January 26, 2003 Indicant.Net Weekly Update

Volume 01, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Dejavu #2?

George W. Bush’s popularity is beginning to wane at about the same time his father started his popularity decent. He and his pals know wallets and purses cannot be light on Election Day, which is less than two years from now. Steering the Titanic is nothing compared to steering the economy. A political strategists were advise an expedient conclusion to a war that has yet to begin.

When the war ends, then George and pals can implement legislation friendly to commerce. It is too old fashion for politicians to believe a sure fire way to re-election is to have a war. It used to be that way, but no more. One has to wonder if politicians know that. Some people are ego blind. You know them and that may be a developing case in the White House.

There is one truth about war. Those who manufacture their own weapons always win. The army backed by the most manufacturing capacity has won all prior wars. Iraq possesses little manufacturing capacity and will lose the war. The market knows that he who can manufacture is king.

The North Vietnamese would have been easily defeated without elite intellectualism and wonderment. Regardless of the right or wrong with the Vietnam war, it was not your normal war. A normal war in the dessert will ensue with CNN and others watching every move. It is highly unlikely that elite intellectualism will enter into the fray, but equally not surprising if Saddam Hussein takes refuge and lives a life of luxury somewhere else and at our expense.

In every major war, since the bombing of Pearl Harbor , the market was higher one year after the initial shock slump. A major international event equivalent to war was the Arab Oil Embargo in 1973. The market was down 25.5% a year after the “shock low.” The Arab Embargo adversely impacted the economy by driving inflation. It was crippling to the transportation sector, which is a major core of economic prosperity. A summary of the market’s performance after wars started is below:

The Dow bottomed out with an 8% decline three weeks after the bombing of Pearl Harbor . One year after that subsequent low, the Dow was up 12.0%. By April 1942, the Dow plummeted 20.2% after peaking in 1941. A year later, it was up 44.3% from the April ’42 low. The North Korean invasion into South Korea resulted in a 12% drop in the Dow, but a year later, the market was up 28.8% during the midst of American involvement. The market fell by 18.4% after the Iraqi invasion of Kuwait in 1990, but was up 26.0% a year later. As you can see, the Arab Oil Embargo was more damaging to the stock market than the three recent wars.

Interestingly, the market fell by only 5.4% after the beginning of the Cuban Missile Crisis and rebounded by 33.8% one year later. It dropped a measly 2.9% after President Kennedy was shot and up by 25% one year later. These two events had no economic consequences and thus little impact to the market. As previously stated the only real impact politicians can have on the economy is negative. All they can do to help it is undo all the stupid things they have done in the past to depress it.

The bull in the stock market cares about one and only one thing – economic prosperity. The market, itself, feels no responsibility for providing economic prosperity. The perception of the market’s contribution to economic prosperity in the late 1990’s was just that – a perception. The market simply waits for the sweat and toll of industry to provide reason for bullish behavior. In other words, the market rewards capitalistic effort. It could care less about political mumbo jumbo.

As stated many times in this newsletter, political establishments around the world have one and only one influence on the economy and the stock market. They can and do drive it south with rhetoric, legislative overkill, saber rattling, and outright death and destruction. If all countries banded together and outlawed political establishments, then everyone would live like a millionaire. Oh well, let’s get back to reality here.

The Quick-term Indicant’s Vector Pressure fell into bearish domains in December 2002, which was the worse December since 1931. The Quick-term Indicant did not signal bear, believing firmly in the forces of market seasonality and the mid-term election year phenomenon. The market rewarded the Quick-term Indicant’s belief with a nice bull spurt in early January. However, Vector Pressure again fell into bearish domains last Friday. Two dips into negative territory in such a short period are too much for the Quick-term Indicant to continue signaling bull. Consequently, many sell signals ensued.

Contemporary electronic media provides the market much better anticipation than say during the days leading up to Pearl Harbor or the invasion of North Korea . Even with that, there was little anticipation of the Iraqi invasion of Kuwait like the impending war with Iraq . It is possible the market has already discounted the war with Iraq with the unseasonable decline in January. Although recent January’s have not been friendly to those of you who prefer bullish behavior, January is historically a very friendly month for the bulls.

Vector Pressure is eight dimensional data. Therefore, no charting is available. We continue to work at simplifying for charting purposes. If Vector Pressure were plottable, you would see up and down cycles. The past three cycles have vacillated higher than the previous cycles. This is the first time that phenomenon has occurred since 1998-1999. Therefore, it is likely this Quick-term Bear will be short-lived. Once the war starts, the market will get over the many distractions and move in its intended economic based direction.

The recent decline in the stock market is complete with breadth. Later you will see last week’s sell off was entirely emotional, but without a tremendous increase in volume. Just as the Quick-term Indicant reluctantly signaled “bear” this weekend, the Mid-term Indicant reluctantly signaled sell for many stocks.

As you know, some stocks and funds with hold signals were down from their buy points. As they declined in price, your stop losses minimized your losses. With the hold signal, you could have bought again. Some of those stocks rebounded. Many of those stocks, such as Apple Computer have not nudged the bearish yellow curve south. Thus, the reluctance to signal sell during this period of bullish seasonality. Keep your eye on those sort of stocks over the next few weeks. If they continue to hover around their respective yellow curves, then perceive that as bullish. If they drop to the yellow and then turn south, then the bear is in charge. The Quick-term Indicant will keep you informed, but you can couple that input with your favorite stocks and funds.

Several stocks possess the same attributes of Apple Computer. Notice the recent resistance for the stock price to fall further. Several of these stocks participated in the bull burst in October 2002, but quickly faded. The salient point is they just faded, as opposed to rapid crashes experienced the past few years. Although a little painful with their 10% to 20% price declines after their initial bull spurt. Some bounced up a little while others are just hovering. You can see normal seasonal behavior is trying to ensue, but threats of war have acted as a price depressant. The question is will the war produce a bear like the one voodoo bookkeeping did.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS01.htm#1

If Vector Pressure was still positive, Apple and several of the other stocks would still have hold signals during this period of bullish seasonality. Just as voodoo bookkeeping overruled bullish seasonality last year, the war with Iraq is overruling the same this year. At least so far, that appears to be the case. However, as you can see from the historical perspectives earlier in this article, wars do not have a lasting bearish impact.

