July 25, 2004 Indicant.Net Weekly Update

Volume 7, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

Mid-term Indicant Signals Bear for NASDAQ and NAS100 Index

Sadly, the Mid-term Indicant signaled bear for the NASDAQ and NASDAQ100 Indices this weekend. The NASDAQ’s Mid-term Indicant Bull expired after its one year and four months of existence. It was born on March 22, 2003 and expired on July 23, 2004. At one time, it had risen by 50% since that bull signal. At expiration, it was up 30.1% after rising from 1,421.17 on March 22, 2003 to 1,849.09. That was a nice increase of about 428 points.

Here are some things to consider. With the exception of the 1929 and 1987 Mid-term Indicant Bull expirations, the market usually flutters a few times after lengthy bull legs. This was a lengthy bull leg of sixteen months. Fluttering means the market moves swiftly above and below bullish red in a span of weeks, as opposed to months and years. Dying Bulls usually do a little kicking and scratching as they are taking their last breath. That is fluttering. Do not be surprised if the NASDAQ bounces wildly to the north and just as sharply back to the south over the next few weeks. If it does not and heads straight south, you will be happy that you executed all those sell signals the past three weeks. Fluttering is more typical than not after long bull legs. The market delights in surprises so keep you eye on the Quick-term Indicant for guidance. The current climate is not fun and does not support any form of a relaxed spirit. It is time for good posture and focused concentration.

The recently expired NASDAQ Mid-term Indicant Bull was not that robust or dynamic, relative its ancestors. It behaved more like a turtle than a rabbit, but the relaxation it provided us was appreciated, even though at times somewhat boring. It behaved in a very tame manner, quite unlike its ancestors from the 1990’s. One could say, its life was more responsible in that “real corporate earnings” provided leadership, as opposed to wild imaginations that guided its 1990’s ancestors. In other words, it was driven by general economic activity, as opposed to some technocratic genius describing a new theory about technology that may or may not make money.

Many of you remember how the Indicant drew comparisons between the NASDAQ crash of 2000-2002 in early 2002 to the Dow crash from 1929-1931. Many of you recall how the NASDAQ bear lasted longer than the Dow’s 1929-1931 bear, though not quite as deep. Although it angered some of you, the Indicant pointed out that it may very well be sometimes after the year 2035 before the NASDAQ rises back to its 2000 peak.

Forecasting anything is not a statement of fact. It is always a speculative engagement. It can be entertaining, but excessive or irresponsible entertainment in any form generally leads to grief. The Indicant does not attempt to entertain. Although forecasting is an expertise our staff has from a mathematical, statistical, and strategic viewpoint, by policy, forecasting is disallowed on a formal basis. The Indicant only cares about direction right now; up or down.

Although some of you do not like to hear the NASDAQ may not return to its 2000 peak until 2035, we unofficially reason that its 2000 peak was a false one due to its speculative nature just as the roaring twenties led to wild speculations driving the Dow to unprecedented highs. However, the 1929 Dow had a few more influencing variables, such as trade protectionism, government interference in the capital markets, and the rising tide of socialism worldwide. Today, there is a rising tide of capitalism worldwide even though terrorism may stall the concept of freedom and thus promote bear market sentiment.

Why do we speculate about such things? Our commitment is to your happy investing. You hear pundits frequently suggesting that it is okay to continue investing in bear markets with dollar-cost-averaging. Those pundits make money on investing volume. They do not make money on investing advice. So, the more money you pour into the market, the more money they make, regardless of which way the market is going. There is no penalty for their bad advice. Quite contrarily, they benefit from it.

The Indicant, on the other hand, only makes money as a function of the quality of information provided to its members. You will notice the web site has no links tied to it, even though we get hounded from stock brokerage firms for reciprocal links. Once we complete our study of stock brokerage quality, only then will we consider their overtures. There are no commissions or any other source of income. If the information is not good, there is no income.

We would like to caution you about the advice provided by pundits. If the market is in a bearish direction, why put money into it? Any dollar put into the NASDAQ in March 2000 is worth about thirty-three cents today. If the NASDAQ does not return to that level until 2035, that dollar will never be worth a dollar for the most of you. Throwing money into bear markets is like throwing money away. Fear of missing the next bull leg is not a good enough reason.

