s current position supports a solid bullish bias at this time.
Force Vector direction, though, is not solidly in support of this bullish
bias. Meandering markets are okay, but can be boring.
As stated
several days ago in the Daily Stock Market Report, Force Vectors peaked
lower than the prior cyclical peak. That suggests future bullish spurts
will not move higher than the current Short-term and Quick-term Bull
peaks. In other words the current Quick-term Bull and Short-term Bull most
likely will not enjoy new peaks in this bullish cycle. It will be
interesting to see if the current northward trek will set a new peak.
Probabilities suggest this will not happen on this cycle.
To understand
potential financial opportunities,
click here to learn to identify Robust Force Vectors. They are visible
on the
Quick-term Indicant charts.
ETF Force
Vectors/Vector Pressure Crossings/Option Signals
Remember, the
links contained herein are more visible when reading this on the website.
Click this sentence for Vector Pressure Option Signals. There were no
option buy signals for the second consecutive day.
Make certain
you sell naked options when the Force Vectors shift direction or within
two days of the purchase, whichever occurs first. If you are unfamiliar
with this, take the
options tour.
Remember
options trading is risky. Never offer “market prices.” Always bid low in
hopes of an intraday contrarian movement to the underlying assumption of
directional behavior. Always place day-orders only. That keeps the floor
folks out of your pocket book. Do not despair if your order does not take.
There are plenty of opportunities throughout the course of the year.
Remember, stalking is the key to success here. Although not necessary for
stock market success, those of you who have a gambling instinct will enjoy
this. For those of you with a longer-term perspective, it does not hurt to
see what the short-term folks are thinking. The Indicant indicates both
perspectives.
Twenty-six
Vector Pressures remain are in bullish domains. That is down from
twenty-eight on February 03, 2006. Vector Pressure moves slowly. The
concern is the average positive (bullish) pressure is minimal. If the
average Vector Pressure turns negative, watch out. The Indicant will keep
you posted.
Quick-term
and Short-term Indicant Summary
As stated the
past several weeks, discontinue writing covered call options. The market’s
bullish bias, although declining, remains with too much risk for this
tactic.
The
Quick-term Bull remains in tact but weakening.
Continue
avoiding ProFunds Ultra Short mutual fund. Remember, it moves inversely to
the QQQQ by exponential amounts.
Overall, the
bullish bias on a Quick-term and Short-term basis continues, but not as
strongly as it was in early January.
To
familiarize yourself with viewing the market from an ETF perspective,
click the following update links.
Quick-term ETF Options
Quick-term Indicant for ETF’s
Short-term Indicant for ETF’s
Consolidated Quick-term/Short-term Indicant for ETF’s
Click here to the report card, which is updated weekly, to link to related
tours.
Links to the
Short-term Indicant and Indicant Volume Indicator are below:
Short-term Indicant for DJIA and NASDAQ
Short-term Indicant Tables for the Dow Jones Industrial Average Index
Short-term Indicant Table for the NASDAQ Composite Index
Indicant Volume Indicator
The
Indicant Stock Market Report’s Secular Market Blend
This section
is a repeat from the last several months with a few modifications,
reflecting recent secular influences. Although appearing redundant at
times, it is important to read this section each week to keep abreast of
secular market shifts. Remember, secular shifts can last twenty-five or
more years. Fortunately, secular market movements do not deter mid-term,
short-term, and quick-term profit opportunities. However, they can wreak
havoc to the long-term investors’ plans and those that buy and hold.
The current
Mid-term Bull market and buying barrage started over three years ago in
late 2002, the last mid-term election year. We are nearing the completion
of the second month of this mid-term election year, which historically
finds a market bottom. The last mid-term election year of 2002 worked
perfectly to historical standards. The mid-term presidential election year
phenomenon was consistent with history in 2002. Will it be consistent in
2006? Bearish behavior before October will be required for historical
conformance. So far this year, the market is not complying with this
historical standard.
The market
synchronized with near perfection to normal seasonality in 2002. The
rolling half of April-October period is typically bearish. The 2002
seasonal bear leg was dynamic. The current mid-term election year of 2006,
fundamentally, supports historical standards. In other words, expect no
bullish enthusiasm in the first half of 2006 with rising interest rates
and rising energy costs. The political establishment and its ugly
influence on economic activity are typically at its worse in presidential
post election years, which just concluded with large cap meandering
behavior with a slight bearish bias.
