January 2006 - Indicant Weekly Stock Market Report

January 29, 2006 Indicant Weekly Stock Market Report

Volume 01, Issue 05 ISSN 1526 6516 © The Indicant Stock Market Report

Bullish Convergence Returns – On a Short-term Basis

As stated after last week’s profound contrarian bullish behavior in the energy sector, one should not overreact. Three or four weeks of bearish divergence would set off a deep bear cycle. However, this past week demonstrated a mild bullish convergence with the exception of utilities.

There are conflicting paradigms tugging at the market. One prognosis is the market is primed to emulate a 1970’s type of market with deep bearish expressions. This view is supported by rising interest rates, rising oil prices, and rising gold prices. It makes sense. As most of you know, the market does not always make sense with current frames of reference. Recent behavior suggests the market’s anticipation of declines oil, interest rates, and precious metals.

Another view is bullish. It is supported by “where else are you going to put your money?” Stock prices rise and fall under the simple influence of supply and demand. Prices rise when the demand for stocks is higher than the supply. This is influenced by expected corporate earnings, which is a derivative of the economic outlook. Right now, the economic outlook is so-so. And the market has been so-so for nearly two years with the exception of the standard performance during the heart and soul of bullish seasonality.

The market seldom dwells on the “now.” It attempts to gauge economic activity well into the future by about six to nine months. Extreme volatility occurs when it recognizes its prior economic prognosis was fraught with error. Rapid dynamic bearish expressions can deflate the demand for stocks and exacerbate declining stock prices. In other words they can move down more than economically justified. That is supply and demand at work. Sellers have to really lower than price offering during deep bear cycles just to get a nimble.

Those that faithfully hold onto their possessions during deep bearish cycles eventually sell. They typically do that near the bottom of the cycle. A critical mass of investors typically adopts a zero trust tolerance of the stock market and its shenanigans during such times. If that critical mass of investors remains on the sidelines for lengthy periods, the demand for stocks will remain depressed. Long bearish cycles ensue when that happens.

The NASDAQ is an excellent example of that. During its dynamic bearish behavior in 2000-2002, many investors were burned. They are now out of the market for life. That same thing occurred in the 1930’s, keeping a lid on stock prices for an entire generation. The crash of 1987 was a little different in that many who tried to escape of pains of equity investments simply could not execute their desired transactions. The market began a slow incline shortly thereafter. Consequently, stock market investing came back as the thing to do by the early 1990’s. If you did not have a stock portfolio in the 1990’s, you were “a nobody” in most social settings. Unfortunately, nearly everybody was in the stock market by the end of last century and the stock market will not make everybody rich. It always punishes whenever that notion becomes pervasive. The stock market is shrouded in Darwinian principles.

The struggle between the two paradigms of bullish and bearish outlooks was obivous the past two weeks. The Dow was down 0.5% for the year a week ago. Last week’s extraordinary bullish behavior has pushed the Dow up 1.8% for the year. The Dow and S&P500 are more reflective of economic outlook, while many of the other indices contain elements of higher speculation. The Dow Utilities is also representative of general economic outlooks and it did not participate in last week’s bullishness. It moved somewhat aggressively to the south. That arouses some suspicion of the bull’s ability to continue last week’s victory over the bear in the immediate future.

The Dow is suppose to find a bottom in the presidential mid-term election year. Political activity in the presidential-post-election-year was consistent with political manipulation. Rising interest rates is a clear example of that. Rising interest rates began its aggressive movements out of historically depressed values just after the last election. Although it made economic sense to do that with the strong dollar and rising energy costs, the timing was perfect for the political cycle.

The problem confronting historical standards is that there is no bottom to be found in this mid-term election year. The market has not gone down enough to provide that neat little bottom that is typical of mid-term election years. The bottom of 2002 was right on par with historical standards and it was so much fun to be ready for it.

Unless there is increased bearish activity over the next few months, historical standards will be shattered. The bull that was born in late 2002 and early 2003 will continue, un-phased by historical standards. The Quick-term, Short-term, and Mid-term Indicants will keep you informed of this potential violation of historical standards. However, do not be surprised at aggressive bearish behavior between now and October.

As of today, none of the Indicant attributes suggests this. The meandering behavior of the market since early 2004 with the exception of normal bullishness in the heart and soul of bullish seasonality is a testament of the strength of this bull. Its standing up to record high oil prices, war, terrorism threats, and rising interest rates is indeed impressive. Much of that strength is tied to “where else are you going to put your money?” The market will punish that simplicity at some future point. It always does. That is why the Indicant was invented – avoid shenanigans and deep bearish expressions.

Weekly Buy/Sell Summary

The Mid-term Indicant generated five 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 8.7% since the Mid-term Indicant signaled sell an average of 19.3-weeks ago.

There were 90-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 26.8% since their respective sell signals an average of 49.1-weeks earlier. Two years ago, on January 31 2004, the Mid-term Indicant was avoiding only eight stocks and funds that were down an average of 27.9% since their respective sell signals an average of 42.4-weeks earlier. Three years ago on January 31, 2003, there were only eight avoided stocks and funds. They were down 6.8% from their respective sell signals an average of 5.3-weeks earlier. There were 57-sell signals in 2003 on this weekend.

In addition to the buy signals this weekend, the Mid-term Indicant is signaling hold for 280 of the 345-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 118.7%. That annualizes to 66.9%. The Mid-term Indicant has been signaling hold for these 280-stocks and funds for an average of 92.3-weeks.

One year ago on January 28, 2005, the Mid-term Indicant was holding 230-stocks and funds out of the 320 tracked at that time for an average of 72.6-weeks. Those 230-stocks and funds were up 90.0% (annualized at 64.5%). The Mid-term Indicant was signaling hold for 282-stocks and funds of the 296 tracked two years ago on January 31, 2004. They were up by an average of 67.1% (annualized at 88.0%) since their respective buy signals an average of 39.7-weeks earlier. There were 137-stocks and funds with hold signals on January 31, 2003 since their buy signals an average of 19.3-weeks earlier. They were up 26.5% (annualized at 62.2%).

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

NYSE Indicant Volume Indicator: Bullish bias strengthening.

NASDAQ Indicant Volume Indicator: Not yet obviating market intention; slight bullish bias.

DJIA Short-term Indicant: Bullish

NASDAQ Short-term Indicant: Bullish

Consolidated Quick-term/Short-term Indicant ETF: Bullish bias.

Short-term Indicant: ETF: Bullish bias.

Quick-term Indicant ETF: Bullish bias.

Quick-term Bearish Yellow: High non-bearishness.

Quick-term Bullish Red: Several red bulls. Bullish bias continues.

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

Robust Force Vectors: Still mixed. Early movement toward bullish domains.

Vector Pressure Position: Bullish domains.

Short-term Indicant Breakout (Bullish) Configuration: Converging bullish movement.

Short-term Indicant Breakdown (Bearish) Configuration: Strengthening non-bearishness.

Vector Pressure Crossings Put Option Activity: No signals today.

Vector Pressure Crossings Call Option Activity: No signals today.

Writing Covered Call Options: Not recommended.

Overall Quick-term Market Bias: Bullish bias improving.

Overall Short-term Market Bias: Bullish bias improving.

Quick-term Short-term Indicant Stock Market Report Details

Volume was significantly higher on Friday’s bullish expression. The Indicant Volume Indicator continues in a robust cycle. The configurations had been elusive in obviating bias, but after a shaky start to the year, this configuration is suggesting bullish expectations on a quick-term basis. As stated last Thursday, the immediate interpretation is a shift to bullish bias, but don’t get too anxious until the Indicant Volume Indicator obviates the market’s intention. It eventually will do that.

The DJIA is up 0.9% since the Short-term Indicant signaled bull on January 26, 2006.The NASDAQ is up 7.5% (annualized at 31.7%) since the Short-term Indicant signaled bull on November 2, 2005. This remains configured in support of the Short-term Bull for the NASDAQ and again for the Dow30. 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 65.5% (annualized at 35.3%) since their respective buy signals an average of 95.4-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 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 67.5% (annualized 37.8%) since the STI signaled, buy, an average of 91.8-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 37.2% (annualized at 38.9%) since the QTI signaled buy an average of 49.1-weeks ago.

Quick-term Indicant Bull/Bear Health Report

All 30-ETF’s are above their respective bearish yellow curves by average of 12.5%. That is up from significantly yesterday. This attribute remains non-bearish and now has strong non-bearish configurations.

Twenty-six ETF’s are above their respective bullish red curves by 4.1%. The number of ETF’s with red bull status is up by three from yesterday. This attribute remains with bullish bias and no longer weakening.

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

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. Although meandering markets are safe, there is an increased probability of dynamic bearishness with yellow contact.

Ten of the 30-ETF’s are contacting their breakout lines (bullish). That is up by three from yesterday and up by seven since last Monday. This has resumed a strong bullish bias on a short-term basis.

The average distance from breakout contact is 1.3%, which is 0.5% more bullish than yesterday. This significantly favors a bullish bias on a short-term basis.

The average distance from the price and breakdown is 24.4%, which is 3.0% more bullish from last Thursday. None of the ETF’s are contacting their respective breakdown lines. That is exceedingly non-bearish even in the face of a weakening bull. 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 (like the 1970’s).

Overall, there is much 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. However, as we near the conclusion of the heart and soul of bullish seasonality, 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.

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

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. As stated last week, Force Vectors are topped out with some turning to the south. That does not necessarily mean the market is about to turn bearish, but it does support some selling off and profit taking. That is exactly what happened today and late last week.

A robust and deep movement to the south suggests severe bearish expressions. A protected movement to the southeast as opposed to due south suggests minor corrections to the underlying bull market.

Force Vectors movement is now mixed, but more have shifted back to the north, supporting bullish bias.

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 today. Yesterday’s report erroneously stated there were two put option buy signals. The table on the website was accurately updated.

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 are 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, has increased 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 underway. There are too many issues, both fundamental and historical, to assume aggressive bullishness. Regardless, a bull is a bull without regard to magnitude.

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.

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 again inside mid-term election year. The last one followed the predicted market bottom in 2002. 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. Doing so this year, will require bearish behavior before October.

Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002. The April-October period was typically bearish. The 2002 season 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.

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 after the heart and soul of bullish seasonality elevates it. 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 has demonstrated normalcy so far with an extremely bullish November. However, December finished with a bearish conclusion. The omission of a solid Santa Claus rally this past year is somewhat ominous. Last week’s bullishness was normal in continuing bullishness during the heart and soul of bullish seasonality.

January has been demonstrating a tug-of-war between bull and bear paradigms. So far, the bull is winning, but it is a healthy battle. The battle is in bullish domains. The bear needs more energy than the bull to become victorious. So far, it has not been able to muster up a higher energy level than the bull. The heart and soul of bullish seasonality has produced gains of 3.2%, 4.5%, and 7.1% for the Dow, S&P500, and NASDAQ so far. The heart and soul of bullish seasonality has only a few days remaining.

