February 2006 Indicant Weekly Stock Market Report

February 26, 2006 Indicant Weekly Stock Market Report

Volume 02, Issue 04 ISSN 1526 6516 © The Indicant Stock Market 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, if good ones, will take many years to manifest. The investment community does not see that and thus the stock continues to be punished, even during a bull market.

What did the market sense last week? Why was it so bullish? There are always several reasons for market shifts. Some sharp shifts in the market are emotional based, but the underlying trend is always based on fundamentals. Read the economic section later in this report.

Commodity prices are having difficulty. They seem to have found a fatigue point from their price rise the past several years. Last week’s bullish behavior was due, in part, to the market’s perception that commodities may fall in price. The market, which has been impressively resilient against the threat of inflation, recoiled with bullish behavior last week.

There is one problem, though, with last week’s impressive bullish behavior. The market’s bullishness was not supported by volume or bullish convergence. However, early movements ahead of cyclical shifts are stimulated by those who speculate. The market will either buy into that paradigm or reject it. You will notice this through the Indicant Volume Indicator. If you see robust configurations by the Indicant Volume Indicator, coupled with bullish behavior, and declining commodity prices, the market will not wait for the Fed to start lowering interest rates. It will anticipate that with bullish gusto.

Weekly Buy/Sell Summary

The Mid-term Indicant generated six buy signals and no sell signals for stocks and funds.

Although there were no 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 9.2% since the Mid-term Indicant signaled sell an average of 20.5-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 29.6% since their respective sell signals an average of 52.9-weeks earlier. Two years ago, on February 21, 2004, the Mid-term Indicant was avoiding only 15-stocks and funds that were down an average of 27.9% since their respective sell signals an average of 43.1-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.

In addition to the buy signals this weekend, the Mid-term Indicant is signaling hold for 286 of the 345-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 115.9%. That annualizes to 65.2%. The Mid-term Indicant has been signaling hold for these 286-stocks and funds for an average of 92.4-weeks.

One year ago on February 18, 2005, the Mid-term Indicant was holding 256-stocks and funds out of the 320 tracked at that time for an average of 68.6-weeks. Those 256-stocks and funds were up 86.2% (annualized at 65.3%). The Mid-term Indicant was signaling hold for 281-stocks and funds of the 296 tracked two years ago on February 21, 2004. They were up by an average of 67.8% (annualized at 82.6%) since their respective buy signals an average of 43.1-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 Lines

NYSE Indicant Volume Indicator: Robustness lost, suggesting market indecisiveness.

NASDAQ Indicant Volume Indicator: Robustness lost; suggesting market indecisions.

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.

Quick-term Bullish Red: Red bulls are still high in numbers, barely retaining red bull status.

Quick-term and Short-term Conflicts: There are no conflicts. Bullish harmony prevails.

Robust Force Vectors: Nearing completion of cycle. Monitoring if new peak will be achieved.

Vector Pressure Position: Mostly in bullish domains.

Short-term Indicant Breakout (Bullish) Configuration: Bullish convergence dominated this week.

Short-term Indicant Breakdown (Bearish) Configuration: Non-bearish bias continues.

Vector Pressure Crossings Put Option Activity: One put option buy signal today.

Vector Pressure Crossings Call Option Activity: No signals today. No activity for several days.

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

The Indicant Volume Indicator continues to lose robustness. There is no excitement in supporting either bullish or bearish aspirations on a quick-term basis.

The Dow Jones Industrial Average is up 3.4% since the Short-term Indicant signaled bear on February 8, 2006. The NASDAQ is up 0.9% 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 65.1% (annualized at 34.0%) since their respective buy signals an average of 98.4-weeks ago. The SQI is not avoiding any of the ETF’s at this time.

Short-term Indicant Report Card, Status, and Charts

There were no buy signals and no sell signals. Although there were no buy signals, the Short-term Indicant is signaling hold for 30-ETF’s. They are up an average of 67.0% (annualized 36.5%) since the STI signaled, buy, an average of 94.4-weeks ago. The Short-term Indicant is not avoiding any ETF’s at this time.

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 36.5% (annualized at 36.1%) since the QTI signaled buy an average of 52.1-weeks ago.

Quick-term Indicant Bull/Bear Health Report

All 30-ETF’s are above their respective bearish yellow curves by average of 10.7%. That is up significantly from yesterday. This attribute remains with strong non-bearish configurations, which suggests no immediate dynamic bearishness.

Twenty-four ETF’s are above their respective bullish red curves by 2.3%. The number of ETF’s with red bull status is down by one from yesterday and up by nine from Monday. This attribute remains with bullish bias.

Short-term Indicant Bull/Bear Health Report

Three of the 30-ETF’s are contacting their breakout lines (bullish). The resumption of increasing bullish bias continues, but weakened slightly on today’s mild bearish behavior. Keep in mind the non-bearish attributes are protecting against dynamic bearish dominance.