On the other hand, many stocks are still performing much better than your CD’s and money market accounts. We realize it is difficult for some of you keep no more than 10% of your investment resources into a single stock. Nevertheless, we will continue to remind you of that, as in the end, you will have a few triple digits and possible four digits performers in your portfolio. 

A listing of the top ten NASDAQ 100 performers is below:

#41 Amazon.Com – Bought -11/9/01 +210.5%

#94 Apollo Corp – Bought - 2/11/01 +178.0%

#74 Gilead Sci -Bought - 4/6/01 +117.2%

#57 BEA Systems - Bought 10/11/02 +102.9%

#83 Nextel Comms A - Bought 8/16/02 + 84.3%

#38 Citrix Systems - Bought 10/25/02 +83.3%

#93 Ciena Corp - Bought 10/25/02 +72.9%

#15 Juniper Networks, Inc. Bought 10/25/02 +57.9%

#70 Genzyme Gen - Bought 8/2/02 +56.4%

#43 Mercury Intract - Bought 10/18/02 +46.6%

A listing of the top ten Indicant Selected Stock performers is below:

#26-Nortel Networks Corp-NT-Bought 10/18/02 +309.5%

#19 Inktomi Corp – INKT – Bought 10/25/02 +292.7%

#44 Chattem Inc – CHTT – Bought 3/9/01 - 284.9%

#4 CNET Networks, Inc. – CNET Bought 10/18/02 +127.6%

#48 Forest Laboratories Inc –FRX Bought 6/4/99 +121.5%

#31 Qwest Communications International Inc Q Bought 10/11/02 +103.7%

#1 CGMI, Inc – CMGI – Bought 10/18/02 +90.2%

#17 Broadvision BVSN – Bought 10/25/02 +84.2%

#20 Lucent Technologies Inc – LU Bought 11/2/02 +73.7%

#43 Corning – GLW – Bought 11/8/02 +66.7%

As you can see, many of the stocks bought in the recent Quick-term Bull spurt are still up nicely. Although these stocks are not up as much as they were in early November when the war with Iraq was a perceived crapshoot, they still have delivered nice gains.

Stock Market Summary

The Force Vectors are very mature in their current bearish cycle. That means they are due for a turn around. Unfortunately, this current bearish cycle possesses attributes of bearish commitment. The nature of the turn around will be influential on many, but not all, of the stock prices. If the Force Vectors turn north in a dynamic manner, the Quick-term Indicant will signal bull and your current holdings will be safe. If the Force Vectors continue southerly, you may consider selling and taking your profits. Many of the stocks not on the above two lists will receive buy signals, provided they are bouncing north of their respective yellow curves. Watch your email daily.

Even with the stock market declines the past two weeks, ProFunds Ultra Short is still down 22% from the sell signal last October. If the Quick-term Indicant indicates deep bearish behavior, you will want to buy this fund, which performed nicely for us in last years Quick-term Bear cycle from April through August 2002. Remember, this fund moves inversely to the stock market in an exponential manner. We will keep you posted on this possibility with the Quick-term Indicant updates.

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

The Mid-term Indicant also signaled bear for five of the eight major indexes. Theses bulls are the NASDAQ, NASDAQ100, and the Dow Utilities. They are up 4.0%, 4.1%, and 5.5% since their respective bull signals. Therefore, the market is still debating what course of direction is appropriate.

Divergence versus Convergence

There continues to be absolutely no market divergence. Last week’s sell off is entirely emotional and just about every sector was included in this bearish behavior. Although the market seldom behaves with apparent logic, last week’s sell off most likely raised a few eyebrows. The Mid-term Indicant signaled bear for the oil field service sectors. Many energy sector mutual funds also got a sell signal. In past Middle East Conflicts, those sectors typically became bullish while the rest of the market went south. The fact that oil prices continue to skyrocket does not support depressing behavior in the energy sector. However, energy service stocks are holding up fairly well, but without the expected bullish fervor one would expect in today’s environment. Keep in mind the market seldom behaves on today’s news. It quite often uses today’s news to predict the future.

It is amazing that the energy sector and the transportation sector both declined last week. Fundamentalists would conclude the entire economy is in a deep and long lasting recession. Of course, fundamentalists do not offer their conclusions on a one-week anomaly or what appears to be blind emotionalism.

On the other hand, the market may see lowering oil prices after the Iraqi conflict and a deep recession to boot. A deepening recession will result in reduced demand for petro and thus the reason for that sort of projection. Fewer planes will fly and each plane will have fewer passengers in that scenario. Trucks will simply set at the truck stops and sipping coffee. Maybe that is why Starbucks rose last week in price.

As stated last week, the market is awaiting the conclusion of its “uncertainty” cycle. It may have completed its uncertainty cycle last week. It may have decided to get on with a continuing bearish attitude. We will know more about this is the next few days, as the Quick-term Indicant will provide critical information about the market’s intention.

Economic Outlook

Although there were some mixed movements last week, the U.S. Dollar continues to express weaknesses against world currencies. As long as interest rates remain low, expect that to continue. If oil shortages manifest, the greenback will erode further.

The three-month T-Bill is shaping additional declines in interest rates. After pausing, CD’s, Fannie Mae, Feddie Mac, and other interest rates are again shifting further to the south.

Gold and oil prices are sky-rocketing. Is this Dejavu 1970’s? We will see.

Other commodity prices continue to reside at cyclical high levels. Some are even setting new cyclical highs. It will be difficult for the market to express a 1990’s type bull leg with these commodity attributes, but the mid-term election year phenomenon is still expected to influence bullish direction.

A link to the CRB Bridge Futures is below. It is one of Greenspan’s favorites. As stated last week, as soon as the employment numbers turn around, he will attack this upward cycle with interest rate hikes. He is running out of stimulus inventory as his prior rate cuts have left him little to play with.

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

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Thirty-three weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Twenty-six weeks ago, it closed up 12.0% since the buy signal. Seventeen weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 72.0%, which is up significantly from the prior week. This fund made a nice U shape near the top of the current MTI Hold Cycle.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% thirty-one weeks ago since the MTI buy signal in April 2001. Twenty-five weeks ago, it closed up 27.8%. Last week it closed up 58.8%, which is up over four percentage points from the prior week. The Mid-term Indicant continues to signal hold for this fund.

As you can see, the Fidelity Fear Fund has outperformed the Vanguard Fear Fund. Oh well, one is free and the other is not.