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 49.7% from the last presidential election year bottom. The NASDAQ is up a whopping 106.8% since October 9, 2002.

Interestingly, the NASDAQ is down 54.4% from its historical high of 5048.62 on March 9, 2000. The Dow is down 7.0% 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.

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. 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 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.

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.

November was exceedingly bullish and consistent with historical normalcy. The November – January rolling quarter is the heart and soul of bullish seasonality. However, December 2005 expressed contrary behavior to historical standards with a bearish conclusion. January 2006 started off with an aggressive bullish response to December’s bearishness, but it appears January is threatened with yet more bearish energy.

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.

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 them in this email message but now display them on the website. This is available to the public, while the specific buy and sell transactions are limited to members only.

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

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

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

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

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

All 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

As stated the past eleven weeks, there is no bullish convergence, until last week. There was solid bullish convergence, which followed the prior week’s solid bearish divergence. This is reflective of tug-of-war battling between bullish and bearish paradigms. Keep your eye on the daily stock market report.

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 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.

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.

The market’s bullishness so far this year is due, in part, to a “perception” of slowing in the Federal Reserve Board interest rate hikes. That makes the market vulnerable in the event the Fed “disappoints” with a rate hike in excess of the market’s speculation. Such disappointment would result in a sharp decline in stock prices. This scenario is congruent with historical standards.

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-eight weeks ago since the MTI buy signal on April 13, 2001. One-hundred and eighty-one weeks ago, it closed up 30.1%. Last week it closed up 264.0%. The current annualized growth rate since the April 13, 2001 buy signal is 54.3%. After falling sharply 32-weeks ago, it bounced north in 26-weeks of the past 32-weeks. This fund moved aggressively to the north last week after posting solid gains in the previous three weeks.

Fidelity Gold, Fund #28, is up 48.6% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 113.5%, 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 moved solidly to the north last week.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 275.6% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 78.7%. This fund moved north the past four weeks after falling sharply in four of the last nine weeks.

Vanguard Energy #18, VGENX, is up 169.0% (annualized at 59.2%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 154.8% (annualized at 71.2%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 141.1% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 56.9%. All energy related funds moved north the last four weeks after falling in four of the last nine 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 27.8% since then. It is annualized at 56.5%. 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 163.5% (annualized at 56.7%). This fund moved solidly north last week after expressing bearishness in three of the seven preceding weeks.

The contrarian sector, commodities and petroleum, were up last week while general equities were also up. That suggests bullish convergence which is opposite from last week’s bearish divergence. The battle between bull and bear is heating up.

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 45.4% since the MTI-RYS signaled bull an average of 100-weeks ago. That annualizes to 23.6%, which is up from last week. The strongest bull is the Dow Utilities. It is up 118.6% since the October 25, 2002 bull signal. The utilities moved slightly south last week even though general equities moved sharply to the north. Your utility hold positions remain safe, but keep your eye on this particular index. Severe bears show little mercy, regardless of dividend yields.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $33,040,553. That beats buy and hold performance of $1,669,396 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $165,476. That beats buy and hold’s $125,744 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $192,797. That beats buy and hold’s $79,897 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.

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 10.6% 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 276.8% (annualized at 19.4%) since the Long-term Indicant signaled bull 743-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

As stated last week, do not be surprised at meandering behavior with possible bearish bias in the immediate future. The heart and soul of bullish seasonality is about to expire at January’s conclusion. The past two years heart and soul bullishness have been 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.

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, even though last week expressed bullish convergence. A lack of consistent bullish convergence suggests the market is having trouble finding and making a directional commitment. Too many sectors are not participating in the current heart and soul of bullish seasonality. Gold’s strong bullish presence with mounting commodity prices and interest rates, if continued, will slap this bull out of influence.

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

01/29/06

January 22, 2006 Indicant Weekly Stock Market Report

Volume 01, Issue 04 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

1970’s Like Divergence Pattern – Do Not Overreact

Energy sector stocks and funds skyrocketed on Friday’s aggressive bearish expression. Do not overreact to this, as one day’s behavior is not a trend. One day’s behavior is not even a cycle or market spurt. It is just one day of fundamental interpretation and emotional follow-on to that interpretation. However, there is some substance to this pattern.

Rising oil prices and interest rates have been in clear view for quite some time. The market conformed to the heart and soul of bullish seasonality like clockwork. Friday’s bearish behavior brought the market back to the theme the Indicant has been advising of since late last year. That is, fundamentals and historical normalcy will prevent “heart and soul” aggressive bullishness that you have seen the past few years.

Historical standards require the market to express a cyclical bottom in mid-term election years. Several indices have been meandering since early 2004 with a slight bullish bias. That meandering behavior followed the explosive bullish leg that began in October 2002 and resumed in March 2003. Meandering behavior following an explosive bull disfigured the required cyclical bottom in the current mid-term election year. Therefore, the market appears to be priming to establish a historical standard. Of course, there are variances to historical standards from time to time, but the various Indicant models will detect those variances or identify conformance to standards.

Fundamentally, the stock market has never liked rising interest rates and rising energy costs. Both are unfavorable to corporate earnings. Larger companies tend to contain more debt and thus one possible reason for the blue chip sell off last Friday. Most large companies are inefficient, which means they are incapable of adjusting to rising energy costs. Their employees work at large companies, primarily for “perceived” security. That means they like comfort. That means the thermostats will be set at their desired temperature, regardless of energy costs.

Ominous attributes on Friday’s sell off include an obvious shift from general equities to petroleum related securities. That has a tinge of a 1970’s type of market. Although the current Mid-term Indicant Bull and Long-term Indicant Bull have expressed impressive tenacity in the face of rising energy costs, rising interest rates, terrorism, war, and a so-so economy, the market will quickly adjust its temperance and apply punishment for its prior tolerance to these sour fundamentals.

For example Schlumberger, Halliburton’s biggest competitor, skyrocketed last week. Its stock price moved up nearly 15-points or almost 14%, while general equities expressed aggressive bearishness. That has a 1970’s tinge to it.

Another ominous attribute confronting the bull was Friday’s volume. It was high on deep bearish expressions. Although one day will not tilt the Indicant Volume Indicator into a bearishly robust configuration, keep your eye on this. Although the Indicant Volume Indicator appears to be in the early stage of a robust cycle, some of that movement is coupled to recent bullish spurts that complied with seasonal expectations of bullish bias.

Why should you not overreact to Friday’s sell off? First, you must identify your relative frame of reference. Let’s use a couple of common mutual funds to understand this. Fidelity Contra (MF#12) is 16.4% above its long-term blue curve. The buy signal occurred on March 22, 2003, which coincides with most of the funds buy signals. The Indicant occasionally suggests the blue curve is a good point to sell, depending on the configuration of the other Indicant models. This is an easy decision for those of you who bought on the March 22, 2003 buy signal. You are up 71.1% since then. Most of you would not mind selling with a 45% profit in a few weeks if, in fact, the market simulates a 1970’s type of configuration.

Some of you are not positioned to enjoy that relative frame of reference. Suppose you bought Vanguard Growth, MF#4, on its last buy signal of July 15, 2005. This fund is up only 3.7% since then and it is above its long-term blue curve by 4.5%. If you wait for it to fall below its long-term blue curve, you will lose money. Although you made significant profit on the buy and sell cycles since March 2003 on this fund, you do not want to lose money on this cycle. For those of you in this short-term relative frame of reference, you need to look to the Quick-term and Short-term Indicant for guidance. It is discussed later in this report.

The decision is much easier for those of you who bought in November 1991 on the Indicant’s Long-term Bull Signal. You are up 268.5% since then. And the Long-term Indicant is nowhere near signaling bear.

Unfortunately, those November 1991 long-term investors are in a minority of investors. Also, those who are long-term oriented are not always successful. A 1900 long-term investor had to wait over twenty years to break even. A 1929 thirty-year old investor was in his late fifties before breaking even. A NASDAQ long-term investor is still down by 55.5% since their investments on March 9, 2000. That investment requires a NASDAQ bull leg of 124.6% to breakeven since their March 9, 2000 investment. It will take a long time for that to happen; most likely over twenty years.

Please read on to assess the market with respect to your individual relative frames of reference.

Weekly Buy/Sell Summary

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

In addition to the sell signals, the Mid-term Indicant is avoiding 52-stocks and funds of the 345 tracked by the Indicant. The avoided stocks and funds are down an average of 11.4% since the Mid-term Indicant signaled sell an average of 24.7-weeks ago.

There were 85-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 27.5% since their respective sell signals an average of 48.7-weeks earlier. Two years ago, on January 17 2004, the Mid-term Indicant was avoiding only eight stocks and funds that were down an average of 28.9% since their respective sell signals an average of 37.4-weeks earlier. Three years ago on January 18, 2003, there were only six avoided stocks and funds. They were down 33.8% from their respective sell signals an average of 25.8-weeks earlier.

In addition to the buy signals this weekend, the Mid-term Indicant is signaling hold for 279 of the 345-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 116.9%. That annualizes to 65.3%. The Mid-term Indicant has been signaling hold for these 279-stocks and funds for an average of 93.1-weeks.

One year ago on January 21, 2005, the Mid-term Indicant was holding 230-stocks and funds out of the 320 tracked at that time for an average of 71.6-weeks. Those 230-stocks and funds were up 88.6% (annualized at 64.4%). The Mid-term Indicant was signaling hold for 288-stocks and funds of the 296 tracked two years ago on January 17, 2004. They were up by an average of 67.5% (annualized at 93.8%) since their respective buy signals an average of 37.4-weeks earlier. There were 289-stocks and funds with hold signals on January 18, 2003 since their buy signals an average of 16.1-weeks earlier. They were up 19.6% (annualized at 63.4%).

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

NYSE Indicant Volume Indicator: Bullish bias weakening and non bearish bias diminishing.

NASDAQ Indicant Volume Indicator: Bullish bias weakening and non-bearish bias diminishing.

DJIA Short-term Indicant: Signaled bear; bearish bias now dominant.

NASDAQ Short-term Indicant: Bullish bias continuing, but weakening.

Consolidated Quick-term/Short-term Indicant ETF: Bullish bias continuing, but weakening.

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

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

Quick-term Bearish Yellow: High non-bearishness, but diminishing.

Quick-term Bullish Red: Several red bulls. Bullish bias continues.

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

Robust Force Vectors: Several moving south. Limited naked options opportunity.

Short-term Indicant Breakout (Bullish) Configuration: Bullish bias expired. Non-bearish bias continues, but weakening.

Short-term Indicant Breakdown (Bearish) Configuration: Diminishing non-bearishness.