The average distance from breakout contact is 2.1% which is 0.2% less bullish than yesterday. Bullish bias continues but that bias continues to weaken.

The average distance from the price and breakdown is 23.6%, which is 0.2% less 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.

Conflicts Between the Short-term and Quick-term Indicants

There are no conflicting signals between the Quick-term and Short-term Indicant. Quick cycles and Short-term inclinations are again in complete bullish harmony.

ETF Robust Force Vector Configurations

Force Vectors are for the most part are moving north. Some of the cycles are mature, which suggests meandering to bearish behavior in the near future. Twenty-eight are in bullish domains, which is up by two from yesterday and up seven from one week ago. Only two remain in bearish domains, which is a non-bullish attribute, but this is minor non-bullishness. 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 was one put option buy signal. Keep in mind put options can disappoint during bull cycles. Even though there has been some recent bearish expressions, this remains a bull market for Exchange Traded Funds. Keep in mind, put options do not deliver huge profits during periods of non-bearishness, which is the current configuration.

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.

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

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 now within the second month of the 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? The last mid-term election year, 2002, found a cyclical bottom, which is a common attribute in presidential mid-term election years. Bearish behavior before October will be required for historical conformance. So far this year, the market is not complying with this historical standard.

Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002. The 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 bearishness imposes a historical need to induce bearishness in the first half of 2006.

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 0.6%, the NASDAQ is down 1.0%, and the Dow is up 2.3%. It had been meandering with a slight bearish bias the first two weeks since the heart and soul of bullish seasonality expired. Last week’s bullish expression repositioned a slight bullish bias.

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 52.6% from the last presidential election year bottom. The NASDAQ is up a whopping 104.9% since October 9, 2002.

Interestingly, the NASDAQ is down 54.8% from its historical high of 5048.62 on March 9, 2000. The Dow is down 5.2% from its historical high of 11723 on January 13, 2000. The S&P500 is down 15.7% 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.

The stock market’s meteoric rise since 1990 was not supported by economic or corporate earnings fundamentals. It was stimulated by an unprecedented demand for stocks. The simple laws supply and demand propelled stock prices dynamically to the north in the 1990’s. The great bear leg of 2001 and 2002 has permanently 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 bullish cycles, the market has been flat since early 2004.

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.

Stock and Fund Update

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

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 bullishness was not convergent. Consequently, last week’s bullish behavior is configured to a bullish spurt as opposed to sustainable bullishness. This is the thirteenth week out of the last fifteen without any bullish convergence. Bearish convergence three weeks ago remains somewhat ominous to the underlying bull market.

Economic Conditions – Inflation, Currency, Interest Rates

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 even fell from bullish to neutrality last week. If commodity prices continue to fall, it would not be surprising for the stock market to react with bullish expressions,

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-one weeks ago since the MTI buy signal on April 13, 2001. One-hundred and eighty-four weeks ago, it closed up 30.1%. Last week it closed up 263.7%. The current annualized growth rate since the April 13, 2001 buy signal is 53.6%. After falling sharply 35-weeks ago, it bounced north in 27-weeks of the past 35-weeks. This fund was down for the second consecutive week last week.

Fidelity Gold, Fund #28, is up 43.2% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 88.8%, 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.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 249.8% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 70.2%. This fund was down last week, after falling sharply two weeks ago.

Vanguard Energy #18, VGENX, is up 154.6% (annualized at 53.0%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 127.2% (annualized at 57.0%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 124.8% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 49.1%. These energy related funds were mixed last week, after falling sharply two weeks ago and after moving north in four of the last twelve 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 26.2% since then. It is annualized at 47.7%. 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 146.5% (annualized at 49.8%). It has expressed bearishness in six of the last nine weeks.

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 45.5% since the MTI-RYS signaled bull an average of 103-weeks ago. That annualizes to 22.9%, which is down from last week, even though the major indices moved slightly north. The strongest bull is the Dow Utilities. It is up 115.3% since the October 25, 2002 bull signal. Utilities endured its second consecutive weekly decline. 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. Recent bearish expressions prior to last week’s bullishness is cause for some concern.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $33,670,968. That beats buy and hold performance of $1,701,057 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $166,201. That beats buy and hold’s $126,089 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $190,967. That beats buy and hold’s $79,139 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.

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 6.4% 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 284.0% (annualized at 19.8%) since the Long-term Indicant signaled bull 746-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, while none of ETF’s has a bear signal. However, the Quick-term and Short-term attributes continue with a bullish bias, albeit a slight one. That bullish bias weakened five 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.

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 four 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 those bearish fundamentals appear to be weakening.

Read your daily reports, as quick-term attributes can shift quickly. As stated the past several weeks, the market lacks bullish convergence. Three weeks ago, the market demonstrated bearish convergence for the first time in several months. That is ominous, but is somewhat relaxed from divergent patterns the past two 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

02/19/06

February 12, 2006 Indicant Weekly Stock Market Report

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

Dear Indicant Members:

This Week’s Report

This Wounded Bull Resists Expiration

Fundamentals continue to threaten the stock market.