The three primary fear elements continue to be war with Iraq , rising 0il Prices, and terrorism. As stated last week, voodoo bookkeepers cannot adjust the price of gold and therefore confidence in financial integrity is always high. Gold has been a safe bet against the threat of inflation.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds require “avoid” signals for the market to embark upon a meaningful and lasting bull leg.

Links to both of the above funds are as follows:

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

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

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight indexes are now Quick-term Bears. The Quick-term Indicant signals all or none for the eight major indexes, even though they do not always express paralleling behavior; especially in magnitude.

Since the Quick-term Bear is new, there are no performance statistics to provide. They will be forthcoming after Monday’s close. Hopefully, this coming week will introduce a new Quick-term Bull, but not very likely.

The Dow is down 23.2% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 68.2% since the Short-term Indicant signaled bear nearly three years ago on March 30, 2000 .

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

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

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

There were five new bear signals. Bull signals still exist for the NASDAQ, NASDAQ100, and the Dow Utilities. These three indexes are up an average of 4.6% since their respective bull signals an average of 13.3 weeks ago. This annualizes to 18.0%, which is half of that reported two weeks ago. Eight weeks ago, all eight indexes were MT Bulls and were up an average of 8.0% (annualized at 70.4%). During the Mid-term Bull cycle, timidity and uncertainty acted as a depressant. Now, the market appears poised to turn bearish, but lets wait and see how the Quick-term Indicant behaves next week.

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

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

Mid-term Indicant Positions - International Markets

There were no new bull signals and five bear signals.

The seventeen bull markets are up an average of 23.4% since the Mid-term Indicant signaled bull an average of 27.8 weeks ago for an annualized gain 43.7%, which is down from 55% eight weeks ago. The international arena is also enduring a wave of uncertainty and timidity. However, the international bulls actually increased last week. Apparently, they have much more economic confidence than the U.S. right now and do not fear war, since most will not be involved.

The five new bears are the only bears. Since they are new there are no performance statistics to provide this week. They will be forthcoming in next week’s report.

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

  January 19, 2003 Indicant.Net Weekly Update

Volume 01, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Dejavu?

George W. Bush’s popularity continues to run high, just as his father’s did before Dessert Storm. The Quick-term Indicant signaled bull on October 4, 2001 or about three weeks after September 11.

The president is fixated on the January 27, 2003 deadline with Iraq . The current Quick-term Indicant signaled bull on October 15, 2002 . The president’s current fixation on January 27, 2003 with Iraq has contributed to this bull’s timidity.

A timid bull is okay, but keeps one on edge. Dynamic bulls allow for some relaxation. The lethargic economy is contributing to this bull’s timidity. The threat of war and an actual war will fundamentally have little mid-term and long-term impact on the stock market. There will be a Quick-term impact on the first shots. Uncertainty is the heart and soul of the timidity of this QT Bull. The uncertainty evaporates after the war starts. Both types of markets, bulls and bears, like certainty. With certainty, they behave dynamically. Our impatience awaits certainty. With that, the market will move in its chosen direction, allowing money to be made.

There was no “uncertainty” at this time last year. The impending “secular” direction of the market was south. The dilettante managers running some large corporations introduced voodoo bookkeeping. The market faltered throughout most of 2002, which was the obvious course of direction for 2002. Most income statements contain some fiction anyway. But the massive scandals of Enron, MCI, Imclone, etc. shattered investor confidence. Many more companies were caught, but you know not all of them were. The type of scoundrels who work there way to the top of corporate America have changed over the past fifteen years. Bill Clinton’s leadership provided fuel to that type of character.

So, is this year going to be like last year in terms of market direction? The Quick-term Indicant signaled bull on October 4, 2001 . The Dow was at 9060.81 and the NASDAQ at 1597.31. By December 31, 2001 , the Dow was up nearly 1,000 points or by 10.6%. The NASDAQ was up 22.1%. In the first few days of January 2002, the markets moved up, much like this year. But as stories of voodoo bookkeeping from Enron and others continued to unfold, the Quick-term Bull evaporated. The Quick-term Bull spurt in March 2002 lasted only six weeks. The balance of 2002 was mostly bearish, until October 15.. The Quick-term Bear signal in April 2002 lasted all the way through August for one of the longest Quick-term Bears on record. The NASDAQ100 plummeted another 50% during that QT Bear cycle.

The Quick-term Indicant signaled bull on October 15, 2002 when the Dow was at 7850.29 and the NASDAQ at 1210.53. By December 31, 2002 , the Dow was up 6.3% and the NASDAQ by 10.3%. This Quick-term Bull was just as strong as the Oct 2001 QT Bull in the first few days, but the Oct 2002 QT Bull is now only one-half as strong as the Oct 2001 QT Bull.

Here is the interesting thing. By January 18, 2002 , the Dow was down from the 2001 close by a few hundred points. The NASDAQ was down by about twenty points. Both indexes eventually closed down in January 2002 from the prior December close.

The Dow and NASDAQ are currently above the December 2002 close. Keep your eye on how January closes. The Dow closed at 8341.63 and the NASDAQ at 1335.51 on December 31, 2002 . Although this QT Bull now has one-half the strength of the Oct 2001 QT Bull, it still has a chance to live a longer life than the October 2001 QT Bull. So goes January, goes the year. Don’t take that to the bank, but it is an indicator that has some precision in predicting direction.

Sure, there will be dips this coming year, but the voodoo bookkeeping scandals are dissipating. Depending on how January closes this year will offer some additional clues about dejavu 2002 into 2003.

Fundamentally, George W. Bush seems to be paralleling the path of his father. Most presidents endure a degree of humility when not reelected for a second term. Can you imagine being a one-term president like your father? George W. Bush has positioned himself to be humiliated like no other. Is dejavu lurking for George W. Bush? His father was popular leading up to war with Iraq . George W. Bush is popular leading up to war with Iraq . Pappa Bush was president during a recession. George W. Bush is president during a recession. Pappa Bush’s popularity waned as the pocket books of Americans got lighter. George W. Bush’s popularity will wane if this recession lingers.

The only different between papa Bush and the kid is that papa helped add fuel to the 1990 recession with a tax increase. At least the kid seems to have read Economics 101.