Vector Pressure Crossings Put Option Activity: Five

Vector Pressure Crossings Call Option Activity: None

Writing Covered Call Options: Not recommended.

Overall Quick-term Market Bias: Bullish bias weakening.

Overall Short-term Market Bias: Bullish no longer exists. Only contrarian ETF contacting breakout.

Quick-term Short-term Indicant Stock Market Report Details

Volume was relatively healthy today’s aggressive bearish expression. That is slightly ominous to the underlying bullish theme. As stated since last Wednesday and appropriate again for today, the Indicant Volume Indicator robust movement with continuing bearish expressions will lead to an early expiration to the underlying Quick-term and Short-term Bulls. Fundamentals and historical standards support significant bearish behavior over the next few months. However, this is a mere observation; not a forecast. Simply wait for the various Indicant models to advise.

The Short-term Indicant signaled bear last Friday for the Dow Jones Industrial Average. Click here to see the Short-term Indicant’s history. The NASDAQ is up 4.8% (annualized at 22.3%) since the Short-term Indicant signaled bull on November 2, 2005. This remains configured in support of the Short-term Bull, although weakening somewhat.

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 60.2% (annualized at 32.8%) since their respective buy signals an average of 94.4-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 62.1% (annualized 35.1%) since the STI signaled, buy, an average of 90.9-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 33.1% (annualized at 35.4%) since the QTI signaled buy an average of 48.1-weeks ago.

Quick-term Indicant Bull/Bear Health Report

All 30-ETF’s are above their respective bearish yellow curves by average of 9.8%. That is down significantly from last Thursday. This attribute remains non-bearish, but no longer exceedingly so.

Twenty-one ETF’s are above their respective bullish red curves by 1.8%, which down significantly from yesterday. The number of ETF’s with red bull status is down by five from last Thursday. This attribute remains bullish on a quick-term basis, but weakening considerably from two weeks ago.

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

Only one of the 30-ETF’s is contacting its breakout line. That is down by seven from last Thursday. This configuration no longer remains with a bullish bias since the only “contacting” ETF is a contrarian one. It is ETF#3, XLE, Natural Resources. That is an ominous configuration to the Short-term Bull now underway.

The average distance from breakout contact is 3.1%, which is 1.9% less bullish than last Thursday. As stated last Thursday, the perspective has shifted significantly, since fewer ETF’s are now making contact on bullish spurts. That does not bode well for the current Short-term bulls.

The average distance from the price and breakdown is 21.5%, which is down by 2.0% from last Thursday. None of the ETF’s are contacting their respective breakdown lines. That is exceedingly non-bearish even in the face of a weakening bull. The probability of immediate contact remains low and thus a significant non-bearish bias prevails.

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

Nothing is different from yesterday. The configuration of this newly forming southerly movement will allow some prognosis of the impending bearish cycle. A robust and deep movement to the south suggests severe bearish expressions. A protected movement to the southeast as opposed to due south suggests minor corrections to the underlying bull market.

The majority of Force Vectors are moving south, some of which are expressing a robust configuration. Red bulls do not crash. However, they will collapse from bull to neutral. There is an increasing probability of this occurring. Positive Vector Pressure is protecting right now, but these declining Force Vectors are dragging Vector Pressure toward negativity (bearishness).

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 five put option buy signals this weekend, bringing the total to seven in the last two trading days. As stated in last Thursday’s daily stock market report, this is signaling growing bearish ambition. Red bulls minimize put option successes and that is the case right now. Put options are more profitable during yellow bears. Although last Thursday’s put option buy signals produced a nice profit, keep in mind there is a higher probability of put option profits during yellow bears.

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, has increased 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 previously 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 underway. There are too many issues, both fundamental and historical, to assume aggressive bullishness. Regardless, a bull is a bull without regard to magnitude.

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.

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

For more information about the Short-term Indicant, refer to stock market daily reports. Click here for the last 12-months daily reports. Members can click here to see current month’s daily reports.

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.

However, January got off to a solid bullish start, but last Friday’s aggressive bearish behavior should not have been surprising. January’s Dow was up 2.3% last week and is now down 0.5% for the year. January’s NASDAQ was up aggressively by 4.5%, but now is up 1.9%.

The heart and soul of bullish seasonality has produced gains of 2.5%, 4.5%, and 6.0% for the Dow, S&P500, and NASDAQ so far. The heart and soul of bullish seasonality has less than two weeks remaining.

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 35.9% from the last presidential election year bottom. The NASDAQ is up a whopping 85.7% since then. As earlier stated, the NASDAQ is down 55.5% from its historical high of 5048.62 on March 9, 2000. The Dow is down 9.0% 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.

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. Fundamentals and historical standards support that scenario. 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

As stated the past ten weeks, there is no bullish convergence. As previously stated in the Indicant Stock Market Report, this lack of bullish convergence is increasing the probability of increased bearish expressions. Last week contained complete divergence with contrarian sectors rising and general equities falling. That increased divergence is somewhat ominous.

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. 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.

Commodity prices continue rising. Some are vacillating around all time peaks. Overall, this behavior will eventually induce bearishness on the stock market.

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-seven weeks ago since the MTI buy signal on April 13, 2001. One-hundred and eighty weeks ago, it closed up 30.1%. Last week it closed up 245.8%. The current annualized growth rate since the April 13, 2001 buy signal is 50.8%. After falling sharply 31-weeks ago, it bounced north in 25-weeks of the past 31-weeks. This fund moved slightly north last week after posting solid gains in the previous two weeks.

Fidelity Gold, Fund #28, is up 44.0% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 107.8%, 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 moved south last week after moving solidly north the previous four weeks.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 273.0% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 78.4%. This fund moved north the past three weeks after falling sharply in four of the last eight weeks.

Vanguard Energy #18, VGENX, is up 164.1% (annualized at 58.0%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 154.3% (annualized at 71.6%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 139.1% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 56.4%. All energy related funds moved north the last three weeks after falling in four of the last eight 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 23.4% since then. It is annualized at 54.0%. 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 162.4% (annualized at 56.7%). This fund moved solidly north last week after expressing bearishness in three of the six preceding weeks.

The contrarian sector, commodities and petroleum, were up last week while general equities were down by significant amounts. That suggests the market’s anticipation of a bullish economic outlook but also expresses inflationary threats will manifest.

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 42.7% since the MTI-RYS signaled bull an average of 99-weeks ago. That annualizes to 22.4%, which is down from last week. The strongest bull is the Dow Utilities. It is up 121.4% since the October 25, 2002 bull signal. The utilities moved slightly north last week in the face of aggressive bearish expressions. Your utility hold positions remain safe, but keep your eye on this particular index. Severe bears show little mercy, regardless of dividend yields.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $32,314,081. That beats buy and hold performance of $1,632,910 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $162,876. That beats buy and hold’s $123,566 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $188,067. That beats buy and hold’s $77,937 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 6.9% since the Mid-term Indicant signaled sell on November 11, 2005. This fund may show some significant promise early 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 268.5% (annualized at 18.8%) since the Long-term Indicant signaled bull 742-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, but starting last Tuesday, that bullish bias was obviously weakening. As stated last week, do not be surprised at meandering behavior with possible bearish bias in the immediate future. As stated last week, the heart and soul of bullish seasonality is now here and should last through January. Historically, it concludes at the end of January. Keep your eye on the daily stock market reports. Fundamentals and disappointing volume threaten a bullish conclusion to this month.

Read your daily reports, as quick-term attributes can shift quickly. As stated the past several weeks, the market lacks bullish convergence, which suggests bearish influences can occur quickly. Too many sectors are not participating in the current heart and soul of bullish seasonality. Gold’s strong bullish presence with mounting commodity prices and interest rates, if continued, will slap this bull out of influence.

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

01/22/06

January 15, 2006 Indicant Weekly Stock Market Report

Volume 01, Issue 03 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

The Problem with Forecasting

There are two datasets employed in forecasting the stock market (or anything else). The first dataset is intrinsic. This is using two or more dimensional data internal to the phenomenon under study. Intrinsic data is purely quantitative. The Dow’s value each day, week, month, or even hour is quantifiable. The time-series is also quantifiable and the most often used since most forecasters are interested in not only what the market will be, but when. Time series data is the independent variable, while the forecasted value is the dependent variable. In other words, the value of the stock market is dependent on time in this example.

Time-series does not have to be the only independent variable. Economists use economic data as an independent variable. They correlate the value of the stock market as a function of economic activity. For example, they may use Net National Product (NNP) as the independent variable. The always know the historical relationship between NNP and the stock market. The process typically involves forecasting NNP with time series data as the independent variable. Then they apply NNP as the independent variable to compute the dependent value of the stock market. Sounds complicated, but this is a common exercise and corporations even pay money for this.

All forecasts have error. That is because the number of independent variables driving any phenomenon approaches infinity. Computers are not yet big enough to accommodate near infinite independent variables. And if they were big enough, the data would not be readily available and if so, the independent variables would contain error. For example, a cycle of stock market lethargy from individual investors would not be immediately available to a computer with infinite database capacity. Another example is the forecast of NNP, mentioned earlier, would contain error and thus introduce more error in the stock market forecast.

Those involved in forecasting work hard at minimizing error. Many models apply prior error as an independent variable. In other words, some portend that the error is predictable. The act of modification for error induces yet another variable that can induce yet more error.

There are thousands of mathematical forecasting techniques. All will produce error. If one turns out be accurate, chalk it up to luck.

The second type of model is extrinsic forecasting. Although, it can be quantifiably based, it usually qualitatively based. Extrinsic data is external to the phenomena being forecasted. For example, Bill Gates had no historical data available for forecasting sales of MS-DOS disks in the early 1980’s. He qualitatively estimated the sales volume of those disks. As historical data of non-Apple computer sales became available, he learned to use historical sales data of non-Apple computer sales and his MS-DOS disks along with growth factors to forecast the sales volume of those disks.

Many employ both broad types of forecasting; intrinsic modeling and extrinsic modeling. The Indicant does not bother forecasting with either model type. It uses heuristics to identify buy, hold, sell, avoid, bull, and bear. The Indicant is not concerned about how long bulls or bears last. It simply avoids the bears. It does not care how long to hold or avoid a stock or fund. All it focuses on is avoiding stocks and funds moving down and holding those moving up. It identifies if the market is a bear or bull on a quick-term, short-term, mid-term, and long-term basis. Indicant members range in age from 18 to 97 years old as far as we know. The eighteen year old is interested in the long-term, while the 97 year old is more interested in the short-term.

Although the Indicant does not forecast, from time to time it is important to take a qualitative view of the market’s independent variables. So, here are a few of them.