Interest rates are about where they were when the 2000 bear market accelerated bearish expressions. Interest rates continue to rise. Although there is little direct linear correlation to interest rate position and stock market valuations, rising interest rates produce unfavorability for bull markets. The current cycle of rising interest rates will eventually take its toll on the stock market. History suggests the best we could hope for would be a meandering market with minor bearish bias.

Commodity prices are not declining, which is one purpose of the Fed’s rate hikes. Some commodity indices continue to skyrocket. Rising raw materials will do one of two things. Either they will compress corporate profits or they will incite inflation. Neither is good for a bull market.

Gold prices are skyrocketing, but related funds expressed bearish behavior the last two weeks. That bearish behavior is attributable to short-term profit taking. The demand for gold is stimulated by those who believe inflation is around the corner. The supply is tight due to a shortage of sellers.

Greenspan is on his way out. Although, personnel changes are not a stock market fundamental, it is an issue of uncertainty. Uncertainty invites meandering behavior and fits of negative emotion, coupled with uncertainty can invite wild volatility. A new fed chief does not want any threats of inflationary behavior. That is one of the testaments to their legacy. The market, of course, will not react directly to interest rate adjustments by the Fed. It will anticipate by its watchful eye over items such as, productivity, producer price indices, the consumer price index, and “real corporate earnings. Greenspan must feel his legacy is in tact since he was around during the greatest bull market of all time and without significant inflation.

Technically, there are some issues confronting the bull market. The presidential mid-term election year is supposed to find a market bottom. This is possible even if the Dow goes down by one single point this year.

The upcoming rolling quarters and rolling thirds is where bearish behavior would have to occur to synchronize to historical standards. The Quick-term and Short-term Indicant remain a bull, but reflect a wounded bull. The associative attributes describing quick-term and short-term cycles are weakening again. Recent shifts from bullish strength to weakening attributes have been followed by a bullish response. Each of these responses consumes quite a bit of bullish energy. Rather than dominating the market, the bull is simply responding defensively to bearish overtures. The bull has been wounded in these interactions with the bear.

Can the bull stay alive? Only time will tell. Historical standards suggest it will perish before this coming October. The Quick-term and Short-term Indicant Bulls for Exchange Traded Funds remain in tact, but certainly have been falling off recently. The Short-term Indicant for the NASDAQ and Dow are now signaling bear. That signal is not supporting dynamic bearish behavior, though. In other words, it is a weak bear signal. A bear is a bear, regardless of magnitude.

The Mid-term Indicant bulls for the ten major indices are demonstrating what a mountain climber may feel after conquering the peak. Intuitively, you can see some exhaustion, even in the face of euphoria. Exhaustion, coupled with euphoria, is an excellent prelude to resting. Hopefully, with respect to your hold positions, this bull will simply take a nap and recoup enough energy to propel onward to new heights later this year. It is unlikely that will happen before October.

A nap by the bull is much better than outright death. That would let the bear dominate without any battles. A free roaming bear could wreak severe damage to those of you who prefer the buy and hold tactic in investing. The stock market has been somewhat of a boring institution to follow since early 2004. The only significant bullish expressions since then occurred in the rolling third, October – January, in 2004 and 2005. There is not much reason to expect more of the same this year, except fundamentals and historical standards support more aggressive bearish expressions.

Keep your eye on the various Indicant models. They will keep you informed of bullish or bearish inclinations.

Weekly Buy/Sell Summary

The Mid-term Indicant generated one buy signal and no sell signals for stocks and funds.

Although there were no sell signals, the Mid-term Indicant is avoiding 59-stocks and funds of the 345 tracked by the Indicant. The avoided stocks and funds are down an average of 8.6% since the Mid-term Indicant signaled sell an average of 19.9-weeks ago.

There were 62-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 30.1% since their respective sell signals an average of 51.9-weeks earlier. Two years ago, on February 14, 2004, the Mid-term Indicant was avoiding only 13-stocks and funds that were down an average of 27.0% since their respective sell signals an average of 42.5-weeks earlier. Three years ago on February 15, 2003, there were only 174-avoided stocks and funds. They were down 8.3% from their respective sell signals an average of 5.2-weeks earlier.

In addition to the buy signal this weekend, the Mid-term Indicant is signaling hold for 285 of the 345-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 111.9%. That annualizes to 63.5%. The Mid-term Indicant has been signaling hold for these 280-stocks and funds for an average of 91.6-weeks.

One year ago on February 11, 2005, the Mid-term Indicant was holding 247-stocks and funds out of the 320 tracked at that time for an average of 69.5-weeks. Those 247-stocks and funds were up 88.1% (annualized at 65.9%). The Mid-term Indicant was signaling hold for 281-stocks and funds of the 296 tracked two years ago on February 14, 2004. They were up by an average of 68.5% (annualized at 85.6%) since their respective buy signals an average of 41.7-weeks earlier. There were 106-stocks and funds with hold signals on February 15, 2003 since their buy signals an average of 27.1-weeks earlier. They were up 26.1% (annualized at 50.2%).