Pundits promoting dollar-cost-averaging indirectly are admitting they have no idea what direction the market is about to take. They assume the market will be higher at some future point and can easily rationalize to the non-thinking that their investment dollar will turn out okay. That is pure hype. If the average investor has an equity investment life span of say twenty-five to thirty years, there are generations of people who endured this horrible, over-simplified advice with the advisor being the only beneficiary of that advice. Think about it. Why do people give advice? Answer: So they can benefit in some way or make themselves feel good. When a person goes to all the trouble to get on TV or talk to a reporter, he or she is not doing that to feel good. They are merely wanting some economic benefit.

The next question is; what is the penalty to the advisor’s bad advice? Last Friday’s guest on Wall Street Week was a brokerage firm executive. His advice included dollar-cost-averaging. His firm will benefit regardless of which way the market goes. There is no penalty to the adviser. Should the advisor’s risk-free advice be only risk-endured by the advisee? Keep on thinking about that. It is important to always understand the motive of advisors.

If the Indicant is wrong in its advice, the penalty could be severe. The Indicant makes plenty of money in the stock market, anyway, and exists only to mitigate feelings of guilt. Is the Indicant’s advice better than TV pundits? Only you know the answer to this.

There are a few more points about the market, stocks, and funds.

The Mid-term Indicant signaled sell for a very nice performing stock. It was one of those stocks that did not participate in the bear market from early 2000 through late 2002. Indicant Select Stock #48, Forest Lab, received its sell signal this past weekend after rising 297.7% since the Mid-term Indicant signaled buy on November 19, 1999. It was purchased at $12.48. The sell signal occurred at $49.63. At one point, it was up over 500%, but it had fallen too much for the Mid-term indicant to continue signaling hold. The Mid-term attributes were weakened too much to take the risk of holding on longer for an increasingly probability of enduring a smaller gain. The Mid-term Indicant is more patient before generating sell signals for triple digit gainers. Sometimes, it is better to take some profits and then reinvest with a smaller position on the next buy signal.

We started out the year holding all one-hundred of the NASDAQ100 stocks. On January 3, 2004, the Mid-term Indicant was signaling hold for all 100 stocks. They were up 75.2%, annualized at 107.7%, since the buy signals an average of 36.3 weeks earlier. Most of those buy signals came in October and early November 2002. Since then, the Mid-term Indicant has generated one-hundred and thirteen sell signals that were countered with fifty-one buy signals. The Mid-term Indicant is now signaling hold for only thirty-eight stocks of the NAS100 stocks due, in part, to the high number of sell signals the past three weeks. Specifically, the Mid-term Indicant has generated forty-five of the one-hundred and thirteen sell signals the past three weeks.

What is disturbing is the behavior of the stocks that received sell signals and subsequently retained avoid signals prior to the past three weeks. All of the NASDAQ100 stocks are down since last January. Even many of the triple digit performers are down considerably. But some of the mediocre stocks have fallen by bear market magnitudes. It is unusual for stocks to fall that much while the Mid-term Indicant continued to signal bull.

For example, Vitesse Semicon, N100 #84 is down 55.0% since the April 17, 2004 sell signal. Ciena, #93, is down 48.5% since the February 28, 2004 sell signal. BEA Systems, #57, is down 48.1% since the April 17, 2004 sell signal. QLogic, #20, is down 46.9% since its January 30, 2004 sell signal. Applied Micro, #33, is down 39.5% since its April 17, 2004 sell signal. RF Micro Devices, #28, is down 38.7% since its January 30, 2004 sell signal. Compuware, #26, is down 20.5% since its sell signal just three weeks ago.

The mediocre performers have been hit hard during this laterally moving market with a bearish tint. Now, the Mid-term Indicant is a bear. If it remains a bear, these mediocre stocks can go much lower.

Remember, the market usually flutters wildly at the conclusion of long Mid-term Bull legs. Some of these stocks may flutter also with the market. Some of them can move up by more than their current losses in just one week. In that event, the Mid-term Indicant will signal buy. If the fluttering continues, the Mid-term Indicant will signal sell on the down cycles. So, be prepared for fluttering behavior. Some of these stocks will remain depressed and will not participate in fluttering. A few will rise and keep on rising.