The market’s aggressive bullish action in early January was due to the underlying assumption the Fed will relax interest rate increases. The market always anticipates things like that. If it anticipates wrongly, as it does quite often, it corrects very quickly to back where it should be. It usually adds a penalty as it seems to be angry at itself for being wrong in its prior anticipation. That is why you see sharp rises and declines in a single day from time to time. Sometimes these sharp adjustments lead to protracted continuation of the underlying direction.

Here is the problem. If the Fed “disappoints” in the next few days, the market will react with a violent bearish expression. If the Fed performs to expectations, the market will most likely stay flat and continue along its current bullish quick-term cycle. The market from time to time will second guess its prior assumption and induce corrective behavior before the moment of revelation. That is why there is significant substance to the old saying, “buy on the rumor and sell on the news.”

The market continually monitors inflation and deflation. It sometimes ignores Fed policy in the short-term knowing the obvious Fed response to inflationary or deflationary threats. The market does not like inflation or deflation. Excessive monetary direction either way invokes bearish behavior.

The market’s interpretation and reaction to the values of inflation, deflation, and interest rates can change. For example, if inflation seems to be maxing out, the market may react bullishly, knowing the Fed will be accommodative to the market’s latent bullish potential.

The concern now is the magnitude of the bearish response in the event the Fed “disappoints” with another healthy rate hike. That behavior is pronounced in presidential post election years, as opposed to mid-term election years. The market typically finds a bottom in presidential mid-term election years, following the normally bearish presidential post election years. Common attributes are evasive in this political cycle with a meandering to mildly bullish 2005.

There is no need to forecast though. The Quick-term, Short-term, Mid-term, and Long-term Indicant were invented to prevent the need to forecast. However, from time to time, it is good to anticipate behavior so the mind can be set for swift and profitable action at the right time. Anticipation is not forecasting. It is merely asking a “what if” and preparing oneself emotionally and mechanically to take the proper action when the various Indicant models obviate bearish behavior.

Weekly Buy/Sell Summary

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

In addition to the sell signals, the Mid-term Indicant is avoiding 52-stocks and funds of the 345 tracked by the Indicant. The avoided stocks and funds are down an average of 10.6% since the Mid-term Indicant signaled sell an average of 23.7-weeks ago.

There were only 84-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 28.2% since their respective sell signals an average of 48.1-weeks earlier. Two years ago, on January 10 2004, the Mid-term Indicant was avoiding only six stocks and funds that were down an average of 29.0% since their respective sell signals an average of 39.4-weeks earlier. Three years ago on January 11, 2003, there were only six avoided stocks and funds. They were down 31.6% from their respective sell signals an average of 24.9-weeks earlier.

In addition to the buy signal 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 113.0%. That annualizes to 67.1%. The Mid-term Indicant has been signaling hold for these 290-stocks and funds for an average of 87.6-weeks.

One year ago on January 15, 2005, the Mid-term Indicant was holding 235-stocks and funds out of the 320 tracked at that time for an average of 69.6-weeks. Those 235-stocks and funds were up 89.2% (annualized at 66.6%). The Mid-term Indicant was signaling hold for 288-stocks and funds of the 296 tracked two years ago on January 10, 2004. They were up by an average of 63.5% (annualized at 90.8%) since their respective buy signals an average of 39.4-weeks earlier. There were 284-stocks and funds with hold signals on January 11, 2003 since their buy signals an average of 15.0-weeks earlier. They were up 22.2% (annualized at 76.6%).

Exchange Traded Fund Buy/Sell Summary and Analysis

The SQI (Consolidated Quick-term/Short-term Indicant) generated no buy or sell signals last Friday. Read the daily stock market newsletter for more analysis. The SQI is signaling hold for 30-ETF’s. They are up by an average of 62.3%, which is up by 1.2 percentage points from last week. That is a nice bullish follow-on to the prior week’s aggressive bullish behavior. This is annualized at 34.3% since their respective buy signals an average of 93.4-weeks ago. The SQI is not avoiding any ETF’s at this time.

Remember, the SQI model signals buy or sell when both the Short-term and Quick-term Indicant are signaling the same. Keep in mind the Quick-term Indicant is the most volatile, but it will help you with successive buying opportunities during various stages of an advancing bull. It also shows Force Vectors and Vector Pressure, providing you greater insight of the ETF’s quick-term bias.

The Short-term Indicant generated no buy signals and no sell signals last Friday. Although there were no buy signals, the Short-term Indicant is signaling hold for 30-Exchange Traded Funds. They are up by an average of 64.2%, which is up slightly from last week. This is annualized at 36.7% since their respective buy signals an average of 89.9-weeks ago. The Short-term Indicant is not avoiding any of the 30-ETF’s at this time.

The Quick-term Indicant generated no buy signals and no sell signals last Friday. Although there were no buy signals, the Quick-term Indicant is signaling hold for 30-Exchange Traded Funds (ETF’s). They are up by an average of 34.9%. This annualizes at 38.1% since their respective buy signals an average of 47.1-weeks ago. The Quick-term Indicant is not avoiding any ETF’s at this time.

Twenty-seven ETF’s are Quick-term Indicant Red Bulls. That is up from twenty-six last week. That reflects significant strengthening in the Quick-term Bull. The ETF’s are above their respective bullish red curves by an average of 3.9%, which is down by 0.1%-age point since last week. The Quick-term Indicant Bull continues with solid bullishness.

None of the ETF’s are below their respective bearish yellow curves, highlighting absolute non-bearishness on a Quick-term Indicant basis. Overall, they are above bearish yellow by 11.9%, which is exceedingly non-bearish on a quick-term basis. That is up by 0.2%-age points from last week. Non-bearish attributes continues with a near zero threat of dynamic bearish expressions.

The Short-term Indicant reveals individual Indicant Volume Indicators. Although the ETF’s Indicant Volume Indicators are not as conclusive as that of the major market indices, it sometimes obviates the market’s short-term intentions. Look for robustness in the individual Indicant Volume Indicators, coupled with dynamic behavior. Robust volume cycles during dynamic bearish or bullish cycles indicate the breadth of the continuation of that cycle. The more pronounced they are, the greater the lingering effect of the underlying bullish or bearish direction.

The Short-term Indicant also identifies the breakout lines and breakdown lines for Exchange Traded Funds. Two of the 30-ETF’s are contacting their breakout lines. That is down from eighteen last weekend, citing a mild rest period for the Short-term Indicant Bull.

The average distance of all 30-ETF’s between their current price and their respective breakout lines is a mere 1.3%, which is 0.4% lower than last week. It is significantly bullish when even just one ETF is contacting its breakout down other than those of a contrarian nature. Solid bullishness continues on a Short-term Indicant basis.

The average distance between the current price and the ETF’s breakdown lines is a whopping 23.5%, which is up by significantly from last week. This configuration remains non-bearish.

The overall relationship between breakout and breakdown lines is configured with a significant bullish bias on a Short-term basis. Contact with breakdown lines is extremely bearish and contact with the breakout lines are extremely bullish. As you can see, there is absolutely no threat of breakdown contact in the near future. Thus, there is little opportunity for the bear to dominate market behavior on a short-term basis. Unfortunately, bearish expressions can occur before contact is made. But your longer term hold positions are safe.

There are no conflicts between the Quick-term and Short-term Indicant at this time. There is complete bullish harmony between the Short-term Indicant and the Quick-term Indicant.

There were no buy signals for ETF options this past Friday. Last week’s market meandered somewhat, triggering little activity for options buying.

Several ETF Force Vectors completed their bullish cycle last week and are now shifting to a southerly direction. That suggests a pause in bullish activity. It does not yet suggest the beginning of a bearish cycle, although that could happen. Vector Pressure remains positive, protecting against dynamic bearish behavior.

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 entering the next mid-term election year. The last one followed the predicted market bottom in 2002. 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.

Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002. The April-October period was typically bearish. That bear leg was a deep one in 2002. The upcoming mid-term election year of 2006, fundamentally, supports historical standards. In other words, expect no bullish enthusiasm with rising interest rates and rising energy costs as we head into the mid-term election year. 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 bearishness.

The current Mid-term Bull has been surprisingly strong with weak fundamentals and the normal political threat in this post election year. The market was mixed this past year with some bearishness and bullishness in the broader indices.

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 after the heart and soul of bullish seasonality elevates it. 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. The current heart and soul of bullish seasonality has demonstrated normalcy so far with an extremely bullish November. However, December finished with a bearish conclusion. The omission of a solid Santa Claus rally this past year is somewhat ominous. However, January has gotten off to a solid bullish start. It appears bent on supporting historical normalcy in the face of December’s disappointment. January’s Dow is up 2.3% while the NASDAQ is up more aggressively by 4.5%. The heart and soul of bullish seasonality has produced gains of 5.0%, 6.7%, and 9.3% for the Dow, S&P500, and NASDAQ so far. The heart and soul of bullish seasonality has only two weeks remaining this year.

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. 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.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth 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.

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. 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 and early November, 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. Fundamentals and historical standards support that scenario. 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. But it is appropriate to anticipate fundamental shifts before they happen. Keep a close eye on the Fed. It can damage the underlying bull.

November was exceedingly bullish and consistent with historical normalcy. The November – January rolling quarter is the heart and soul of bullish seasonality. However, December 2005 expressed contrary behavior to historical standards with a bearish conclusion. January seems bent on slapping December’s dismal performance.

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.

There are some instances where stocks rise during bear markets due to legitimate fundamental reasons. If the market emulates a 1970’s configuration, most stocks will plummet, but energy related stocks will skyrocket. It is unusual that energy has been skyrocketing the past three years, of which two of those years enjoyed bullish market behavior. The coexistence of a bullish energy sector and general equities does not make much fundamental sense, but the underlying economic fundamentals have supported this phenomenon. There is good reason to expect an abandonment of this phenomenon with record setting oil prices and rising interest rates. However, the heart and soul of bullish seasonality, more often than not, excludes fundamental reason in its normally bullish behavioral patterns. You are enjoying that now. There are two weeks of the heart and soul of bullish seasonality remaining.

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

As stated the past nine weeks, there is no bullish convergence. That is a common attribute with meandering behavior. Several stocks are not moving up even during the bullish spurts we have enjoyed the past several weeks. Force Vectors have started shift downward but a few continue moving north. This lack of bullish convergence suggests a reduce probability of dynamic bullish expressions in the immediate future.

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. will provide increased difficulty for the Canadian Dollar to continue weakening. 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.

Commodity prices continue rising. Some are vacillating around all time peaks. Overall, this behavior will eventually induce bearishness on the stock market.

The market’s bullishness so far this year is due, in part, to a slowing of the Federal Reserve Board interest rate hikes. That makes the market vulnerable in the event the Fed “disappoints” with a rate hike in excess of the market’s speculation. Such disappointment would result in a sharp decline in stock prices. This scenario is congruent with historical standards.