Americans vote their pocket books. George W. Bush most likely knows this better than anyone, as he watched that phenomenon bring Slick Willy Clinton to the Whitehouse. Slick Willy’s leadership style and exposed character helped bring on voodoo bookkeeping. There must be some truth to the belief that the president’s life style and message has a sociological impact.

The market’s strong suit is anticipation. It anticipates economic activity before the fact. Yes, sometimes it gets a little over anxious in its beliefs and fosters some dynamic volatility. But, the trend is generally on target. Its anticipation cycle has a time interval six to nine months in advance of the economic cycles. If the economy and stock market remain depressed throughout 2003, George W’s popularity will wane. Once the unpopularity trend gains momentum, George W. will endure increased risk of facing unbelievable humiliation in the 2004 elections. If he is a normal person, he will do everything possible to avoid such humility.

Religious fanatics and dictators fight wars for glory and their belief of a sure-fire way to heaven. Communists fight wars to increase the numbers of low cost labor so the few at the top live like royalty. Socialists are too afraid to fight. Capitalists view wars as a nuisance, much like that Nat threatening your nostrils on a marsh mellow roast. Many of the so-called allies to the U.S. are socialists. So, George W. will have difficulty gaining United Nations full support. The democrats will convince the Americans that George W. is going against the world if he fires upon Iraq .

Capitalists will win any war because their provider of arms and weaponry are more efficient than an enemy who supports non-capitalists views. The stock market knows this. The stock market is the soul of capitalism. Capitalism is more closely aligned with the laws of nature and will always prevail over any other philosophy. That is why the stock market typically considers war as irrelevant. The outcome is obvious. Productivity and efficiency always prevail. That is a law of nature. But the uncertainty of whether or not a war will occur makes the market timid on choosing a dynamic direction – up or down.

So, can George W. turn the economy around and fight a war at the same time? The war pulls hard working people off their jobs. Working people are the heart of the economy. Most politicians do not understand that. When people are not at work, then the economy does not have its heartbeat. George W. can push through economic stimulus packages, but if like the same old cheap offerings from Washington , he runs the risk of the greatest humility.

There is one thing that George W. Bush can do to ensure his reelection and it has nothing to do with Iraq . For the first time in years, the Republicans control both houses. The Russian stock market and economy will leave ours in their dust with their flat tax. The U.S. must counter. A capitalistic Russia with a flat tax will make what Japan did to Detroit look like a cakewalk. A flat tax is a tough call in the U.S. as it will cut deep into credentialism and board room cronyism. More and more of the parasitical elite will actually have to put in an honest days work to survive.

Yes, it is possible to have the economy turn around without a flat tax. George W. will be popular if he has military victory in Iraq . But if the American’s wallets are still light on election day November 2004, bye bye George.

If the January indicator holds true to form and with some bullish magnitude, then George W Bush may be able to squeak in four more years, but the magnitude must be there. A 1% January and a 1% 2003 will not cut it. Something dramatic, like a flat tax, must be done to offset last year’s voodoo bookkeeping scandals that still act as a lid on the stock market. The way January finishes will offer some insight as to what the market is thinking about all of this. It will not be a good sign for the president if this Quick-term Bull dies in January 2003 and a bear like 2002 reemerges.

Stock Market Summary

It is still amazing that December 2002 was the worse performing since 1931. The Dow closed at 77.9 on December 1931. In January 1932 it closed at 76.2 or down from the prior December. The Dow went on to collapse to 59.9 in 1932 or by another 23.1%. from 1931 and by nearly 90% from its speculative peak in 1929. The good news is that the market increased from 59.9 to 99.9 in 1933 for a nice 66.8% rise. It did that about the time that nearly everyone had sold out and had given up on the market. Is that the case now?

Sometimes history repeats itself. If 2003 emulates the patterns and magnitude of 1932, then 2003 will be another year for the bear. There are similarities - scandals, increasing communism (today’s religious fanaticism), speculative bubbling, followed by exerted reality, etc. You can see the parallelism between then and now.

The Dow is up 217% since December 1990. The NASDAQ is up even more by 257%. Some say we are into a secular bear market. That depends on one’s frame of reference and expectations at the time of the investment decision. A long-term investor originating in 1990 is probably okay with today’s market. What is all this about a secular bear? But another year of bearish expressions will cut down the size of his or her retirement yacht. So, some investors may not be through selling. If that is the case, supply and demand will unfold and drive stock prices lower.

The prior three paragraphs are showered with unadulterated speculation. Some people make a living writing and talking about that sort of stuff. The various Indicant models violate the need for speculative commentary.

The current Quick-term Bull is alive and well. The Mid-term Bull is alive and well. The current Long-term Bull is alive and well. Look at the Mid-term Indicant charts. There is nothing unusual about a bull pausing. As long as the Quick-term Bull stays alive, then that is all the Mid-term Bull is doing (pausing – taking a breather).

The Quick-term Bull is alive, although not as healthy as we would like. A vibrant bull is the choice, but nature dictates that. The Force Vectors are moving south, but in timid fashion. Vector Pressure is still positive but losing some steam due to the Force Vector’s direction. Until the Vector Pressure turns negative, the Quick-term Bull is still breathing. Please keep in mind Force Vectors and Vector pressure are eight dimensional and not yet plottable.

The Indicant Volume Indicator continues to reveal some interest in gaining market robustness. But it is showing some early signs of softening. Preferred robustness requires smooth rigidity heading on an incline of 45 degrees or so. The early movement in the current IVI cycle is along a 30-degree incline. We will take that, but recognize it is fraught with indecisiveness.

Seasonal bullishness desires its influence to move the market north, but market uncertainty induces a lack of commitment. Will there be a war or not? After the war with Iraq starts, the market will ignore it, unless Iraq is victorious or nuclear destruction to the oil fields unfolds. Those sorts of scenarios are introducing market timidity. Market timidity and robustness do not coexist. The battle between seasonal forces and market uncertainty is a very interesting one. We will keep our eye on it. George W. could fuel a bullish move by acquiescing and allowing inspectors more time to prove the non-compliances of Saddam Hussein.

Finally, as stated in yesterday’s preliminary report, the Mid-term Volatility Index is showing some resistance at its bearish yellow. This is a natural phenomenon, which influenced the overall market’s drop last week.