The Mid-term Indicant signaled sell for eighteen mutual funds. That is the highest number of sell signals for mutual funds since January 31, 2003. Many of you recall how the Mid-term Indicant signaled buy for nearly all the mutual funds it tracks in October and November 2002. You will recall how the market did not follow historical standards of bullish seasonality from December 2002 through February 2003. That unseasonable bearish expression in early 2003 triggered sell signals for most mutual funds, while very few stocks received sell signals then. So, in January 2003, sixty sell signals were generated for mutual funds. As you can tell, mutual funds track more closely to the market than individual stocks.

On March 22, 2003, the Mid-term Indicant signaled buy for fifty-six mutual funds. By May 3, 2003, the Mid-term Indicant was avoiding only one fund. It was the infamous inversely running Pro-Funds Ultra Short, which made some money in the great Quick-term Bear leg that ran from April 2002 through August 2002. Between May 3, 2003 and August 9, 2003, there were no sell signals for mutual funds. The Mid-term Indicant nervously generated some sell signals after that as the market historically expresses dynamic bearish behavior at that time of year. But the bull in 2003 solidly obsoleted historical bearish behavior prompting buy signals shortly after those sell signals. The high number of sell signals for mutual funds is indicative of the breadth of the underlying bearish attributes that exist at present.

About a year ago, the Mid-term Indicant signaled bull for Profunds Ultra Short, #22 in the Mutual Fund table. It did not perform that well in the solid bull market and a sell signal quickly followed that buy signal.

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

Keep in mind, this funds moves inversely at twice the rate of the NASDAQ100. If the NASDAQ moves up by a point, this fund will move down by two points and vice-versus. This fund is for those of you who have the instinct to gamble, somewhat. Market fluttering can wreak havoc on holding this fund. It is somewhat expensive with a minimum investment of $15,000.

The Mid-term Indicant signaled buy for this fund ahead of the expected technical rebound in the market before August. If you buy, use the Quick-term Indicant as a guide to buying or selling. If the Quick-term attributes indicate robust bullish expressions, dump this fund immediately, as the Mid-term Indicant is a weekly model while the Quick-term Indicant is a daily model. If Quick-term Force Vectors move north with robust configurations, you will not want to be holding this fund. The embryonic nature of hold periods shortly after a buy signal can generate reverse signals very quickly. If the technical rebound occurs next week, expect a sell signal next weekend. If the Quick-term Indicant continues to signal bear for say, three or four more weeks, then it may not signal sell for this fund on the technical rebound at the end of that four-week period. That depends on the nature of the Quick-term attributes and the profits already generated by this fund.

If the expected technical rebound is mild, it is likely this fund will receive a hold signal through October, although that is not an official forecast. Historical standards suggest the market to drop off severely in September with October being a crapshoot. The Quick-term Indicant will know more about October 2004 when October arrives; not before then.

Weekly Buy/Sell Summary

The Mid-term Indicant generated one buy signal and forty-six sell signals for stocks. The lone fund receiving the buy signal was counter-cyclical, ProFunds Ultra Short. Also, place your stop loss order immediately on buying and each week thereafter.

In addition to the sell signals, the Mid-term Indicant is avoiding eighty-three stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 26.3% since the Mid-term Indicant signaled sell an average of 41.8 weeks ago.

There were only sixteen stocks and funds avoided at this time last year in addition to twelve sell signals. The avoided stocks and funds one year ago were down an average of 29.1% since their respective sell signals an average of 30.2 weeks earlier. This contrasts strongly with the avoided stocks and funds two years ago. On July 27, 2002, the Mid-term Indicant was avoiding two-hundred and fifty-five stocks and funds that were down an average of 29.0% since their respective sell signals an average of 10.9 weeks earlier.

In addition to the buy signal this weekend, the Mid-term Indicant is currently signaling hold for 166 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 80.7%. That annualizes to 67.5%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 166 stocks and funds for an average of 6.2 weeks.