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-six weeks ago since the MTI buy signal on April 13, 2001. One-hundred and seventy-nine weeks ago, it closed up 30.1%. Last week it closed up 244.4%. The current annualized growth rate since the April 13, 2001 buy signal is 50.7%. After falling sharply 30-weeks ago, it bounced north in 24-weeks of the past 30-weeks. This fund moved solidly to the north the past two weeks after several weeks of bearish expressions.

Fidelity Gold, Fund #28, is up 44.3% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 113.9%, 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 moved north the past four weeks.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 263.1% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 76.0%. This fund moved north the past two weeks after falling sharply in four of the last seven weeks.

Vanguard Energy #18, VGENX, is up 157.1% (annualized at 55.8%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 139.9% (annualized at 65.5%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 129.8% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 53.0%. All energy related funds moved north the last two weeks after falling in four of the last seven 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 signaled buy for ETF#03 – Energy and Natural Resources on March 26, 2003. It is up 153.3% (annualized at 53.9%). This fund moved solidly north last week after expressing bearishness in three of the five preceding weeks.

The contrarian sector, commodities and petroleum, were up last week while general equities were up slightly. That suggests the market’s anticipation of a bullish economic outlook but also expresses inflationary threats will manifest. At any rate, contrarian and general equities moving in a bullish direction is the best of both worlds. Do not believe that relationship will last too long. One or the other has a high probability of giving in to bearish influences this year.

Short-term Indicant Update for Major Market Indices

The Indicant Volume Indicator is in the embryonic stages of expressing a robust cycle. Volume was not that robust last week. That suggests the possibility of a return to meandering behavior.

The Short-term Indicant signaled bull for the Dow30 on November 3, 2005 and the NASDAQ on November 2, 2005. They are up 4.2% and 8.1%, respectively since then. That annualizes to 21.4% and 40.8% respectively. It is not likely those annualized expressions will manifest by this time next year.

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

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 44.4% since the MTI-RYS signaled bull an average of 98-weeks ago. That annualizes to 23.5%, which is down by 0.1% from last week. The strongest bull is the Dow Utilities. It is up 118.5% since the October 25, 2002 bull signal. The utilities moved slightly north 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.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $33,200,073. That beats buy and hold performance of $1,677,408 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $165,249. That beats buy and hold’s $125,125 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $193,869. That beats buy and hold’s $80,341 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 14.1% since the Mid-term Indicant signaled sell on November 11, 2005. This fund may show some significant promise early 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 278.6% (annualized at 19.5%) since the Long-term Indicant signaled bull 741-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. The shifting Force Vectors to the south is of little concern at this time, but do not be surprised at meandering behavior with possible bearish bias in the immediate future. As stated last week, the heart and soul of bullish seasonality is now here and should last through January. Historically, it concludes at the end of January. Keep your eye on the daily stock market reports. Fundamentals and disappointing volume threaten a bullish conclusion to this month.

As stated last weekend, the current Quick-term and Short-term Bulls remains possessed with bullish configurations.

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

01/15/06

January 08, 2006 Indicant Weekly Stock Market Report

Volume 01, Issue 02 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Neutrality, YYY5, and YYY6

It was noted last week that the Dow is down 0.7% this century, as of the end of last year. The dilettante infested S&P100 is down 17.0% during this same time span. The bubble-infected NASDAQ100 is down 29.7% from December 31, 2000 through December 31, 2005.

The bluest of blue chips, the Dow30, is now up this century. And it did all that just last week, moving bullishly by a whopping 2.3% in the first four days of this new year. The Dow is now up 1.6% since December 31, 2000. The heart and soul of bullish seasonality prevails, which is where this bullish domain was built. Or does it?

Earlier this past week, Wall Street optimism compelled bullish behavior on the premise the Federal Reserve was about to adopt an accommodative stance. In other words, the prior “measured” interest rate hikes would about to be abolished. This perception carried bullish momentum all week.

Unfortunately, the market periodically moves on emotion. An emotional-based market cycle self-corrects when the market detects an erroneous cycle to impending reality. Reality detection occurs when the Fed shows its hand. If the hand demonstrates variance from emotional-based market levels and “disappoints,” the market will wipe out every bit of the emotion based gains of this past week. It will most likely wipe more than these gains because negative emotion punishes prior positive emotion. It is the market’s way of punishing false emotion (mysticism). Free markets consistently impose zero tolerance with penalties for any mysticism. However, since people are involved in the market, that aspect of the market generates the vicissitudes that comes with life itself. The stock market can be cruel to those who are based in emotion.

The market anticipates; sometimes wrongly. The market adjusts quickly and sometimes violently at the first moment of recognition of its prior error. Although the Fed has yet to play its cards, watch out if it disappoints. That disappointment, if indeed that is the conclusion, may also be anticipated, as opposed to the formal announcement by the Fed. If disappointment is “anticipated,” the market will adjust bearishly. If that turns out to be a false anticipation, the market will adjust bullishly.

Right now, economists suggest the stock market has adjusted to neutrality, where interest rates are neither accommodative nor restrictive to the economy. That means the interpretation by the Fed is to let the economy drive itself without interference from policy makers. Who knows if all that jibber-jabber is accurate? However, if it is accurate and the Fed displays “restrictive” policies in a few weeks, the market will most certainly offset this past week’s gains, plus penalty.

History supports a “restrictive” policy by the Fed. That is because the market typically finds a bottom in presidential mid-term election years. There is little pressure to be economically friendly in presidential post election years, but that changes during mid-term election years. Political clout is lost when the incumbent president loses too many congressional seats in mid-term election years.

Americans typically penalize the incumbent by politically aligning with the other party, but an excessive loss of seats is a slap in the face of the incumbent. Political leaders hate losing power, for power is what drove them to that lifestyle. Many people know this and by virtue of this, it could become a self-fulfilling prophecy. This prophecy is what usually drives the market south during presidential post election years. Policy makers adjust to more economic accommodative positions in the mid-term election year, which is why the market typically finds bottoms in those years.

Although the majority is usually wrong, wicked cyclical adjustments can occur when the majority holds similar consensus. The first wave of sellers is followed by the second wave of sellers, and so on. This is a common attribute an emotional-based market. The final few waves of sellers are the followers, who bought near the top and sold near the bottom. Those typically stay out of the market for the rest of their lives. When that occurs, equities lose a source of demand and thus the reason bear markets last a long time.

Although several Indicant models, as well as others, suggest the current bull market started in March 2003, it remains a bear market in terms of historical standards. That is because the major indices are below their peaks. History suggests that a generation of investors has to pass on before the major indices return to their historical peaks. That means the NASDAQ will not see 4,000 until around 2020 or so.

For those who bought in March 2003, this is certainly a bull market. For those who set on the sidelines in 2003 when the current bull did all of its movement, the interpretation is different. Those folks feel the sting of the bear. They did not enjoy the fruits of the bull. The meandering behavior of 2004 and 2005 has been a little too scary for many. That prevents an increased demand for stocks, which is the most fundamental cause of market movement.

Fundamentalists will be waiting and watching for the Fed to show its hand. If the Fed truly adopts an accommodative stance, then the early January barometer will hold true. According to the Stock Trader’s Almanac, the year is bullish when the first few days of January are bullish. Historical evidence is pretty solid. But as always, there are exceptions to historical standards.

Early last year, a member of the Indicant wrote and asked about the historical record for years, ending in the number 5. He advised he listened to a TV stock market expert telling the whole world how bullish years ending in the number 5 were. Geese, if someone knows something that works, the best way to have it not work is to tell the whole world. The Indicant advises its members only – not the whole world.

At any rate, the member asked me to research stock market performance for years ending in the number 5. Sure enough, since 1900, nearly every year ending in the number 5 was profoundly bullish. The Indicant never mentioned in any of its weekly or daily stock market reports in 2005. It did not want to distract members from the Indicant’s predominant theme; a meanderer until the heart and soul of bullish seasonality.

Now that 2005 is over, here is the performance of years ending in the number 5 from last century:

1905, +38.5%; 1915, +81.7%; 1925, +30.0%; 1935, +38.5%; 1945, +26.6%; 1955, +20.8%; 1965, +10.9%; 1975, +38.3%; 1985, +27.7%; 1995, +33.5%. The average performance for years ending in the number 5 is 34.6%.

So, how did 2005 do? Answer: -0.6%. That’s right. That is a minus sign. Last year was the first down year, ending in the number 5, since 1875. Did the discoverer of this destroy such a beautiful model?

There is a physical law that some of you may be familiar with. An object you are looking at changes by virtue of simply looking at it. There is another law about the stock market. If you find something that works, it will quit working when everyone learns about it. The market will not tolerate mass distribution of its secrets. It always adjusts. The Stock Traders Almanac even admits this.

The Indicant prefers logical explanations. There is logic in presidential post-election-year bearishness. There is also a logical explanation in the extreme bullishness in presidential pre-election years, With a few exceptions, overall behavior in last year’s presidential post-election-year bearishness was right on cue with historical standards. The reason that always works is based in logic. Politicians strong-arm policy makers into accommodative stances leading up to elections. The presidential mid-term election year precedes the presidential pre-election year where nearly 80% of all stock market growth occurred since the beginning of recorded capitalizations in the U.S.

The Indicant staff could come up with no logical explanation for the number 5. The relationship between 5 and profound bullishness was impressive, as you can see. But, there was not any logical explanation and not worthy of mention last year. The Indicant, in hindsight, is happy with its decision to not mention this to members. Although the Indicant ignores press pontificators, one cannot help but hear it.

The pontificating evangelist kept promoting the bullish relationship to number 5 early in 2005 and the corresponding bullishness to be expected in 2005. It was unbelievable that he could even get airtime and he got a lot of it. Others even plagiarized his work, as if they were the discoverer. It is difficult to copyright such a simple thing. Enough people heard it and sure enough, it quit working. At least it did not work in 2005. You can check it again in 2015. The Indicant has no plans to remind you, though.

Did the YYY5 quit working because it was over-marketed? One has a solid argument that record high oil prices and corresponding inflationary threats induced meandering market behavior with mild bearishness more than any other single reason. Technically, the Indicant reminded you almost daily that the underlying theme in nearly all of 2005 was with meandering inclinations.

We waited until the year was over to mention YYY5’s correlation to massive bullishness. The message is this; if information is publicly conveyed and massively marketed, the system being conveyed will cease working. The presenter destroys their own discovery in doing so. The phenomenon of commonality has always prevailed and will continue to do so. This holds true even if other variables can logically explain the underlying phenomenon being conveyed to the masses. It is unbelievable that CNBC exists. You are better off playing golf than watching that nonsense, where pontificators appear for self-promotion purposes and CEO’s appear to embellish egos and have a digital recording for their grandkids.