The current
Mid-term Bull has been surprisingly strong with weak fundamentals and the
normal political threat of post-election-year traditions. The market was
mixed in 2005 with some bearishness and bullishness in the broader
indices. The lack of dynamic presidential post-election -year bearishness
imposes a historical need to induce bearishness in the first half of 2006.
Keep in mind,
the heart and soul of bullish seasonality (Nov-Jan) is historically
bullish regardless of fundamental reason. The market can find a cyclical
bottom in this year’s mid-term election year since the heart and soul of
bullish seasonality elevated the market right on cue. The market, so far,
has accommodated with typical bullishness since last October. As stated
for several weeks, it would not be surprising for a nice rise during the
current heart and soul of bullish seasonality only to be followed with
bearish expressions after January 2006. That configuration has been
occurring until last week when the market moved bullishly.
The heart and
soul of bullish seasonality, ending January 31, 2006, demonstrated bullish
normalcy. Since then the market has been more or less a meanderer. Since
January 31, 2006, the S&P500 is up 0.7%, the NASDAQ is down 0.7%, and the
Dow is up 1.8%. It had been meandering with a slight bearish bias the
first three weeks since the heart and soul of bullish seasonality expired.
Last week’s behavior typifies meandering markets.
The heart and
soul of bullish seasonality, which ended on January 31, 2006 produced
gains of 2.8%, 4.2%, and 7.2% for the Dow, S&P500, and NASDAQ,
respectively. Historical standards suggest those gains will be wiped out
before October of this year. Historical standards also suggest the market
should be down from September 30, 2005 so it can advance during the 2006
heart and soul of bullish seasonality. That would require a drop of more
than 3.1%, 5.1%, and 3.3% for the S&P500, NASDAQ, and Dow, respectively.
The Dow30
found bottom in the last presidential mid-term election year on October 9,
2002 at 7286.27. The NASDAQ found bottom on the same day at
1114.11.Finding cyclical bottoms in mid-term election years is common. The
Dow is up 51.8% from the last mid-term presidential election year bottom.
The NASDAQ is up a whopping 107.6% since October 9, 2002.
The NASDAQ is
down 54.7% from its historical high of 5048.62 on March 9, 2000. The Dow
is down 5.6% from its historical high of 11723 on January 13, 2000. The
S&P500 is down 15.6% since its all time high of March 23, 2000. So far,
the new century, 2000 inclusive, has not been kind to long-term investors.
Historical standards suggest the NASDAQ will not return to historical high
until 2025 or so. Many people left the market and will never return. Those
of you still participating avoided the losses earlier this century and
reinvested in late 2002. Your retirement plans or desire for money is in
good shape.
Economic or
corporate earnings fundamentals did not support the stock market’s
meteoric rise since 1990. Unprecedented demand for stocks skewed the
supply demand ratio. The simple law supply and demand propelled stock
prices dynamically to the north in the 1990’s. The great bear leg of 2001
and 2002 has depressed sources of demand. The market now has to wait for a
new generation of investors to enjoy dynamic secular bullishness. The
great bull leg of 2003 was a relatively short bullish spurt that has not
enjoyed follow-on bullish behavior due to this lack of demand with the
exception of normal bullish expressions during the heart and soul of
bullish seasonality in 2004 and 2005.
The market has
been slightly bullish since late 2003 with pronounced meandering behavior.
The only significant bullish expressions not followed by bearish
expressions occurred in the heart and soul of bullish seasonality in 2003,
2004, and 2005. Other than those “heart and soul” bullish cycles, the
market has been flat since early 2004.
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.
There were 239 buy signals between October 5, 2002 and November 9, 2002
out of the 296 stocks and funds tracked by the Mid-term Indicant at that
time. Even badly managed companies received a buy signal, which is a
common attribute of sustainable new bull markets. As many of you noticed,
those companies eventually dipped back to the south after the euphoria of
new bullishness.
Some of you
recall the Indicant Stock Market Report tracking the
Short-term Indicant Bear for the NASDAQ in 2002. It was the longest in
history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in
breadth and approached it in magnitude. The good news is that the NASDAQ’s
decline did not lead to a depression, which is a clear indication of how
little influence tech stocks have on the economy.