Quick/Short-term Indicant Stock Market Report - Punch Lines

NYSE Indicant Volume Indicator: Lost its embryonic robust expression; no bias either way.

NASDAQ Indicant Volume Indicator: Continues with robust configuration; no bias either way.

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: Bullish bias, but weakening.

Quick-term Indicant ETF: Bullish bias, but weakening.

Quick-term Bearish Yellow: High non-bearishness, preventing immediate dynamic bearishness.

Quick-term Bullish Red: Red bulls are still high in numbers, but barely retaining red bull status.

Quick-term and Short-term Conflicts: There is one minor conflict right now.

Robust Force Vectors: Settled in bearish domains, but cycle is mature.

Vector Pressure Position: Bordering neutrality with some nestling inside bearish domains.

Short-term Indicant Breakout (Bullish) Configuration: No longer enjoying bullish convergence.

Short-term Indicant Breakdown (Bearish) Configuration: Non-bearish bias continues.

Vector Pressure Crossings Put Option Activity: One put option buy signals today.

Vector Pressure Crossings Call Option Activity: No signals today. No activity for several days.

Writing Covered Call Options: Not recommended.

Overall Quick-term Market Bias: Decreasing bullishness; strong non-bearish support, though.

Overall Short-term Market Bias: Decreasing bullishness; strong dynamic non-bearish support.

Quick-term Short-term Indicant Stock Market Report Details

The NASDAQ Indicant Volume Indicator cycle continues along its robust cycle, while the NYSE returned to a flattening configuration. This mixed configuration suggests market indecisiveness without any bias.

The Dow Jones Industrial Average is up 1.6% since the Short-term Indicant signaled bear on February 8, 2006. The NASDAQ is flat since the Short-term Indicant signaled bear February 3, 2006. The Short-term Indicant 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 61.9% (annualized at 32.7%) since their respective buy signals an average of 97.4-weeks ago. The SQI is not avoiding any of the ETF’s at this time.

Short-term Indicant Report Card, Status, and Charts

There were no buy signals and no sell signals. Although there were no buy signals, the Short-term Indicant is signaling hold for 29-ETF’s. They are up an average of 65.9% (annualized 35.1%) since the STI signaled, buy, an average of 96.6-weeks ago. Although there were no sell signals, the Short-term Indicant is avoiding one ETF. It is up 0.3% since its sell signal last Wednesday.

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 34.1% (annualized at 34.4%) since the QTI signaled buy an average of 51.1-weeks ago.

Quick-term Indicant Bull/Bear Health Report

All 30-ETF’s are above their respective bearish yellow curves by average of 9.4%. That is down slightly from yesterday. This attribute remains with strong non-bearish configurations, which suggests no immediate dynamic bearishness.

Nineteen ETF’s are above their respective bullish red curves by 1.1%. The number of ETF’s with red bull status flat from yesterday. This attribute remains with bullish bias, but ever so slightly.

Short-term Indicant Bull/Bear Health Report

None of the 30-ETF’s are contacting their breakout lines (bullish). Zero contact has been constant for the past few days and thus without strong bullish bias. Keep in mind the non-bearish attributes are protecting against dynamic bearish dominance.

The average distance from breakout contact is 3.6%, which is 0.2% less bullish than yesterday. Bullish bias continues but that bias continues to weaken.

The average distance from the price and breakdown is 21.5%, which is 0.2% less 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.

Conflicts Between the Short-term and Quick-term Indicants

There are conflicting signals between the Quick-term and Short-term Indicant. Quick cycles and Short-term inclinations are no longer in harmony. The conflict is minor with only one ETF in conflict.

ETF Robust Force Vector Configurations

Several Force Vectors continue moving south. Many remain in bearish domains. 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.

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 was one put option buy signal today. Keep in mind put options can disappoint during bull cycles. Even though there has been some recent bearish expressions, this remains a bull market for Exchange Traded Funds. Keep in mind, put options do not deliver huge profits during periods of non-bearishness, which is the current configuration.

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.

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.

This paragraph will remain unchanged until conditions warrant modifications. 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

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 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. So far, so good. The current heart and soul of bullish seasonality demonstrated normalcy. Since January 31, 2006, the S&P500 is down 1.0%, the NASDAQ is down 1.9%, and the Dow is up 0.5%. It has been meandering with a slight bearish bias the first two weeks since the heart and soul of bullish seasonality expired.

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 49.9% from the last presidential election year bottom. The NASDAQ is up a whopping 103.0% since October 9, 2002.

Interestingly, the NASDAQ is down 55.2% from its historical high of 5048.62 on March 9, 2000. The Dow is down 6.9% from its historical high of 11723 on January 13, 2000. The S&P500 is down 17.1% 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 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.