Please, do not ask about years ending in the number, 6. We are not even going to research it even though it takes less than five minutes.

Here’s some good thoughts about the stock market.

Do not be surprised at a bearish reaction if the Fed adopts a restrictive policy. Do not be surprised if the market not only punishes the gains last week but gets revenge for the underlying mysticism.

The heart and soul of bullish seasonality has delivered right on cue and it is not over yet. Three more weeks of this wonderful time of year remain. However, even bearish expressions in the next three weeks should wind up with a bullish conclusion since the heart and soul of bullish seasonality began in late October. The Dow is up 5.0% since October 31, 2005. The NASDAQ is up a whopping 8.7% since then. Even the dilettante infested S&P500 is up 6.5% since then.

Finally, do not worry about forecasting any of this stuff because The Indicant Stock Market Report will let you know the underlying trend and cycles in the market. It will signal bull, bear, buy, hold, sell, and avoid at the appropriate times. You will never see insight, techniques, or signals from The Indicant Stock Market Reports on television or any other publicly displayed media. It is only for those of you who are members of The Indicant.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and no sell signals for stocks and funds. December bearishness and January bullishness to date have resulted in the same old meandering results. Thus there were no signals this past weekend. Also, there is little bullish convergence since bullish expressions were primarily in those securities enjoying a hold signal. The avoided securities tend to be listing aimlessly in their depressed condition.

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 10.5% since the Mid-term Indicant signaled sell an average of 22.5-weeks ago.

There were only 15-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 41.1% since their respective sell signals an average of 61.1-weeks earlier. Two years ago, on January 3, 2004, the Mid-term Indicant was avoiding only six stocks and funds that were down an average of 28.6% since their respective sell signals an average of 38.6-weeks earlier. Three years ago on January 4, 2003, there were only 12-avoided stocks and funds. They were down 25.9% from their respective sell signals an average of 23.0-weeks earlier.

Although there were no buy signals this weekend, the Mid-term Indicant is signaling hold for 292 of the 345-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 110.8%. That annualizes to 66.8%. The Mid-term Indicant has been signaling hold for these 292-stocks and funds for an average of 86.3-weeks.

One year ago on January 7, 2005, the Mid-term Indicant was holding 236-stocks and funds out of the 320 tracked at that time for an average of 68.4-weeks. There were 69-sell signals last year as the heart and soul of bullish seasonality expired early. Those 236-stocks and funds were up 86.7% (annualized at 65.9%). The Mid-term Indicant was signaling hold for 286-stocks and funds of the 296 tracked two years ago on January 3, 2004. They were up by an average of 57.7% (annualized at 83.9%) since their respective buy signals an average of 35.8-weeks earlier. There were 277-stocks and funds with a hold signal on January 4, 2003 since their buy signals an average of 14.3-weeks earlier. They were up 19.1% (annualized at 69.3%).

Exchange Traded Fund Buy/Sell Summary and Analysis

The SQI (Consolidated Quick-term/Short-term Indicant) generated no buy or sell signals last Friday. Read the daily stock market newsletter for more analysis. The SQI is signaling hold for 30-ETF’s. They are up by an average of 61.2%, which is up by 8.9% from last week. That is an impressive bullish expression. This is annualized at 34.1% since their respective buy signals an average of 92.4-weeks ago. The SQI is not avoiding any ETF’s at this time.

The Short-term Indicant generated no buy signals and no sell signals last Friday. Although there were no buy signals, the Short-term Indicant is signaling hold for 30-Exchange Traded Funds. They are up by an average of 63.1%, which is up by 7.0%-age points from last week. This is annualized at 36.5% since their respective buy signals an average of 88.9-weeks ago. The Short-term Indicant is not avoiding any of the 30-ETF’s tracked at this time.

The Quick-term Indicant generated no buy signals and no sell signals last Friday. Although there were no buy signals, the Quick-term Indicant is signaling hold for 30-Exchange Traded Funds (ETF’s). They are up by an average of 34.1%, which is up by 5.5%-age points from last week. This annualizes at 38.1% since their respective buy signals an average of 46.1-weeks ago. The Quick-term Indicant is not avoiding any ETF’s at this time.

Twenty-six ETF’s are Quick-term Indicant Red Bulls. That is up from only eleven last week. That reflects significant strengthening in the Quick-term Bull. The ETF’s are above their respective bullish red curves by an average of 4.0%, which is up by 3.6%-age points since last week. The Quick-term Indicant Bull has resumed a category of solid bullishness.

None of the ETF’s are below their respective bearish yellow curves, highlighting absolute non-bearishness on a Quick-term Indicant basis. Overall, they are above bearish yellow by 11.7%, which is exceedingly non-bearish on a quick-term basis. That is up by 4.0%-age points from last week. Non-bearish attributes has resumed near zero threat of dynamic bearish expressions.

The Short-term Indicant also identifies the breakout lines and breakdown lines for Exchange Traded Funds. Eighteen of the 30-ETF’s are contacting their breakout lines. That is up from zero last weekend This non-bearish attribute strengthened significantly this past week. The market reacted by countering the unseasonable bearishness of December.

The average distance of all 30-ETF’s between their current price and their respective breakout lines is a mere 0.9%, which is 2.9% higher than last week. It is significantly bullish when even just one ETF is contacting its breakout down other than those of a contrarian nature. Solid bullishness has resumed on a Short-term Indicant basis.

The average distance between the current price and the ETF’s breakdown lines is a whopping 18.2%, which is down by 1.3% from last week. Although bearish expressions dominated this past week, this configuration remains non-bearish.

There are no conflicts between the Quick-term and Short-term Indicant at this time.

There were no buy signals for ETF options this past Friday. Meandering markets are not good for options traders. December, coupled to last week, still has the effects of meandering behavior. Thus market volatility is not ripe for options trading. It is interesting to note that there was a call option buy signal last week for QQQQ. That was the first call option buy signal since early November 2005.

ETF Force Vectors remain directionally mixed with some moving south and some moving north. However, the QQQQ call option buy signal in the middle of last week was prompted by Vector Pressure moving back into bullish domains. It was recommended to be conservative, but a profit was indeed enjoyed if you benefited from a intraday contrarian move relative to your offering price. Never offer market prices. Do not despair if you miss out on a good opportunity. They are presented regularly throughout the year. Option stalking is the only way if you cannot be on the floor with the traders.

The Quick-term and Short-term Bulls were apparently annoyed by their reclassification from solid bullish bias to slight bullish bias last week. That angered the bulls to return to solid bullish bias with last week’s aggressive bullish behavior.

Secular Market Blend

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 mid-term election year after the heart and soul of bullish seasonality elevates it. As stated for several weeks, tt 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. The current heart and soul of bullish seasonality has demonstrated normalcy so far with an extremely bullish November. However, December finished with a bearish conclusion. The omission of a solid Santa Claus rally this past year is somewhat ominous. However, January has gotten off to a solid bullish start. It appears bent on supporting historical normalcy in the face of December’s disappointment.

The Dow30 found bottom over three years ago 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. 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.

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. 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.

November was exceedingly bullish and consistent with historical normalcy. The November – January rolling quarter is the heart and soul of bullish seasonality. However, December 2005 was contrary to historical standards with a bearish conclusion. January seems bent on slapping December’s dismal performance.

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.

There are some instances where stocks rise during bear markets due to legitimate fundamental reasons. If the market emulates a 1970’s configuration, most stocks will plummet, but energy related stocks will skyrocket. It is unusual that energy has been skyrocketing the past three years, of which two of those years enjoyed bullish market behavior. The coexistence of a bullish energy sector and general equities does not make much fundamental sense, but the underlying economic fundamentals have supported this phenomenon. There is good reason to expect an abandonment of this phenomenon with record setting oil prices and rising interest rates. However, the heart and soul of bullish seasonality, more often than not, excludes fundamental reason in its normally bullish behavioral patterns. You are enjoying that now. There are three weeks of the heart and soul of bullish seasonality remaining.

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

As stated the past eight weeks, there is no bullish convergence. That is a common attribute with meandering behavior. Although last week’s bullish behavior was impressive, it did not generate any new buy signals. In other words, the weaker stocks did not rise that much. The bullish behavior was pretty much limited to those stocks already riding high. The current Quick-term and Short-term Bull markets did, however, regain solid bullish biases. This lack of bullish convergence suggests an increasing possibility the current Quick-term and Short-term bulls will peter out early this year; most likely in the next few weeks. Such a scenario would result in political normalcy, when the market finds a bottom in the mid-term election year. Keep in mind, though, that forecasting is not The Indicant’s model.

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 weeks, the Athabasca Tar Sand Oil potential continues to threaten the Canadian cost advantage. The perception of huge imports to the U.S. will provide increased difficulty for the Canadian Dollar to continue weakening. 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. Detroit may learn the economic benefits of elevating carburetor efficiency. 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 ear-marked for closure.

Commodity prices are again rising and approaching recent cyclical peaks.

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. So do not be surprised at economically friendly policies in the second half of this year. Expect accelerated troop reductions in Iraq, as well.

The market’s bullishness in the first week of this year is due, in part, to a slowing of the interest rate hikes. That makes the market vulnerable in the event the Fed “disappoints” with a rate hike in excess of the market’s speculation. Such disappointment would result in a sharp decline in stock prices. This scenario is congruent with historical standards.

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-five weeks ago since the MTI buy signal on April 13, 2001. One-hundred and seventy-eight weeks ago, it closed up 30.1%. Last week it closed up 241.5%. The current annualized growth rate since the April 13, 2001 buy signal is 50.3%. After falling sharply 29-weeks ago, it bounced north in 23-weeks of the past 29-weeks. This fund moved solidly to the north last week after several weeks of bearish expressions.

Fidelity Gold, Fund #28, is up 41.6% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 112.5%, 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 moved north the past three weeks.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 255.9% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 74.4%. This fund moved sharply to the north last week after falling sharply in four of the last six weeks.

Vanguard Energy #18, VGENX, is up 152.3% (annualized at 55.4%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 135.4% (annualized at 64.0%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 125.2% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 51.6%. All energy related funds moved solidly to the north after falling in four of the last six 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 signaled buy for ETF#03 – Energy and Natural Resources on March 26, 2003. It is up 148.7% (annualized at 52.6%). This fund moved solidly north last week after expressing bearishness in three of the four preceding weeks.

The contrarian sector, commodities and petroleum, were up last week while general equities were also up. Both sectors were dynamically bullish. That suggests a bullish economic outlook but also expresses inflationary threats will manifest. At any rate, contrarian and general equities moving in a bullish direction is the best of both worlds. Don’t believe that relationship will last too long. One or the other has a high probability of giving in to bearish influences this year.