There are two
important axioms to remember and are always repeated in this report. 1)
Real economic wealth is created in only three ways - manufacturing,
agriculture, and extraction. 2) The only positive influence politicians
have on the economy is to undo their prior damage. They are now doing
their damage, some of which will be undone in 2007; the next presidential
pre-election year. That is why the market typically finds a bottom in the
mid-term election year. That is also why the presidential pre-election
year is historically the most bullish on the four year cycle. If the
strength of the current Mid-term Bull can be subjected only to meandering
behavior, like 2004 and 2005, then it is possible for the current Mid-term
Bull to be a record setting one in terms of duration.
The political
industry reduces wealth. Politicians continually attempt to redistribute
wealth, which flies in the face of the laws of nature. They promote
“middle class” attainment. The larger the middle class, the more power
politicians and their academia brethren have. The communists tried that,
resulting 99% poverty, while the ruling 1% lived like kings. In other
words, socialism rewards an ability to intellectualize, while capitalism
rewards the results of appealing effort.
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 change, there will be modifications to it to
maintain a balanced 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. December 2002 was
the most bearish since 1931, but not nearly as dynamic as the 1931 bearish
expression. 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 in 2003. The market continued
moving north during that time, contrary to historical standards. 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
result was a meandering market with a slight bearish bias during most of
2004 and 2005.
As stated
since late October 2005 and early November 2005, do not be surprised at
increasing quick-term and short-term bullish expressions in the immediate
future, followed by increased bearish expressions early next year. So far,
this prognosis is at par with those expectations. It is time for the
market to turn bearish. Fundamentals and historical standards support that
scenario.
The magnitude
of early 2006 bearishness is not predictable. Simply wait for the various
Indicant model’s advisement of bull/bear status, as forecasting the market
is a waste of time. However, it is appropriate to anticipate fundamental
shifts before they happen. Keep a close eye on the Fed. It can damage the
underlying bull.
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 recommends a stop loss of 5% on recent buys because of the
Short-term Indicant’s recent bear signal and the propensity of bearishness
in the current political cycle.
Use a 10%
trailing stop loss or the yellow or green values you will find on the
tables for your longer-term hold positions. 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.
Stock and
Fund Update
Click the
following link to see sorted performance of stocks and funds with
hold/avoid signals. In the past, they were included 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 updated
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
Bullish and
bearish divergent patterns continue to rotate from bi-weekly period to
bi-weekly period. Last week’s meandering behavior confuses this
observation this week. In other words the market could have remained
closed last week and nothing would have been different from last weeks
performance. Consequently, last week’s bullish behavior is configured to a
bullish spurt as opposed to sustainable bullishness. This is the
fourteenth week out of the last sixteen without any bullish convergence.
Bearish convergence four weeks ago remains somewhat ominous to the
underlying bull market.
Economic
Conditions – Inflation, Currency, Interest Rates
There is
little difference from the last few weeks. Most world currencies continue
in their cyclical shift in support of a strengthening U.S. Dollar.
Although the cyclical direction remains in favor of a strengthening U.S.
Dollar, behavior the past few weeks has been of a meandering nature.
However, continued strengthening is expected as long as interest rates
continue rising.
There is
nothing new. This paragraph remains unchanged from the past several
months. As repeatedly stated, the only exception to this is the
Canadian Dollar. It has not yet made this cyclical mid-term commitment
to weaken against the greenback. It continues to strengthen against the
U.S. Dollar. As stated the past several months and first mentioned in
2003, the Athabasca Tar Sand Oil potential continues to threaten the
Canadian cost advantage. The perception of huge oil exports to the U.S.
and around the globe will provide increased difficulty for the Canadian
Dollar to weaken. This should hurt Canadian manufacturing. The Canadian
government is going to attempt to weaken the Canadian dollar, most likely
at the request of General Motors, but $60+ oil will make that difficult.
General Motors can benefit tremendously with a weaker Canadian dollar with
their massive manufacturing capacity in Oshawa, Ontario,
Canada. Unfortunately, the strengthening Canadian dollar has hurt GM’s bottom
line and consequently, much of the Canadian capacity is earmarked for
closure. This paragraph will remain unchanged until such time conditions
change. The folks in Oshawa do not
believe their manufacturing capacity will be closed. That is usually a
death sign unless they can accelerate productivity to offset the impending
disadvantage of their wage rates.