The stock market’s meteoric rise since 1990 was not supported by economic or corporate earnings fundamentals. It was stimulated by an unprecedented demand for stocks. The simple laws supply and demand propelled stock prices dynamically to the north. The great bear leg of 2001 and 2002 has permanently 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. 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 bullish cycles, the market has been flat since early 2004.

There are two important axioms to remember. 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.

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.

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 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

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

Bearish convergence two weeks ago could not be maintained with bearish divergence last week. That is not a bullish attribute, but certainly a non-bearish attribute. This is the twelfth week out of the last fourteen without any bullish convergence. Bearish convergence two weeks ago remains somewhat ominous to the underlying bull market.

Economic Conditions – Inflation, Currency, Interest Rates

Commodity prices continue rising. Some are vacillating around all time peaks. Gold is skyrocketing. There is a strong belief in rising inflation in some quarters. Overall, this behavior will eventually induce bearishness on the stock market. Again, this paragraph will remain unchanged until conditions change. The current rise in commodity prices is unprecedented.

As stated the past few weeks, OPEC does not want encourage Athabasca Tar Sand Oil competitiveness. They also do not want to see dynamic energy conservation measures in the Western Hemisphere. OPEC will not consider a long-term strategy due to their inherent incapability to do so. Consequently, it is possible, although not likely, OPEC will force oil price reductions to mitigate growing competitiveness. Even OPEC cannot alter the dynamics of supply/demand laws. Keep your eye on this, as rapidly declining oil prices will catapult the market into another strong bull leg. Equally, do not be surprised at a dynamic bear in the event that high oil prices penetrate the consumer price index.

Nothing has changed here. The trend in interest rates continues in an unfavorable direction for the stock market. 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 weeks ago since the MTI buy signal on April 13, 2001. One-hundred and eighty-three weeks ago, it closed up 30.1%. Last week it closed up 264.8%. The current annualized growth rate since the April 13, 2001 buy signal is 51.8%. After falling sharply 34-weeks ago, it bounced north in 27-weeks of the past 34-weeks. This fund was down last week.

Fidelity Gold, Fund #28, is up 41.1% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 90.3%, 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.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 251.5% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 71.1%. This fund fell sharply last week.

Vanguard Energy #18, VGENX, is up 152.6% (annualized at 52.7%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 135.9% (annualized at 61.4%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 124.9% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 49.4%. These energy related funds fell sharply last week after moving north in four of the last eleven 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. The last two weeks drop off is due to profit taking by short-term traders. 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 25.9% since then. It is annualized at 48.8%. This ETF continues to be bullishly biased, although down considerably last week.

The SQI signaled buy for ETF#03 – Energy and Natural Resources on March 26, 2003. It is up 144.4% (annualized at 49.4%). This fell sharply the past two weeks. It has expressed bearishness in five of the last eight weeks.

Contrarian sectors such as commodities and petroleum were down 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 43.5% since the MTI-RYS signaled bull an average of 102-weeks ago. That annualizes to 22.1%, which is down from last week, even though the major indices moved slightly north. The strongest bull is the Dow Utilities. It is up 112.9% since the October 25, 2002 bull signal. Utilities endured its second consecutive weekly decline. 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. Recent bearish expressions continue and is cause for some concern.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $33,076,419. That beats buy and hold performance of $1,671,197 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $163,586. That beats buy and hold’s $124,105 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $189,253. That beats buy and hold’s $78,429 on an October 18, 1985 $10,000 investment. The Mid-term Indicant model beats buy and hold by 1,879.2%, 31.8%, and 141.3%, respectively, for these indices as of this past week.

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 5.2% 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 277.2% (annualized at 19.3%) since the Long-term Indicant signaled bull 745-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, but only one of the ETF’s has a bear signal. However, the Quick-term and Short-term attributes continue with a bullish bias, albeit a slight one. That bullish bias weakened four weeks ago. The problem for the short-term buyer internal to the heart and soul of bullish seasonality is the endurance of impending bearish expressions.

As stated the past three weeks, do not be surprised at meandering behavior with possible bearish bias in the immediate future. So far, the market is down 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.

Read your daily reports, as quick-term attributes can shift quickly. As stated the past several weeks, the market lacks bullish convergence. Two weeks ago, the market demonstrated bearish convergence for the first time in several months. That is ominous, but is somewhat relaxed from last week’s divergent pattern.

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

02/12/06

February 05, 2006 Indicant Weekly Stock Market Report

Dear Indicant Members:

This Week’s Report

The Heart and Soul of Bullish Seasonality Ends

The October-January rolling third is the most bullish of all rolling thirds in the year. No other period of the year expresses as much consistency in bullish behavior as the October – January rolling third of the year. This job is easy in this particular rolling third of the year. The easy part is now over.