Divergence versus Convergence

There is absolutely no market divergence. All sectors are more or less on hold. The market is awaiting the conclusion of its “uncertainty” cycle. An ugly war with Iraq will influence the oil service stocks to the north. That will propel the balance of stocks to the south. A clean, swift victory will cause oil field service stocks to crash and the stock market will explode, provided it sees economic optimism. The stock market smells both scenarios as having an equal chance of happening and thus the holding patterns.

Biotech and pharmaceutical stocks continue to remain depressed. That is because many advisories recommended “buy” last August. The crowd is always wrong. When they become unpopular by the masses then they should move northward due to the fundamentals of the aging baby boomers. However, invest only in those companies where the CEO knows where the research lab is. Do not invest in those companies where the CEO spends all day reading the Wall Street Journal and clamoring for airtime on CNBC.

Economic Outlook

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

The three-month T-Bill is shaping additional declines in interest rates. After pausing, CD’s, Fannie Mae, Feddie Mac, and other interest rates are again shifting further to the south.

Commodity prices continue to reside at cyclical high levels. If they do not start coming down, then you can expect them to penetrate the producer price index in the next few months. That will ultimately hit the consumer price index. The stock market will not like that. As stated the past few weeks, inflation is a growing threat. What is interesting is that a crashing stock market, crashing interest rates, a weaking dollar, coupled with a rising consumer price index could stimulate bearish behavior for years to come. Greenspan’s irrational exuberance is slowly evolving into the possibility of irrational famine. The good news for rising commodity prices is that those who extract the stuff will have more profit margins even in the face of falling demand.

A link to the CRB Bridge Futures is below. Greenspan keeps a close eye on this one. As soon as the employment numbers turn around, he will attack this upward cycle with interest rate hikes. He is running out of stimulus inventory as his prior rate cuts have left him little to play with.

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

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Thirty-two weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Twenty-five weeks ago, it closed up 12.0% since the buy signal. Sixteen weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 66.5%, which is up slightly from the prior week. The Mid-term Indicant continues to signal hold for this fund. As you can see, the recent increase in this fund’s value has made a “U” shape since the Mid-term Buy signal.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% thirty weeks ago since the MTI buy signal in April 2001. Twenty-four weeks ago, it closed up 27.8%. Last week it closed up 52.1% 54.5%, which is down over two percentage points from the prior week. The Mid-term Indicant continues to signal hold for this fund. A few weeks ago, the Mid-term Indicant neared signaling sell for both of these funds. As stated last week, these two funds have rebounded due to increasing fears about the impending war with Iraq and oil shortages. Last week, there was no demonstrably increase in fear. Even the fear element is being confused by uncertainty and the underlying timidity of all investment angles right now.

As you can see, the Fidelity Fear Fund has outperformed the Vanguard Fear Fund. Oh well, one is free and the other is not.

The three primary fear elements are war with Iraq , Rising Oil Prices, and Terrorism. Also, voodoo bookkeepers cannot adjust the price of gold and therefore confidence in financial integrity is always high.

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

Links to both of the above funds are as follows:

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

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

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. None are red bulls. This bull continues to express discomfort when crossing above the bullish red curve. Quick-term rallies in a bear market usually peak when the Quick-term Bull goes above the red curve. So far, each retreat from the bullish red curve has resulted in neutral behavior. Seasonal forces are acting as a floor while economic and peace uncertainty are acting as a lid.

All eight indexes are up an average of 4.5% (annualized at 17.6%) since the October 15, 2002 Quick-term Bull signals. Seven weeks ago, the Quick-term Bull was up 9.5% (annualized at 74.8%).

The Dow is down 18.9% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 67.4% since the Short-term Indicant signaled bear over two and a half years ago on March 30, 2000 .

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

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

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

All eight major indexes are up an average of 4.9% since their respective Mid-term Bull signals an average of 12.9 weeks ago. This annualizes to 19.8%, which is half of that reported last week. Seven weeks ago, they were up an average of 8.0% (annualized at 70.4%). Timidity and uncertainty continue to rule the market’s lack of magnitude.

The Dow Jones Utilities has resumed its position of being the strongest bull. It is up 9.7%, but took a hit last week when it was the second strongest bull with a 12.9% growth rate since its November 1, 2002 MTI Bull signal. The NASDAQ100 is now the third strongest Mid-term Bull. It is up 6.4% since its Mid-term Bull signal on October 18, 2002 . The NASDAQ Composites is the second strongest bull. It is up 6.9% since its October 18, 2002 Mid-term Bull signal.

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

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

Mid-term Indicant Positions - International Markets

There were two new bull signals and no bear signals.

In addition to the new bulls, the twenty bull markets are up an average of 20.0% since the Mid-term Indicant signaled bull an average of 25.6 weeks ago for an annualized gain 40.6%, which is down from 55% seven weeks ago. The international arena is also enduring a wave of uncertainty and timidity.

None of the twenty-two international markets tracked by the Indicant are bears.

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

January 12, 2003 Indicant.Net Weekly Update

Volume 01, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Stock Market Ignores Bad News Except Earnings Reports?

The stock market will react to the earnings news this coming week. There is a growing perception that you can actually believe the reports. At this time last year, one could not believe the reports as voodoo bookkeeping was in full swing.

Not only did fear induce the rise in the price of gold, voodoo bookkeeping by corporate America contributed. There is no way a soft-handed dilettante manager can erase $353 an ounce and scratch in $550 an ounce. Many people decided to escape to the world of facts and away from Corporate America’s fictitious financial statements.

After locking up some of the voodoo bookkeepers and dilettante managers, you can expect conservative and more accurate financial reports. It will be interesting to see how the market reacts to the upcoming earnings reports. Low numbers could simply reflect more honesty. There are reasons for pessimism in earnings.

Retail sells during the Christmas season were disappointing. Unemployment figures last week disappointed. Even with that, the market zoomed north as is typical. The market has historically moved north on disappointing unemployment news on the belief that would pressure the Fed to cut interest rates. How much further can the Fed do that? In this environment, the market will find joy in just holding them where they are.

However, commodity prices are at cyclical highs. Raw material prices are higher, acting as a depressant to the bottom line. The question is are commodity prices at a peak? They probably are, as most parallel oil prices. As “flat tax Russia ” continues to move more into a capitalistic environment, existing industrial supply chains will endure even greater competitive pressures. This will induce southerly pricing pressure. The lazy and hazy companies do not have a chance to survive. Keep in mind that only seventy-four of the 1957 Fortune 500 companies were on the list in 1998.