Short-term Indicant Update for Major Market Indices

The Indicant Volume Indicator is in the embryonic stages of expressing a robust cycle. It is potentially bullish on a short-term basis that last week’s bullish expression was coupled with increased volume. However, more robustness is need to conclude longevity for the Short-term Indicant Bull that is now underway. Last week’s rise in volume followed holiday lethargic volume and on the surface could be misleading. It was a little disappointing that volume was not higher on last week’s bullish behavior.

The Short-term Indicant signaled bull for the Dow30 on November 3, 2005 and the NASDAQ on November 2, 2005. They are up 4.2% and 7.5%, respectively since then. That annualizes to 23.7% and 42.2% respectively. It is not likely those annualized expressions will manifest by this time next year.

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

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 44.2% since the MTI-RYS signaled bull an average of 97-weeks ago. That annualizes to 23.6%, which is up significantly from last week. The strongest bull is the Dow Utilities. It is up 118.2% since the October 25, 2002 bull signal. The utilities moved north last week after falling in the last two weeks of December. Your utility hold positions remain safe, but keep your eye on this particular index. Severe bears show little mercy, regardless of dividend yields.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $33,198,377. That beats buy and hold performance of $1,677,322 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $165,970. That beats buy and hold’s $125,913 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $192,913. That beats buy and hold’s $79,945 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 13.1% since the Mid-term Indicant signaled sell on November 11, 2005. This fund may show some significant promise early 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 278.6% (annualized at 19.6%) since the Long-term Indicant signaled bull 740-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 returned with a bullish bias last week after reclassifying to mild bullish bias at the close of last year. As stated last week, the heart and soul of bullish seasonality is now here and should last through January. Keep your eye on the daily stock market reports, as the market from time to time aborts historical standards. Fundamentals and disappointing volume threaten a bullish conclusion to this month. Last weekends favoring of bearish attributes ignited a bullish response this past week.

As stated last weekend, the current Quick-term and Short-term Bulls remains possessed with bullish configurations. Last week’s performance was exceedingly bullish in response to three consecutive weeks of bearish expressions. None of the Quick-term, Short-term, and Mid-term attributes suggest dynamic bearish influences, although current configurations may be an embryonic prelude to what will occur in the first half of this year.

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

01/08/06

January 01, 2006 Indicant Weekly Stock Market Report

Dear Indicant Members:

This Week’s Report

The Notoriously Bearish Presidential Post Election Year Ends Harmlessly

As stated last week, the Dow Jones Industrial Average and older market indices have a history of solid bearish expressions during presidential post election years. A $10,000 investment in 1832, only in presidential post election years, shriveled to $8,758 as of the end of 2005. That is a reduction of 12.4% from an investment made over 170-years ago. Not too many folks would do this, but the consistent degradation of a post election year only investment should not go unnoticed.

Politicians know that Americans vote their pocket books on Election Day. Policies are economically friendly in a timely manner so that American wallets are flush with cash on Election Day. The economy is too dynamic for perfect political manipulations, but those poor souls who enter politics to tell everyone else how to behave try. The stock market understands this, knowing that policies are generally business-friendly leading up to election years. The stock market anticipates economic activity by six to nine months most of the time. It also tries and when it is wrong for a period, it adjusts quickly. That is why there are a few days each year when the market zooms north or south by a bunch. The market does not like being wrong and shows it.

Using the Dow30, the presidential post election year of 2005 was down slightly by 0.6%. It was congruent with historical standards, albeit mildly. However, with historical accuracy, the Dow lost money in the 2005 post election year. It does that more than not in presidential post election years. Interestingly, the S&P100 was down even more by 0.9%. All other broad market indices were up this past year. The most bullish was the S&P400, Mid-caps. Small-caps were up also, but gained too much popularity by the masses to continue leading the bullish behavioral patterns. The phenomenon of commonality will act as a depressant on small caps until the masses are burned enough to stay out for a while. The masses will be burned since not everyone is allowed to make money in the stock market. The stock market’s design is to ensure the forces of capitalism; winners and losers.

The largest of the large caps, DJIA and S&P100, represent companies with the greatest percentage of dilettante managers on the payrolls. Those companies will continue with dismal performance more so than the other indices due to massive incompetence that pervades the blue chips. It is not surprising those are the only two indices expressing bearish behavior this past year.

So much for history and who really cares anyway? Historical patterns can be misleading, but it is hard to ignore a 12.4% loss since 1832. Most of the money made in the stock market occurs in the presidential pre-election year, which occurs next in 2007. It is in a league by itself in terms of bullish behavior. A $10,000 investment in 1832 would amount to $283,810 if only invested in the presidential pre-election year.

We now have to contend with the mid-term election year, which is begins today. A $10,000 in 1832 only in mid-term election years grew to a meager $24,313 by 2002. CD’s or even a simple bank savings account during the same period would have beaten that performance by a significant amount. The last presidential mid-term election year was extremely bearish. The Dow finished down 15.9%. It was a continuation of the bear market that began in early 2000. Other indices fared worse. At one point prior to bullish seasonality in 2002, the NASDAQ100 was down over 50% in 2002 alone and by nearly 80% since it pinnacled in March 2000.

The Dow is down 0.7% so far this century. It has been meandering for five years after a profound, unprecedented, never-happened-before, rise that began in 1980. The S&P100 (large caps) is down a whopping 17.0% so far this century, while the S&P600 (small caps) are up a whopping 59.7% this century. Do not expect that level of performance in small caps this coming year, as the masses are now into small caps. They will get burned by the phenomenon of commonality. It is a requirement of capitalism. And it is good. It allows those who work to be rewarded more than those with passive interest are. Politicians generally favor everyone being the same, which would lower the standard of living for all.

The NASDAQ100 is down 29.7% this century. The market appropriately punished those late arrivers into the NASDAQ bubble late last century. A 30-year old NASDAQ bubble buy-and-hold investor will most likely be over sixty before breaking even. That lengthy financial pain occurs about every 1.5-generations. Those buy and holders in between decades of stock market grief are lucky. Simple buying and holding cannot always work. It is too simple. And what does one buy and hold? As companies and funds become successful, the dilettante population increases disproportionately with those seeking “security” and that by its very nature causes the organization’s collapse. The small caps are not infested with dilettante management. That is why they are so popular right now. People are learning this. The problem is the phenomenon of commonality.

This past presidential post election year was a meanderer. It actually started meandering in early 2004 after the nice bull leg in 2003. The Dow is up by a mere 2.5% the past two years but down this century. CD’s and simple savings accounts beat it during that time. The S&P600, Small Caps, are up 29.7% during the same period. Small cap bullishness can be rationalized by virtue of fewer dilettante managers. Corporate politics and the resultant stupidity are not predominant venues in small cap companies. However, as earlier stated, small cap investing is becoming too popular and the phenomenon of commonality will eventually inflict financial pain on many. As soon as the market weeds them out, small caps will again rise dramatically.

Now, back to the impending mid-term election year. First, let’s point out one major issue. The Indicant does not forecast the market. That is a waste of time. Forecasts are always wrong. If one does forecast the market successfully, chalk it up to luck. Each success in forecasting will be followed with an increased probability of error and with wider error bands. With that mind, let’s take a look at the typical mid-term election year.

Although the market has expressed mild bullishness during mid-term election years, most of that bullishness occurred in the last third of the year. The heart and soul of bullish seasonality does most of the bullish work in any year, including the mid-term election years.

The market typically finds a bottom in mid-term election years, which leads to the most bullish presidential pre-election year, which next occurs in 2007. The last pre-election year of 2003 brings pleasant memories. There was nothing tricky about it, as the Indicant staff did not even have to work hard signaling bull during the most part of that great bull leg. The market found bottom in October 2002 (mid-term year) and zoomed north, like clockwork, in the presidential pre-election year of 2003. This job was easy in 2003. Red bulls are a no-brainer.

The last presidential mid-term election year was also easy as the market was congruently bearish to historical standards. However, the mid-term election year of 2005 will not be easy unless there is aggressive bearishness coupled with a robust Indicant Volume Indicator. That combination is also a no-brainer, as it is nearly 100% accurate in predicting immediate cyclical behavior.

Rising interest rates is not uncommon during post election years and early into the mid-term election year. That is part of the political model. Cooling the economy leading into post election years is common. Rising interest rates and rising energy costs threaten the existing Mid-term Indicant bull markets. The charts, which are discussed later in this report, appear to have pinnacled. It would not be surprising to see those Mid-term Indicant bulls perish early this year. They are very mature in terms of historical standards.

The Quick-term and Short-term Indicant bulls weakened considerably in December, which is typically the most bullish month of the year. The Dow was down 0.8% this past month. December 2005 was only the sixth bearish December in the last 25-years. The last time was in December 2002, which was followed by explosive bullish behavior in March 2003. Interestingly, that coincided with the beginning of the war in Iraq. That war that did not depress the historical standards of presidential pre-election year bullishness.

The first few days of this New Year should reveal market inclinations until the next heart and soul of bullish seasonality later this year. A bearish start will continue the erosion of the Quick-term and Short-term Indicant bulls. That could prompt historical congruency with bearish expressions. In other words, the market may find a bottom in this mid-term election year. The market needs to turn bearish in the first half of this year to support historical congruency. The Indicant Volume Indicator will help identify this possibility a few days into the year. It first needs to shed the lethargy brought on by holiday apathy. Keep your eyes on the Quick-term and Short-term Indicant in January, which is the final month of the heart and soul of bullish seasonality.

Weekly Buy/Sell Summary

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

In addition to the sell signal, the Mid-term Indicant is avoiding 50-stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 16.0% since the Mid-term Indicant signaled sell an average of 27.2-weeks ago.

There were only 15-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 39.6% since their respective sell signals an average of 60.1-weeks earlier. Two years ago, on January 3, 2004, the Mid-term Indicant was avoiding only six stocks and funds that were down an average of 28.6% since their respective sell signals an average of 38.6-weeks earlier. Three years ago on December 28, 2002, there were only sixteen avoided stocks and funds. They were down 25.6% from their respective sell signals an average of 21.9-weeks earlier.

Although there were no buy signals this weekend, the Mid-term Indicant is signaling hold for 269 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 94.8%. That annualizes to 57.5%. The Mid-term Indicant has been signaling hold for these 269-stocks and funds for an average of 85.8-weeks.

One year ago, the Mid-term Indicant was holding 304-stocks and funds out of the 320 tracked at that time for an average of 57.6-weeks. They were up 73.3% (annualized at 66.2%). The Mid-term Indicant was signaling hold for 286-stocks and funds of the 296 tracked two years ago on January 3, 2004. They were up by an average of 57.7% (annualized at 83.9%) since their respective buy signals an average of 35.8-weeks earlier. There were 274-stocks and funds with a hold signal on December 28, 2002 since their buy signals an average of 13.5-weeks earlier. They were up 14.2% (annualized at 54.7%).