Your 1950 $10,000 investment in the Dow since 1950 only in the Oct-Jan rolling third increased to $141,000 as of January 31, 2006. That is a significant contrast to the Jun-Sep rolling third investment where your $10,000 shriveled to $7506. Your 1970 $10,000 investment in the NASDAQ only in the Oct–Jan rolling third grew to $111,507. That same investment only in the Jul-Oct rolling third shriveled to $6,408. The consistency is absolutely amazing, as there is little logic to it.

Some of you do not like to think in terms of rolling thirds. That is okay since the Quick-term and Short-term Indicant advise you daily of the market’s bullish or bearish inspirations. However, it is important to have a mid-term and long-range mindset. The upcoming rolling third of Feb-May is a so-so period based on historical standards. The problem is that we are entering a period of several rolling thirds that do not have a history of dynamic bullish expressions like that in the Nov-Apr rolling half.

The Jul-Oct rolling third is the least bullish. It has consistently demonstrated outright bearishness over a long period. The Jun-Sep is the second least bullish. The Aug-Nov rolling third is the third least bullish. The May-Aug rolling third is the fourth least bullish. The Feb-May is the fifth least bullish rolling third. As you can see, we are entering a period of limited bullish expectations.

Pessimistic fundamental corporate and economic outlooks tend to deflate bullish optimism at its greatest during the upcoming months. The question is, “what is the magnitude of the pessimism?”

Here is the problem for the short-term trader. The market can express significant bearish behavior in the upcoming weeks and still be a bull. The January buyer will lose money while the October 2005 buyer will still enjoy a profit.

Look at Short-term Indicant of any of the ETF’s, other than the contrarian ones. ETF#2, SPY, is a good example. Remember, your email may not see the link here, but it is visible on the website. This fund is representative of most of them. It is well above its breakdown line by a significant amount. The market can drive it down to near that breakdown line, while it is technically still a bull. The longer-term investor will simply ride that sort of bearish expression out. The one who bought in the last week or so will endure fits of anxiety. The one who bought, say at the beginning of the heart and soul of bullish seasonality, would understand the nature of the decline while one who bought near the end of bullish seasonality would not be so content in this “understanding.”

As stated in the past few daily stock market reports, do not be surprised at increased bearish expressions over the next few weeks and months. The underlying influences of these bearish expressions require a deep understanding of their nature. No investor wants to endure dynamic bearish expressions. That is true for both the long-term investor and the short-term trader. If these impending bearish expressions are simply normal seasonality, then holding will be okay for most of you. If these bearish expressions are under the influence of one-hundred oil prices, double-digit interest rates, etc., then you will want to sell and avoid stock market equities with a couple of exceptions.

Precious metals and energy can express profound bullishness, while the rest of the market crashes. Economic attributes right now are very similar to those of the 1970’s where 40% plus stock market declines occurred. No one wants to endure that magnitude of a decline because of the unpredictability in the follow-on supply and demand for stocks. Many left the market for good after the 1987 crash. More left after the bear of 2000-2002. So, the current generation of investors has been burned twice. A deep bearish cycle will influence a depression on the demand for stocks. That influence can last for an entire generation.

The Quick-term and Short-term Indicant, as well as the Mid-term Indicant, will help you understand the nature of the bearish cycles that are most likely to occur in the immediate future. Contact with breakdown lines will most likely induce aggressive bearish behavior. That will generate significant sell signals and follow-on avoid signals. Keep your eye on this. The market is most vulnerable to bearish inclinations over the next several months.

Weekly Buy/Sell Summary

The Mid-term Indicant generated two buy signals and two sell signals for stocks and funds.

In addition to the sell signals, the Mid-term Indicant is avoiding 58-stocks and funds of the 345 tracked by the Indicant. The avoided stocks and funds are down an average of 10.4% since the Mid-term Indicant signaled sell an average of 19.6-weeks ago.

There were 71-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 28.6% since their respective sell signals an average of 50.7-weeks earlier. Two years ago, on February 7, 2004, the Mid-term Indicant was avoiding only 12-stocks and funds that were down an average of 27.4% since their respective sell signals an average of 41.6-weeks earlier. Three years ago on February 8, 2003, there were only eight avoided stocks and funds. They were down 8.9% from their respective sell signals an average of 5.4-weeks earlier. There were 32-sell signals on this weekend in 2003. There were 58 in the previous week, as the heart and soul of bullish seasonality was followed with deep bearish behavior.

In addition to the buy signals this weekend, the Mid-term Indicant is signaling hold for 283 of the 345-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 114.5%. That annualizes to 65.5%. The Mid-term Indicant has been signaling hold for these 280-stocks and funds for an average of 90.9-weeks.

One year ago on February 4, 2005, the Mid-term Indicant was holding 228-stocks and funds out of the 320 tracked at that time for an average of 73.9-weeks. Those 228-stocks and funds were up 97.0% (annualized at 68.3%). The Mid-term Indicant was signaling hold for 281-stocks and funds of the 296 tracked two years ago on February 7, 2004. They were up by an average of 67.5% (annualized at 86.2%) since their respective buy signals an average of 40.7-weeks earlier. There were 112-stocks and funds with hold signals on February 8, 2003 since their buy signals an average of 24.9-weeks earlier. They were up 24.5% (annualized at 51.2%).