More interestingly, as Russia ’s capitalistic growth is quite a threat to OPEC’s influence on oil prices. Communist Russia ruined many oil fields. Business people who have that greedy profit motive will not do that.

In addition, a flat tax society will out-compete a society that has to spend twenty pounds of paper and two-hundred hours a year discussing taxes. Any conversation about any tax is 100% NVA (non-value added). Let us all pay our taxes. Let us do it in one minute on a single sheet of paper. We will all live like millionaires with that. Of course, political leadership will dwindle in importance and thus such thoughts border naivity at this time. But as each U.S. industry dies a slow death from flat tax societies, you can expect the current political climate to die with them. At some future point reality will exert itself, as is always the case. Sometimes it takes a thousand years to do so, but it reality always supports the most productive.

Why does big company evaporate or at the very least becomes displaced from the Fortune 500 list? Dilettante management is the biggest reason. Many managers today work hard – on the wrong things. “Last thought management” is a big culprit. The bigger a company is the more noise there is. When an idiot is the loudest, sell that stock. Watch your annual reports. If an industrial company is overly concerned about the environment and cleaning the environment is not their business, sell the stock. They are not focused on their one and only purpose – making you money. Read a 1990’s annual report from Toyota . Read an 1990’s annual report from Ford. You will see the difference.

Who will solve the world’s pollution problems? The flag waving, whining green peace folks are incapable. The capitalists is the only problem solver. All they need is an economic reason to move on the problem. When the environment gets ugly enough for the critical mass to repel the sources that contribute to it, then someone driven by the profit motive will clean it up. Politicians will talk to get votes, but you can bet they will not participate in cleaning up the mess.

The problem with large companies is dynamic. Their employees go to work and many of them have plenty of time on their hands. Somewhere in their career, they learn the paycheck is pretty much the same regardless of how they spend their days. Their counterparts at small companies know a misuse of time is influential on whether they eat or not.

Another dynamic is egotism. View any CEO who gloats his ego with suspicion. Lee Iaccoco wrote a book and promoted himself as opposed to ensuring Chrysler’s longevity. Rather than writing a book, he would have benefited Chrysler shareholders much more by reading Henry Ford’s My Life and Work or Shingo’s Toyota Production System and then applying that knowledge.

Jack Welch sold off much of GE’s manufacturing and bought into the entertainment industry. In other words, a big company CEO is more or less a portfolio manager as opposed to operations whereby real improvements to the bottom line are made. Now, many ex dilettante managers from GE are sought after. It is a façade, as Jack Welch merely rearranged GE’s content. It did little to improve. This does not make Jack Welch a bad manager. It is the interpretation of the company’s greatness that is ridiculous. In addition, greatness is not there so long as a big contributor to profits is from advertising revenue. Remember real economic wealth is delivered in only three ways; manufacturing, extraction, and agriculture. Advertising revenue is not on the list. As media market share is spread more and more from the cyberspace explosion, expect companies such as GE to shrivel in size.

Another dynamic is the rush to provide good numbers for this quarter. If an organization is not properly engaged in long range planning, then this is always an issue. The reactionaries are forced to practice voodoo bookkeeping so they do not disappoint Wall Street. It is getting harder to cheat in this way with the modern day EBITDA. That forces more direct correlation to cash flow, which in the final analysis is king.

A company successfully engaged in long range planning does not have a quarter-to-quarter problem, as they made good decisions five years ago.

Many of the NASDAQ100 stocks that crumbled since early 2000 will not recover for some of the reasons cited above. There are thousands of horror stories whereby investors bought at $100 plus and now the stock is worth less than a buck. There is no need for that and thus the reason the Indicant was invented. Research to improve is continuing.

The old 80-20 rule continues to prevail. Just as 80% of the stock market’s movement in either direction is achieved on 20% of the trading days, 20% of the workers in any large organization do 80% of the smart work. When that 20% starts to dwindle to 18% and then to 10% those stocks will remain forever depressed and most likely just fade away.

Stock Market Summary

Even after the worse December since 1931, the bull in the market held its ground by virtue of a strong January so far this month. It is solidifying its bullish stance. Several NASDAQ100 stocks yellow curves are turning north for the first time in three years. That signals a widening of the bullish stance.

Although December was somewhat depressing to those of you who desire bullish behavior, the Indicant Volume Indicator was signaling passivity in the sell-off. That means big money was not participating in the sell-off. December is the month losers sell their shares after a bear market year, which was the case in 2002. Although Vector Pressure support for bullish behavior was lost in December, the lethargic behavior by the Indicant Volume Indicator revealed there was no massive sell-off underway.

The market is now getting Vector Pressure support to maintain its bullish position. Force Vectors have been unusually erratic since mid-December, but the general direction is north.

The dark clouds mentioned last week continue to unfold, but there are some signs the war with Iraq will be delayed or simply not occur. We cannot avoid February, which is not the most exciting month of the year for bulls. If the second half of January does not incur excessive profit taking, then you expect that environment in February. If January incurs a sell-off in its second half, then expect a ho-hum February.

As stated last week, quite a few people believe it is impossible for the stock market to encounter four consecutive yearly declines. If a critical mass of people believe this and act on this, then expect another bearish year. Remember, one of the stock market’s purposes is to disappoint the crowd. It does an outstanding job of that.

Divergence versus Convergence

The market continues to lack clarity. Oil service stock prices softened last week as allies requested an extension to the January 27, 2003 deadline with Iraq . If the perception of war with Iraq wanes, then you can expect oil prices to drop and the oil service stocks should parallel that drop. Gold and other fear related investments will falter, somewhat, but terrorism threats will continue to provide an underlying uplift.

Utility stocks continue to impress. Precious metals and other fear related investments continue to do well. While at the same time, high technology stocks have rebounded from the worse December since 1931. The Indicant continued to signal hold during December due to bullish seasonality. You will notice that several NASDAQ100 stocks yellow curve is making its first move north in nearly three years.

The market is still expressing convergence with the exception of the biotechnology and health related sectors. In other words, as the majority of investors continue to move money into the comfort of CD’s and money markets, the market is making a bullish move. As the public begins to move their money into the market, then it will turn into a bear again after the initial rise from the new influx of money.