Keep in mind,
the Indicant does not attempt to offer literary entertainment. It will
repeat configurations, bias, and facts as long as they persist. Much of
the Canadian dollar’s strengthening is directed toward economic behavior
twenty to fifty years from now, much like Dell stock was reward ten to
fifteen years ago for today’s performance. That is a testament to “buying
on the rumor” and selling on the news.
Commodity prices are finally behaving as the Federal Reserve Board
would like them to. They are showing signs of fatiguing and some are
approaching neutrality as opposed to maintaining their red bull status.
Oil remained in neutrality domains even after Friday’s attempted terrorist
act at destroying oil production capacity in Saudi. If commodity prices
continue to fall, it would not be surprising for the stock market to react
with bullish expressions.
Although he
trend in interest rates continues in an unfavorable direction for the
stock market, falling commodity prices will stimulate the Fed into
softening rate hikes or deferring them altogether. Interest rates continue
their incline, which is politically congruent. Even a lame duck president
wants his party to retain power after his departure. President Bush’s job
is to gain seats in Congress right now. Do not be surprised at
economically friendly policies in the second half of this year. Expect
accelerated troop reductions in Iraq, as well.
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 ninety-two weeks ago since the MTI buy signal on April 13,
2001. One-hundred and eighty-five weeks ago, it closed up 30.1%. Last week
it closed up 260.3%. The current annualized growth rate since the
April 13, 2001 buy signal is
52.7%. After falling sharply 36-weeks ago, it bounced north in 27-weeks of
the past 36-weeks. This fund was down for the third consecutive week last
week.
Fidelity Gold, Fund #28, is up 45.4% since the Mid-term Indicant
signaled buy on August 26, 2005. That annualizes to 89.8%, which is not an
impossible performance level if oil prices resume their advance. This fund
should do well in the event this market turns into a 1970’s type of
market. This fund was up slightly last week.
State Street Research Global #9, SSGRX, which is isolated in the
energy sector, is up 256.2% since the Mid-term Indicant signaled buy on
August 16, 2002. It is annualizing at 71.6%. This fund moved north last
week.
Vanguard Energy #18, VGENX, is up 158.1% (annualized at 53.9%) since
the Mid-term Indicant signaled buy on April 5, 2003.
Fidelity Energy Services #40, FSESX, is up 131.9% (annualized at
58.5%) since the Mid-term Indicant signaled buy on December 6, 2003.
Fidelity Energy #39, FSENX, is up 128.6% since the Mid-term Indicant
signaled buy on August 16, 2003. It is annualized at 50.2%. These energy
related funds were solidly up last week, after falling sharply three weeks
ago. They have moved north in five of the last thirteen weeks. Investors
in these funds are supporting a 1970’s type of market with high inflation
and high oil prices. Energy and gold always do well during such times.
Fundamentals continue to support holding these.
These funds
should do well even if the market turns extremely bearish. Continue to
hold them until the Mid-term Indicant signals sell.
The SQI
(Consolidated Short-term and Quick-term Indicant) model signaled buy for
the
GLD-ETF#11 on August 3, 2005. It is up 27.8% since then. It is
annualized at 48.9%. This ETF continues to be bullishly biased.
The SQI
signaled buy for
ETF#03 – Energy and Natural Resources on March 26, 2003. It is up
149.4% (annualized at 50.5%). It has expressed bearishness in six of the
last ten weeks. It moved solidly to the north last week.
Contrarian
sectors such as commodities and petroleum were mixed last week while
general equities were bullish. That divergent pattern is non-bullish for
the general market.
Mid-term
Indicant Positions – Ten U.S. Indices
There were no new bull signals and no new bear signals.
All ten major
indices are bulls. They are up by an average of 46.1% since the MTI-RYS
signaled bull an average of 103-weeks ago. That annualizes to 23.0%, which
is down from last week, even though the major indices moved slightly
north. The strongest bull is the
Dow Utilities. It is up 116.5% since the October 25, 2002 bull signal.
Utilities bounced mildly to the north last week after falling in the
previous two weeks. Your utility hold positions remain safe, but keep your
eye on this particular index. Severe bears show little mercy, regardless
of dividend yields. This index has been the strongest, since the bull was
born in October 2002.