Quick/Short-term Indicant Stock Market Report - Punch Lines

NYSE Indicant Volume Indicator: Bullish bias softening; remains favorable to bullish ambitions.

NASDAQ Indicant Volume Indicator: Bullish bias weakening, bearish bias is threatening.

DJIA Short-term Indicant: Signaling bull since January 26, 2006.

NASDAQ Short-term Indicant: Signaling bear as of February 3, 2006 when 5.5% bull expired.

Consolidated Quick-term/Short-term Indicant ETF: Bullish bias; long-term hold signals strong.

Short-term Indicant: ETF: Bullish bias, but weakening.

Quick-term Indicant ETF: Bullish bias, but weakening.

Quick-term Bearish Yellow: High non-bearishness.

Quick-term Bullish Red: Reduced number of red bulls threatens current bullish bias.

Quick-term and Short-term Conflicts: Bullish harmony.

Robust Force Vectors: Moving south into bearish domains.

Vector Pressure Position: Moving away from bullish domains.

Short-term Indicant Breakout (Bullish) Configuration: No longer enjoying bullish convergence.

Short-term Indicant Breakdown (Bearish) Configuration: Non-bearish bias continues.

Vector Pressure Crossings Put Option Activity: Several buy signals.

Vector Pressure Crossings Call Option Activity: No signals today.

Writing Covered Call Options: Not recommended.

Overall Quick-term Market Bias: Bullish

Overall Short-term Market Bias: Bullish

Quick-term Short-term Indicant Stock Market Report Details

Today’s volume was again somewhat aggressive with aggressive bearishness. The Indicant Volume Indicator continues with robust behavior. Your hold positions do not want to see robustness with dynamic bearish expressions. The current cycle has been loyal to bullish ambitions, but recent behavior has been mixed. The current bias favors the bull, but behavior the past two days suggests a possible turnaround.

The DJIA is down 0.1% since the Short-term Indicant signaled bull on January 26, 2006. The NASDAQ received a short-term bear signal today. The recent Short-term Bull delivered a 5.5% gain since its bull signal on November 2, 2005. That was mediocre performance during the heart and soul of bullish seasonality. The Short-term Indicant is no longer biased in favor of bullish expressions. 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 62.8% (annualized at 33.5%) since their respective buy signals an average of 96.4-weeks ago. The SQI is not avoiding any of the ETF’s at this time.

Short-term Indicant Report Card, Status, and Charts

There were no buy signals and no sell signals. Although there were no buy signals, the Short-term Indicant is signaling hold for 30-ETF’s. They are up an average of 64.7% (annualized 35.8%) since the STI signaled, buy, an average of 92.9-weeks ago. The Short-term Indicant is not avoiding any of the ETF’s.

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 35.0% (annualized at 35.9%) since the QTI signaled buy an average of 50.1-weeks ago.

Quick-term Indicant Bull/Bear Health Report

All 30-ETF’s are above their respective bearish yellow curves by average of 10.3%. That is down slightly from yesterday. This attribute remains with strong non-bearish configurations. Today’s follow-on bearish behavior to Thursday’s same is discerning, but the non-bearish configuration threatens against immediate dynamic bearishness.

Seventeen ETF’s are above their respective bullish red curves by 2.0%. The number of ETF’s with red bull status is down by three from yesterday. This attribute remains with bullish bias.

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.

Short-term Indicant Bull/Bear Health Report

None of the 30-ETF’s are contacting their breakout lines (bullish). That is down considerably in the past few days. This eliminates one of the strong bullish bias attributes. Keep in mind the non-bearish attributes are protecting against dynamic bearish dominance.

The average distance from breakout contact is 3.1%, which is 0.6% less bullish that yesterday. That is a significant reduction in bullish bias.

The average distance from the price and breakdown is 22.1%, which is 0.8% less 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 lines will induce dynamic bearish behavior. Keep your eye on this attribute.

Conflicts Between the Short-term and Quick-term Indicants

There are no conflicting signals between the Quick-term and Short-term Indicant. Quick cycles and Short-term inclinations are in harmony with bullish bias.

ETF Robust Force Vector Configurations

Force Vectors are moving south and many have now penetrated bearish domains. As stated in Thursday’s Daily Stock Market Report, notice Force Vectors peaked lower than the prior cyclical peak. That suggests the next 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 are past their recent peaks.

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 several put option buy signals today. Keep in mind put options can disappoint during bull cycles. Even though this week endured increased bearish behavior, the market remains a bull.

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 in 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.

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.