Economic Outlook

This paragraph is unchanged from last week. The U.S. Dollar continues to express significant weaknesses against world currencies. As long as interest rates remain low, expect that to continue. If oil shortages manifest, expect the greenback to erode further.

Commodity prices continue to reside at cyclical high levels. If they do not start coming down, then you can expect them to penetrate the producer price index in the next few months. That will ultimately hit the consumer price index. The stock market will not like that. As stated the past few weeks, inflation is a growing threat.

As previously stated Greenspan keeps an eye on the CRB Bridge Futures. As you can see from the following chart, it is at a cyclical high since the Indicant began tracking that. Notice the last cyclical rise preceded the first collapse cycle in the stock market. The 2002 rise coincided with the 2002 bear. There is seldom a one to one correlation between the market and inflationary concerns, but commodities are influential on the long-term trend of the market.

Interest rates remain low, which will contribute to a further erosion of the U.S. Dollar. Keep your eye on interest rates. If they start to move up, bond prices will collapse. Buying bonds is in vogue right now by the crowd and they will be wrong.

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

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Thirty-one weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Twenty-four weeks ago, it closed up 12.0% since the buy signal. Fifteen weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 66.2%, which is down slightly from the prior week. The Mid-term Indicant continues to signal hold for this fund. As you can see, the recent increase in this fund’s value has made a “U” shape since the Mid-term Buy signal.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-nine weeks ago since the MTI buy signal in April 2001. Twenty-three weeks ago, it closed up 27.8%. Last week it closed up 54.5%, which is up slightly from the prior week. The Mid-term Indicant continues to signal hold for this fund. A few weeks ago, the Mid-term Indicant neared signaling sell for both of these funds. As stated last week, these two funds have rebounded due to increasing fears about the impending war with Iraq and oil shortages.

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

The three primary fear elements are war with Iraq , Rising Oil Prices, and Terrorism. Also, voodoo bookkeepers cannot adjust the price of gold and therefore confidence in financial integrity is always high.

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

Links to both of the above funds are as follows:

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

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

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. All but two are red bulls. Quick-term rallies in a bear market usually peak when the Quick-term Bull goes above the red curve. You will learn a little about the QT Bull’s longevity by its behavior after all eight indexes move above red.

All eight indexes are up an average of 8.1% (annualized at 33.9%) since the October 15, 2002 Quick-term Bull signals. Six weeks ago, the Quick-term Bull was up 9.5% (annualized at 74.8%).

The Dow is down 17.0% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 66.7% since the Short-term Indicant signaled bear over two and a half years ago on March 30, 2000 .

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

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

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

All eight major indexes are up an average of 8.5% since their respective Mid-term Bull signals an average of 11.8 weeks ago. This annualizes to 37.7%. Six weeks ago, they were up an average of 8.0% (annualized at 70.4%). As you can see the market is up more now than six weeks ago, but the annualized rate has been halved due to time eating away at its growth. A Mid-term Bull of around 25% this time next year would be nice.

The strongest bull had been the Dow Jones Utilities. Although it is up 12.9% since its November 1, 2002 MTI Bull signal, the NASDAQ100 is now the strongest Mid-term Bull. It is up 13.7% since its Mid-term Bull signal on October 18, 2002 . The NASDAQ Composites is the third strongest bull. It is up 12.4% since its October 18, 2002 Mid-term Bull signal.

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

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

Mid-term Indicant Positions - International Markets

There were no new bull or bear signals.

The nineteen bull markets are up an average of 21.4% since the Mid-term Indicant signaled bull an average of 25.7 weeks ago for an annualized gain 43.4%, which is down from 55% six weeks ago.

Two international markets have been bears for an average of 10.4 weeks. They are down an average of 7.2%. Click the following hyperlink to view the status and charts.

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

January 5, 2003 Indicant.Net Weekly Update

Volume 01, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Stock Market Ignores Bad News?

So far this year the Dow Jones Industrial Average is up 3.1% for an annualized gain 392.8% for 2003. The NASDAQ is even more impressive. It is up 3.7% for an annualized gain of 486.5%.

Of course, you know you should ignore those annualized numbers. However, one cannot ignore the fact that the stock market opened 2003 strongly. It did this in the face of the following:

1. War with Iraq is imminent.
2. Terrorism continues to be a threat.
3. North Korea is rattling its weaponry.
4. The economy is stagnant.
5. December was the worst since 1931.
6. Voodoo bookkeeping warped many financial reports.
7. Security analysts lies to churn investors.
8. Not all-dilettante management has been terminated.
9. Most Enron executives are still enjoying their wealth in retirement.
10. Commodity prices are rising, along with crude oil.

Last year, the Dow’s gain was annualized at 189.3% after the first two days of 2002. The NASDAQ was again more impressive with an annualized two day gain of 605.8%. As most of you know, the Dow fell 16.5% in 2002. The NASDAQ fell 31.5%.

The undercurrents to market timing are better than this time last year. Voodoo bookkeeping and dilettante management were producing books of fiction in their annual reports in early 2002. In the face of fictional quarterly reports and crazed guests on CNBC, the stock market propelled to the north in the first few days of January 2002.

As reality exerted itself, the market plummeted to the south from mid-January until early March 2002. Stocks exploded north during early March and most of April in the face of increasing voodoo bookkeeping scandals. Again, reality exerted itself. On April 19, 2002 , the Quick-term Indicant signaled bear. It turned out to be one of the longest Quick-term Bears on record, lasting all the way to August. At one point during that bear cycle, the NASDAQ100 was down 70% from the bear signal. Many constituent stocks that were already down continued to plummet to near penny stock status.

This year, tough penalties are supposedly in place to counter voodoo bookkeeping practitioners. Will these tough penalties help? Were not laws already in place to punish swindlers, employed by publicly traded companies?

The stock market advances in substance for one and only one reason; increased earnings and cash flow. Do investors now believe annual reports and prospectus statements? Is the threat of terrorism over? Will political leadership effectively lead the way to great economic happiness in 2003?

Have any of you ever seen the movie, Canadian Bacon? If not let me indulge. During the fictional presidency of Alan Alda, the world was at peace, but the economy was sour. To get the populace distracted from their economic soreness, the Alda administration stimulated military conflicts with Canada . The story, of course, is fiction. However, as you have read in this newsletter before, politicians love the limelight, regardless of the causes. The terrorists are unwittingly playing into politicians hands. Rest assured that terrorism will be around for years to come. It will act as a continuing depressant on the stock market.