Exchange Traded Fund Buy/Sell Summary and Analysis

The SQI (Consolidated Quick-term/Short-term Indicant) generated no buy or sell signals last Friday. Read the daily stock market newsletter for more analysis. The SQI is signaling hold for 30-ETF’s. They are up by an average of 54.3%, which is down by 2.1% from last week. This is annualized at 30.6% since their respective buy signals an average of 91.4-weeks ago. The SQI is not avoiding any ETF’s at this time.

The Short-term Indicant generated no buy signals and no sell signals last Friday. Although there were no buy signals, the Short-term Indicant is signaling hold for 30-Exchange Traded Funds. They are up by an average of 56.1%, which is down by 2.1% from last week. This is annualized at 32.8% since their respective buy signals an average of 87.9-weeks ago. The Short-term Indicant is not avoiding any of the 30-ETF’s tracked at this time.

The Quick-term Indicant generated no buy signals and no sell signals last Friday. Although there were no buy signals, the Quick-term Indicant is signaling hold for 30-Exchange Traded Funds (ETF’s). They are up by an average of 28.6%, which is down by over 2.0% from last week. This annualizes at 32.7% since their respective buy signals an average of 45.1-weeks ago. The Quick-term Indicant is not avoiding any ETF’s at this time.

Eleven ETF’s are Quick-term Indicant Red Bulls. That is down from twenty-seven last week. That reflects a significant weakening in the Quick-term Bull. The ETF’s are above their respective bullish red curves by an average of 0.4%, which is down by 1.7% since last week. Although this remains a bullish configurations, it is no longer solidly bullish.

None of the ETF’s are below their respective bearish yellow curves, highlight absolute non-bearishness on a Quick-term Indicant basis. Overall, they are above bearish yellow by 7.7%, which is exceedingly non-bearish on a quick-term basis. However, that is down by 1.0% from last week. Non-bearish attributes are considerably weakening.

The Short-term Indicant also identifies the breakout lines and breakdown lines for Exchange Traded Funds. None of the 30-ETF’s are contacting their breakout lines. That is down from three last weekend This non-bearish attribute weakened considerably. This is down by 20 funds from five weeks ago when the current Quick-term Bull last pinnacled. Since then the overall market has been cooling.

The average distance of all 30-ETF’s between their current price and their respective breakout lines is a mere 3.8%, which is 1.1% lower than last week. It is significantly bullish when even just one ETF is contacting its breakout down other than those of a contrarian nature. Unfortunately, the solid bullishness has been lost on a Short-term Indicant basis.

The overall relationship between breakout and breakdown lines is no longer configured with a significant bullish bias on a Short-term basis. Contact with breakdown lines is extremely bearish and contact with the breakout lines are extremely bullish. As you can see, there is absolutely no threat of breakdown contact in the near future. Thus, there is little opportunity for the bear to dominate market behavior on a short-term basis. Unfortunately, bearish expressions can occur before contact is made.

There are no conflicts between the Quick-term and Short-term Indicant at this time.

There were four put option buy signals for ETF options this past Friday. There were a few put option buy signals throughout this past week, as well. As indicated in the daily stock market reports, conditions were not ripe for profitability. Meandering markets are not good for options traders. Volatility is a requirement for profitability and that missing right now.

ETF Force Vectors remain directionally mixed with some moving south and some moving north. Many are now inside bearish domains. Vector Pressure, which had been in bullish domains is approaching bearish domains. Some have even fallen into bearish domains, which triggered the put option buy signals.

As sated last week, there is no bullish or bearish convergence, which supports meandering behavior. This configuration has shifted away from a solid bullish bias to a slight bullish bias on a quick-term and short-term basis. Never buy a put option when the underlying security is a red bull. There are only four red bulls, which even one supports a bullish bias. The problem is the huge drop of red bulls from last week.

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 entering the next mid-term election year. The last one followed the predicted market bottom in 2002, which was a mid-term election year. 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.

Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002. The April-October period was typically bearish. That bear leg was a deep one in 2002. The upcoming mid-term election year of 2006, fundamentally, supports historical standards. In other words, expect no bullish enthusiasm with rising interest rates and rising energy costs as we head into the mid-term election year. The political establishment and its ugly influence on economic activity are typically at its worse in the presidential post election year, which just concluded with large cap bearishness. The current Mid-term Bull has been surprisingly strong with weak fundamentals and the normal political threat in this post election year. The market was mixed this past year with some bearishness and bullishness in the broader indices.

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 next year’s mid-term election year after the heart and soul of bullish seasonality elevates it. It would not be surprising for a nice rise during this year’s heart and soul of bullish seasonality only to be followed with bearish expressions after January 2006. The recent weakening in the Quick-term and Short-term Indicant suggests such bearishness. The current heart and soul of bullish seasonality has demonstrated normalcy so far with an extremely bullish November. However, December finished with a bearish conclusion. The omission of a solid Santa Claus rally this past year is somewhat ominous.

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. 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.

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

As stated the past seven weeks, there is no bullish convergence. That is a common attribute with meandering behavior. The current Quick-term and Short-term Bull markets, although maintaining non-bearish configurations, have weakened considerably. This lack of bullish convergence suggests an increasing possibility the current Quick-term and Short-term bulls will peter out early this year. Such a scenario would result in political normalcy, when the market finds a bottom in the mid-term election year.

Economic Conditions – Inflation, Currency, Interest Rates

There is nothing different 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 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 weeks, the Athabasca Tar Sand Oil potential continues to threaten the Canadian cost advantage. The perception of huge imports to the U.S. will provide increased difficulty for the Canadian Dollar to continue weakening. 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. Detroit may learn the economic benefits of elevating carburetor efficiency. 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.

Commodity prices continue holding at near cyclical peaks. Some are falling due to profit-taking, but their cyclical nature remains bullish. That does not bode well for general equities.

The Quick-term Indicant is keeping a daily eye on Gold. Its recent quick-term bullishness suggests increasing expectations of inflationary threats. Read your daily stock market newsletters to monitor this dynamic.

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-four weeks ago since the MTI buy signal on April 13, 2001. One-hundred and seventy-seven weeks ago, it closed up 30.1%. Last week it closed up 217.8%. The current annualized growth rate since the April 13, 2001 buy signal is 45.5%. After falling sharply 28-weeks ago, it bounced north in 22-weeks of the past 28-weeks. This fund has fallen sharply in two of the last three weeks.

Fidelity Gold, Fund #28, is up 31.9% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 91.0%, 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. This fund moved north the past two weeks.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 237.2% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 69.3%. This fund has moved down significantly in four of the last five weeks.

Vanguard Energy #18, VGENX, is up 137.8% (annualized at 49.6%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 117.3% (annualized at 55.9%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 111.3% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 46.2%. All energy related funds moved south in four of the last five weeks. However, they remain with a solid hold position.

These funds should do well even if the market turns extremely bearish. Continue to hold them until the Mid-term Indicant signals sell. If litigation and voodoo brokering brings these funds down, the Mid-term Indicant will advise of appropriate actions.

The SQI (Consolidated Short-term and Quick-term Indicant) model signaled buy for the CLD-ETF#11 on August 3, 2005. It is up 18.5% since then. It is annualized at 44.7%. Interestingly, it moved north last week, even though the related Vanguard fund fell sharply to the south.

The SQI signaled buy for ETF#03 – Energy and Natural Resources on March 26, 2003. It is up 134.0% (annualized at 47.8%). This fund moved south consistent with a general bearish attitude toward the energy sector. Remember, the markets anticipate by six to nine months ahead of actual events.

The contrarian sector, commodities and petroleum, were down last week while general equities were also down slightly. One does not want to see declines in general equities and contrarian industries at the same time. That suggests a sour economic outlook. Last weeks convergent bearishness is a little discerning. As stated last week, there is simply not enough optimism to propel a dynamic bullish spurt on a quick-term basis at this time.

Short-term Indicant Update for Major Market Indices

Read your daily reports. The Quick-term Indicant signaled bull 8.3-weeks ago after signaling bear since January 4, 2005. The eight major indices are up 2.7% since the Quick-term Indicant’s bull signal on November 2, 2005. The Dow is up 2.3% since the Short-term Indicant signaled bull on November 3, 2005. The NASDAQ is up 2.8% since the Short-term Indicant signaled bull on November 2, 2005. Last week’s bearish expressions is a little concerning about the 2006 first quarter.

The Indicant Volume Indicator is expressing a lethargic cycle due to holiday apathy. As stated last week this indicator should resurface into a meaningful observation the first week of January 2006.

The Short-term Indicant signaled bull for the Dow30 on November 3, 2005 and the NASDAQ on November 2, 2005. They are up 1.9% and 2.8%, respectively since then.

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

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 40.2% since the MTI-RYS signaled bull an average of 96-weeks ago. That annualizes to 21.7%, which is down from last week. The strongest bull is the Dow Utilities. It is up 112.9% since the October 25, 2002 bull signal. The utilities moved south the last two weeks after moving north in the prior 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.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $32,465,876. That beats buy and hold performance of $1,640,534 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $161,172. That beats buy and hold’s $122,273 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $184,521. That beats buy and hold’s $76,467 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 3.2% since the Mid-term Indicant signaled sell on November 11, 2005. This fund may show some significant promise early 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 270.2% (annualized at 19.0%) since the Long-term Indicant signaled bull 739-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. Quick-term and Short-term attributes remain with a bullish bias, but it is no longer significant. The heart and soul of bullish seasonality is now here and should last through January. Keep your eye on the daily stock market reports, as the market from time to time aborts historical standards. Fundamentals and volume lethargy threaten a bullish conclusion to this month. Several Quick-term and Short-term attributes no longer favor bullish expressions. Conversely, there is a slight increase in those favoring bearish expressions.

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 in early 2006. As always, await guidance from the various Indicant models. They will let you know when or if this expected bearishness will occur.

The current Quick-term and Short-term Bulls remains possessed with bullish configurations, but again no longer solidly bullish. Last week’s performance was bearish. That has now occurred for three consecutive weeks. Although the market has demonstrated no bullish expressions the past three weeks, there is no dynamic bearish threat on the immediate horizon. None of the Quick-term, Short-term, and Mid-term attributes suggest dynamic bearish influences, although current configurations may be an embryonic prelude to what will occur in the first half of this year.

Read your daily reports, as quick-term attributes can shift quickly. As stated last week, the market lacks bullish convergence, which suggests bearish influences can occur quickly. Too many sectors are not participating in the current heart and soul of bullish seasonality. Gold’s strong bullish presence with mounting commodity prices and interest rates, if continued, will slap this bull out of influence.

Do not get lazy and set those stop losses for those stocks and funds that continue to enjoy hold signals.

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Hyperlinks

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Happy Investing,

www.indicant.net

01/01/06