Supply and
demand relationships may hold Utilities higher than the other indices if
the market turns bearish as the October 2002 buyers are locked into some
serious dividend yields that will be hard to give up.
The Mid-term Indicant Dow Jones Industrial Average performance is now
at $33,508,995. That beats buy and hold performance of $1,692,923 on a
$10,000 investment in the Dow stocks in 1900. The
MTI S&P500 is at $166,484. That beats buy and hold’s $126,303 on a
December 31, 1971 $10,000 investment. The
MTI-NASDAQ is at $191,359. That beats buy and hold’s $79,301 on an
October 18, 1985 $10,000 investment. The Mid-term Indicant model beats buy
and hold by 1,879.4%, 31.8%, and 141.3%, respectively, for these indices
as of this past week.
The Indicant’s
percentage advantage over buy and hold does not change during bull
signals. The advantage changes only during bear signals. That is because
the buy and hold model has to keep holding, while the MTI-RYS model avoids
bear markets. The only purpose of the MTI-RYS model is to avoid the bear
markets. That is why it beat buy and hold by nearly 2000% over the past
100+ years.
Click here for a tour of the Mid-term Indicant for major market indices.
Mid-term
Indicant Positions - NASDAQ100 Stocks
Click here to see NASDAQ100 report card history.
Click the
following link to view this group of stocks:
http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-NAS100-STKS.htm
Mid-term
Indicant Positions - Dow Jones 30 Industrial Stocks
Click here to see Dow 30 report card history.
Click the
following hyperlink to view this group of stocks:
http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-DJIA-STKS.htm
Mid-term
Indicant Positions - Dow Jones 15 Utility Stocks
Click here to see Dow Utilities Report Card history.
http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-DJU-Stks.htm
Mid-term
Indicant Positions - Indicant Selected Stocks
Click here to see Indicant Select Stock Report Card history.
Click the
following hyperlink to view this group of stocks:
http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-Stks.htm
Mid-term
Indicant Positions - Mutual Funds
Click here to see Mutual Fund Report Card history.
The Mid-term
Indicant continues avoiding
ProFunds Ultra Short due, in part, to the Quick-term Indicant’s bull
signal and the heart and soul of bullish seasonality. The SQI
(Consolidated Quick-term and Short-term Indicant) is signaling hold for
the QQQQ, which is why ProFunds Ultra Short is avoided. It is down 6.5%
since the Mid-term Indicant signaled sell on November 11, 2005. This fund
may show some significant promise this year. The last time this fund was
very profitable was in the first half of 2002, which was also a mid-term
election year. This fund disappointed in the meandering markets of 2004
and 2005.
Click here to see all Mutual Funds tracked by the Mid-term Indicant.
Always
remember never to keep more than 20% of your investment resources into a
single mutual fund. Sector investing in mutual funds is an extremely good
way to mix your investments.
Long Term
Indicant Positions - Dow Jones Industrial Average
The blue-chip
Long-term Indicant Bull signal was at 2895 for the DJIA in November 1991.
Keep in mind the Long-term Indicant generated only five bull/bear cycles
since 1920.
The Dow is up
282.1% (annualized at 19.6%) since the Long-term Indicant signaled bull
747-weeks ago. Economic data is the primary influence on the Long-term
Indicant. The recession, deflation, and inflation have not been strong
enough to signal bear. A link to the Long-term Indicant is below:
http://www.indicant.net/Members/Updates/LTI-Markets-DJIA/DJIA.htm
Indicant
Conclusion
The Short-term
Indicant is now signaling bear for the Dow and NASDAQ. One ETF has a bear
signal on the Short-term Indicant, but the bias remains overwhelmingly in
favor of the bull on a Short-term and Quick-term basis. As stated for the
past few weeks, the Quick-term and Short-term attributes continue with a
bullish bias, albeit a slight one. That bullish bias weakened six weeks
ago. The problem for the short-term buyer, internal to the heart and soul
of bullish seasonality period, is the endurance of impending bearish
expressions.