This year should not manifest many voodoo bookkeeping reports. The undercurrents to the economy will be hampered by military confrontations and terrorism. Pundits will say the first day of the year is the best one we will have in all of 2003. Others will say there is two trillion setting on the sidelines and that will propel the market north, much like last year.

Forecasting the stock market is a crazy thing to do. If one does forecast it accurately, then it is luck. It is impossible to forecast the stock market as there are too many variables that influence its behavior. That is why it meanders along the charts like a snake with a bellyache. The stock market could be flat this year but within the year it can enjoy swings of 50% or more. So, keep a close eye on your email.

Discipline is the order of the day. Although the stock market does not react to today’s news over a two-day period, it evaluates today’s news impact in the next six to nine months. There is no need to speculate. If the market goes down, the various Indicant models will let you know before you wring your hands wandering what it is going to do next.

Stock Market Summary

The market responded bullishly once the tax selling ended. Apparently, many small investors maintained their hold positions in 2002 and forced to sell during December. If they bought in early 2002 and held throughout the year, they will begrudgingly enjoy tax write-offs for years to come.

The Quick-term Indicant is now up 5.5% since the Quick-term Bull signal on October 15, 2002 . That is an annualized gain of 24.9%. Last week, the Quick-term Indicant had no underlying support from the Indicant Volume Indicator, Force Vectors, and Vector Pressure. This week, the Quick-term Indicant is now getting Force Vector Support, but still lacks support from the Indicant Volume Indicator and Vector Pressure.

The Mid-term Bull is up 5.7% since the Mid-term Bull signal an average of 10.9 weeks ago. The strongest Mid-term Bull is the Dow Jones Utilities, which is now up 10.7% since its Mid-term Bull signal on November 1, 2002 . All eight indexes are now in positive territory since the MT Bull signal. The weakest index is the S&P100, which is up 2.3%.

If Force Vectors continue to drive north, then Vector Pressure will build and support continuing bullish behavior.

There are a couple of dark clouds looming on the horizon; Iraq and February. Military commitments in Iraq should have more clarity at the end of this month. February is typically a bearish month, but much of that is due to January being one of the most bullish months. If January is strongly bullish, expect February to be dotted with profit taking. If January is strongly bearish, you can expect bear and sell signals from the Indicant.

There are quite a few people who believe it is impossible for the stock market to encounter four consecutive yearly declines. If a critical mass of people believe this and act on this, then expect another bearish year. Remember, one of the stock market’s purposes is to disappoint the crowd. It does an outstanding job of that.

Divergence versus Convergence

The market is lacking clarity. As long as oil prices skyrocket, you can expect most equities to turn bearish. However, do not act on that as it is speculative.

After softening for a week, utilities took off. They continue to be the strongest sector. About this time last year, some of you took advantage of some dividend returns. For those of you who did not sell on the MTI sell signals during 2002 watched your capital erode. As long as the population continues to grow, you should expect your utility holdings to do well in the long run.

Precious metals and other fear related investments continue to do well.

The biotech and health sectors continue to diverge from the recent bullish patterns in equities and fear related investments.

Economic Outlook

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

It appears the dynamics of supply and demand believe the war with Iraq is imminent. Oil prices continue to skyrocket. Although oil has not yet achieved its early 2000 peak, it is heading that way. The price surge is based entirely on speculation and Venezuela being unable to deliver.

Commodity prices took a break last week, but still threaten continuing expectations of low interest rates. As stated in last week’s report, inflation is a growing threat.

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

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

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Thirty weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Twenty-three weeks ago, it closed up 12.0% since the buy signal. Fourteen weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 67.8%. The Mid-term Indicant continues to signal hold for this fund. As you can see the recent increase in this fund’s value has made a “U” shape since the Mid-term Buy signal nearly one year ago.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-eight weeks ago since the MTI buy signal in April 2001. Twenty-two weeks ago, it closed up 27.8%. Last week it closed up 53.0%. The Mid-term Indicant continues to signal hold for this fund. A few weeks ago, the Mid-term Indicant neared signaling sell for both of these funds. As stated last week, these two funds have rebounded due to increasing fears about the impending war with Iraq and oil shortages.

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

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

Links to both of the above funds are as follows:

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

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

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. They are up and average of 5.5% (annualized at 24.9%) since the October 15, 2002 Quick-term Bull signals. Five weeks ago, the Quick-term Bull was up 9.5% (annualized at 74.8%).

The Dow is down 18.7% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 67.2% since the Short-term Indicant signaled bear over two and a half years ago on March 30, 2000 .

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

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

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

All eight major indexes are up an average of 5.7% since their respective Mid-term Bull signals an average of 10.9 weeks ago. This annualizes to 27.1%. Five weeks ago, they were up an average of 8.0% (annualized at 70.4%).

The strongest bull continues to be the Dow Jones Utilities. It is up 10.7% since its November 1, 2002 MTI Bull signal. It was the last major index to receive a bull signal and it is up the most. The NASDAQ Composites and the NASDAQ100 are the second strongest bulls since their bull signals on October 18, 2002 . They are up 7.7% and 7.9%, respectively.

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

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

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

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

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

Mid-term Indicant Positions - International Markets

There were no new bull or bear signals.

The nineteen bull markets are up an average of 20.3% since the Mid-term Indicant signaled bull an average of 24.7 weeks ago for an annualized gain 42.7%, which is down from 55% five weeks ago.

Three international markets have been bears for an average of 6.6 weeks. They are down an average of 3.9%.  Click the following hyperlink to view the status and charts.

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

http://www.indicant.net/Members/Updates/MTI-Mkts-Index%20Options/I03.htm#16

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

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

In addition to the buy signal, the Indicant is signaling hold for 73 of the seventy-six mutual funds it tracks. These funds are up an average of 6.0% for an annualized gain of 24.2%, which is down from 34.8% four weeks ago. The average holding period is 6.5 weeks.

The Mid-term Indicant is avoiding two funds. They are down an average of 10.0% since their respective sell signals an average of 6.5 weeks ago.

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.  

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

Mid-term Indicant Positions - Indicant Selected Stocks

01-05-03

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