This paragraph will remain unchanged until conditions warrant modifications. The Quick-term Bull remains in tact but severely weakening. As stated for the past several weeks, do not expect dynamic bullishness like the past three years during the heart and soul of bullish seasonality, which is now over. The recent heart and soul of bullish seasonality performed to geometrical expectations, its bullish result was mediocre when compared to recent ones.

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

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 now starting the second month of the 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? The last mid-term election year, 2002, found a cyclical bottom, which is a common attribute in presidential mid-term election years. Bearish behavior before October will be required for historical conformance.

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 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. So far, so good. The current heart and soul of bullish seasonality demonstrated normalcy.

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 48.1% from the last presidential election year bottom. The NASDAQ is up a whopping 103.1% since October 9, 2002.

Interestingly, the NASDAQ is down 55.2% from its historical high of 5048.62 on March 9, 2000. The Dow is down 6.8% from its historical high of 11723 on January 13, 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 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.

The stock market’s meteoric rise since 1990 was not supported by economic or corporate earnings fundamentals. It was stimulated by an unprecedented demand for stocks. The simple laws supply and demand propelled stock prices dynamically to the north. The great bear leg of 2001 and 2002 has permanently depressed sources of demand. The market now has to wait for a new generation of investors to enjoy dynamic bullish growth. 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. 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 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 dip back to the south after the euphoria of new bullishness.

The magnitude of early 2006 bearishness is not predictable. Also, 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 8% on recent buys because of the Quick-term Bull.

Stock and Fund Update

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

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

Bearish convergence occurred last week. That follows the previous week’s bullish convergence. This is the first week of bearish convergence since last September. This is the twelfth week out of the last thirteen without any bullish convergence. Last week’s bearish convergence is somewhat ominous to the underlying bull market.

Economic Conditions – Inflation, Currency, Interest Rates

There is nothing new. This paragraph remains unchanged from the past few weeks. 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 imports 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.

Commodity prices continue rising. Some are vacillating around all time peaks. Overall, this behavior will eventually induce bearishness on the stock market. Again, this paragraph will remain unchanged until conditions change. The rise in commodity prices is unprecedented.

The market’s bearishness last week can be attributed to underlying economic fundamentals. There is a growing perception that inflation is around the corner. Productivity flattened and it is the only source of fuel to stave off rising material costs. The bear will dominate the market if productivity improvements do not resume. Productivity growth is the only source of increasing quality of life.

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 eighty-nine weeks ago since the MTI buy signal on April 13, 2001. One-hundred and eighty-two weeks ago, it closed up 30.1%. Last week it closed up 264.8%. The current annualized growth rate since the April 13, 2001 buy signal is 54.3%. After falling sharply 33-weeks ago, it bounced north in 27-weeks of the past 33-weeks. This fund eked a small gain last week after posting solid gains in the previous four weeks.

Fidelity Gold, Fund #28, is up 49.7% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 111.0%, 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.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 275.9% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 78.4%. This fund moved north the past five weeks after falling sharply in four of the last ten weeks.

Vanguard Energy #18, VGENX, is up 165.5% (annualized at 57.6%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 149.4% (annualized at 68.1%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 138.8% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 55.4%. These energy related funds fell sharply last week after moving north in four of the last ten weeks. They are paralleling gold and precious metals. 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.

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 29.8% since then. It is annualized at 58.4%. 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 156.8% (annualized at 54.0%). This fell sharply last week. It has expressed bearishness in four of the seven preceding weeks.

The contrarian sector, commodities and petroleum, were mixed last week while general equities were aggressively bearish. That is a shift in bias from bullish convergence two weeks ago to bearish convergence this past week.

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 43.3% since the MTI-RYS signaled bull an average of 101-weeks ago. That annualizes to 22.3%, which is down from last week. The strongest bull is the Dow Utilities. It is up 113.0% since the October 25, 2002 bull signal. The utilities moved aggressively to the south last week. 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 but has recently been expressing aggressive bearishness.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $32,696,462. That beats buy and hold performance of $1,652,115 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $163,204. That beats buy and hold’s $123,815 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $189,312. That beats buy and hold’s $78,453 on an October 18, 1985 $10,000 investment. The Mid-term Indicant model beats buy and hold by 1,879.0%, 31.8%, and 141.3%, respectively, for these indices as of this past week.

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 5.3% 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 272.9% (annualized at 19.1%) since the Long-term Indicant signaled bull 744-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 Quick-term Indicant and Short-term Indicant continues signaling bull for all major indices and related Exchange Traded Funds. Quick-term and Short-term attributes continue with a bullish bias. That bullish bias weakened three weeks ago. The problem for the short-term buyer internal to the heart and soul of bullish seasonality is the endurance of impending bearish expressions. 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 two weeks, do not be surprised at meandering behavior with possible bearish bias in the immediate future. The heart and soul of bullish seasonality has expired. 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.

Read your daily reports, as quick-term attributes can shift quickly. As stated the past several weeks, the market lacks bullish convergence. Last week demonstrated bearish convergence for the first time in several months. That is ominous.

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

02/05/06