Nothing is
different from last week’s stock market report. The heart and soul of
bullish seasonality moved the market higher. Significant bearish
expressions can ensue over the next few months without generating a bear
signal. That is because the ETF’s are well above their breakdown lines and
bearish yellow curves. A retreat to those bearish domains will still leave
the longer-term and mid-term investor in healthy profit positions, while
the January 2006 buyer will most likely endure losses before October 2006.
As stated the
past five weeks, do not be surprised at meandering behavior with possible
bearish bias in the immediate future. So far, the market is relatively
flat since the expiration of the heart and soul of bullish seasonality.
The past three year’s of heart and soul bullishness were followed by
pathetic meandering behavior. Historical standards and economic
fundamentals do not support a repeat this year. On the contrary, there is
much in favor of bearish dominance between now and October although some
bearish fundamentals, such as commodity prices, appear to be weakening.
Keep in mind
this is the mid-term election year, which historically finds a market
bottom. Since predecessor years leading up to the upcoming presidential
mid-term election year have not demonstrated dynamic bearishness, do not
be surprised at a bearish cycle early this year. As always, await guidance
from the various Indicant models. They will let you know when or if this
expected bearishness occurs.
Read your
daily reports, as quick-term attributes can shift quickly. As stated the
past several weeks, the market lacks bullish convergence. Four weeks ago,
the market demonstrated bearish convergence for the first time in several
months. That is ominous, but is somewhat relaxed from divergent patterns
or no pattern at all the past three weeks.
Do not get
lazy and set those stop losses for those stocks and funds that continue to
enjoy hold signals.
The daily
updates are on the following link.
http://www.indicant.net/Non-Members/Back%20Issues/QT.htm
Hyperlinks
To access all
major markets, stocks, funds, economic data, charts, statuses, etc, click
the following hyperlink:
http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20Summary.htm
In addition,
once you are inside the website, click on "members update" or simply log
in. It is on the top of every page in the web site so you can always find
your way back.
Happy
Investing,
www.indicant.net
02/26/06
February
19, 2006 Indicant Weekly Stock Market Report
Volume 02, Issue 03 ISSN 1526 6516 © The
Indicant Stock Market Report
Dear Indicant
Members:
This Week’s
Report
This
Wounded Bull Resists Expiration – Part 2
Last week’s
bullish behavior was indeed impressive in the face of unfavorable
fundamentals. As many of you know, the market does not care about the
“right now.” It is always focused on the future. Sometimes the market
anticipates wrongly, but that is seldom. Most of the time the market
projects accurately to the required fundamentals to supports its behavior.
Sometimes the market’s behavior drives the fundamentals. There is one
thing that is certain. The market is always right. It merely reflects
agreed upon pricing by a buyer and a seller who are not under duress most
of the time. There is nothing more honest than that.
Many investors
do not understand this. They tend to react to the news. For example, Dell
continues to report record earnings.
And Dell stock continues to meander. (The link on the website is
clearly visible). The market, a long time ago, projected Dell’s amazing
wealth building model and rewarded the stock price then. That is why this
particular stock rose more than any other in stock market history, a long
time ago. Fundamentally, it is a sound stock, but also fundamentally, its
performance is not tied so much to earnings, as much as speculation about
Michael Dell working hard for Dell Computer, Inc.
The market
understands management talent. If it suspects the talent is not working
hard or being distracted, it will not reward the stock regardless of
earnings performance. The market understands that management decisions and
actions years ago influence today’s performance. That is why Oracle stock
got punished several years ago. Larry Ellison invested too much time in
hobbies and not enough time in his company. The market knew that Oracle’s
greatness was directly related to Ellison’s work ethic. Ellison tried to
compensate by employing underlings so he could play. Those underlings did
not understand the details as well as Mr. Ellison and the company
languished. Consequently, the stock price was punished. It moved back to
the north when Mr. Ellison learned this lesson.
The same thing
is not occurring at Dell, but there are times the stock price dips if
there is a suspicion about Michael Dell’s interest in the company. Dell’s
stock has been meandering for several years with the exception of some
bullish spurts. That is because the market anticipated Dell’s earning
potential years ago and positioned the stock price then to today’s
performance.
General Motors is another example of the market reflecting management
talent. The investment community does not see any talent. The company has
been losing market share for a generation of management. Several folks
have taken the helm since the late 1960’s, but they are powerless to stop
the bleeding. Maybe one will come along and right the ship, but the
earnings from current decisions and actions