One year ago, the Mid-term Indicant was holding 265 stocks and funds for an average of 25.9 weeks. They were up 46.2% (annualized at 92.9%). That contrasts significantly with the Mid-term Indicant signaling hold for only twenty-four stocks and funds two years ago on July 27, 2002. They were up by an average of 54.0% since their respective buy signals an average of 49.0 weeks earlier.

This paragraph is a repeat from last several weeks with a few modifications. The current bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection with normal seasonality in 2002. The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market. Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways; manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth.

This paragraph is repeated from the past several weeks, but it does not hurt to reread it each week during bearish seasonality. You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy in 2004. Bearish expressions on a Mid-term basis in 2004 between May and October should not be surprising. So far, this year has been consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule.

The second most bullish year along the presidential election cycle is the election year, which is underway in 2004. We are anticipating enjoyment of that as well, but its bullish fervor may not unfold until just before the election this year. The following link will take you to charts that explain this phenomenon, which is currently underway. It is in a “members only” section. This paragraph will repeat throughout this year.

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. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know.

Right now, the Mid-term Indicant continues to signal bull. There is more about that later in this report.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of bearish seasonality. If you are up by 50% or more you may find it advantageous to set your stop loss at 10% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% 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 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% 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.

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. 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

Commodity related indices moved more bearish last week, which should be bullish for the market. However, one week’s movement is not a trend or even a major cycle. As stated last week, the markets are not showing respect for Greenspan’s rate hike. Foreign indices also turned slightly more bearish last week. The Internet and Technology remained bearish after plummeting to the south last week. The Medical sector also remained bearish. Two sectors maintaining red bull status were counter-cyclicals and energy.

As stated two weeks ago, the convergence of bearish expressions along with the rising counter-cyclicals and energy provides significant bearish sentiment. The Mid-term Indicant Bull is close to expiration for several indices. The NASDAQ Mid-term Indicant Bull that was born in March 2003 expired this week. It lived a long life, although not very dynamic.

As stated last week, it would not be surprising to see a technical rebound in the next few weeks, as many funds and stocks fell below their long-term blue curve. Typically, there is at least once bounce back to the north before outright bearish dominance. Also as stated last week, there is an obvious bearish convergence and that is bearish.

Economic Outlook

There is not much difference here from last week. Interest rates continue in a northbound direction, while their recent bottoms are historically low and their current values are low. The market has little experience in dealing with rising interest rates from historically low levels.

As has been the case for quite some time, commodity prices are not yet plummeting. As stated last week, they are showing little respect for Greenspan’s policy shift in policy. Greenspan will do all possible to fend off inflation. The swords will be drawn in early 2005 when all the political chums are safely in office for four more years.

Even the exchange rate has not strengthened the U.S. Dollar. A stronger dollar would help in the fight against inflation, but at the expense of domestic exporters. As stated last week, the dollar seems comfortable with its current weak position, although not falling anymore.

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 nine weeks ago since the MTI buy signal in April 2001. One-hundred and two weeks ago, it closed up 30.1%. Last week it closed up 88.0%, which is higher than the 75.9% reported fifty-three weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 26.7%, which is slightly higher than 23.1% reported fifty-three weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%. This fund was down significantly last week.

The Fidelity Gold Fund #28 is up 0.2% since the Mid-term Indicant signaled sell on April 30, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.7% profit. This fund was down significantly this past week and still receiving the avoid signal.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 103.2% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 52.6%. Vanguard Energy #18, VGENX, is up 45.4% (annualized at 34.4%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 21.4% (annualized at 33.5%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 29.3% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 30.9%. All of these funds were down last week, as market bearish expressions knocked the wind out of normally solid bullish investments with the current market undercurrents.

There is more about mutual funds later in this report and the links to the mutual fund tables can be found there.

The Gold Index is down 8.5% since the bull signal two weeks ago. This bull is only two weeks old and is very vulnerable. Fundamentally, it should rise if other commodities do not fall. Until this past week, their resistance to falling has been impressive, given the outright attack on them by Greenspan.

As repeatedly stated in this weekly report, gold prices will tumble if terrorism and inflationary threats subside. There is a “perception” that inflationary threats will subside, as demonstrated by the plummeting gold prices of the recent past.

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

http://www.indicant.net/Members/Updates/MTI-Mkts-Index%20Options/I05.htm#25

Quick-term and Short-term Indicant Update

The last Quick-term Bull Market was indeed not impressive. It was short-lived and the best it performed was being up 3.0% since the Quick-term Bull Signal on May 25, 2004.

The eight major indices are down 1.0% since the Quick-term Indicant signaled bear on July 23, 2004. The NASDAQ is the most bearish. It is down 1.3% since the Quick-term Bear signal of July 23, 2004.

As stated the past four weeks, the indices continue to move laterally with little chance of robust bullish expressions on a Quick-term basis. The bias is now decidedly in favor of the bear.

All eight indices are now Yellow Bears. This is the first time that configuration has formed since early 2003.

Force Vectors are moving south for all eight major indices, which was the case last weekend.  As stated last week, all eight indices’ Force Vectors reside in bearish domains, adding significantly to a bearish bias.

All eight Vector Pressures are in bearish domains. Three weeks ago, all eight were in bullish domains. Two weeks ago, two were in bearish domains. As stated last week, the market is increasingly expressing bearish behavior on a Quick-term basis. All eight Vector Pressures are moving south. Six weeks ago, all eight were moving north. This configuration is providing added confidence to the bear, who appears ready to pounce on the remaining Mid-term Bulls.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. About a year ago, one of our members, a Mechanical Engineer, made some suggestions that appear to be promising for plotting. Until then, we will continue to use words to describe them.

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

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

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

As stated in daily reports the past two weeks, the NASDAQ’s Indicant Volume Indicator’s recent increase with bearish market expressions is ominous. Such a relationship has not existed for quite some time. This is increasingly bearish on a Quick-term basis. It appears big money is dumping to avoid the annual August-September market slump, which by the way of benign last year.

The NYSE Indicant Volume Indicator is also rising again, but not yet robust. However, its rise with recent market bearish expressions adds to the ominous concerns supporting immediate bearish expressions.

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

The Dow Jones Industrial Index is down 2.1% since the Short-term Indicant signaled bear on July 8, 2004. The NASDAQ is down 4.5% since the Short-term Indicant signaled bear on July 8, 2004.

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

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

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

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

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

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

Perspectives

There is nothing different to report here. The remainder of this paragraph remains unchanged from the last ten weeks. As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions.

This is a new paragraph. An explosive bullish movement is appearing less likely until the indices collide with their breakdown lines. The Dow is about 900 points above its breakdown line. It is not likely the Dow will fall that much to make contact as the breakdown line will continue to rise. It will be interesting to see how the Dow behaves upon contact or near contact. If it rides the breakdown line to the south, expect severe bearish expressions. Extrapolating the data suggests contact will occur within the next nine to twelve weeks. It would not be surprising to see explosive bullish behavior in late October or early November after the contact is made. Keep in mind the Indicant does not officially forecast. Current Quick-term attributes indicate an increasing probability of this scenario occurring.

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

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

Overall, the Quick-term Bear, although embryonic, is starting out with good genes. It appears solid and could last for several more weeks. A technical rally to the north is due. The magnitude of that technical rally will provide some insight about the possibility of a protracted Mid-term Indicant Bear market.

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

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

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

The NASDAQ and NASDAQ100 received bear signals this past week. The NASDAQ Mid-term Bull was born on March 23, 2003 and lived for well over a year. That is below average for dynamic bull legs. Although it was a nice bull leg to enjoy, it never expressed much robustness. The NASDAQ very well take up to thirty-five years to get back to its 2000 peak, just as it took the Dow that long to return to its 1929 peak in 1954. Many of you recall, how the NASDAQ Bear of 2000 through 2002 was eerily similar to the Dow’s great bear leg from 1929-1932.

The Dow Utilities and Dow Transports remained above their respective bullish red curves. That is down by one from last week. Three weeks ago, all eight major indices were above their bullish red curves. Bearish expressions the past four weeks destroyed parts of the current Mid-term Bull, which as born on March 22, 2003.

The six remaining Mid-term Bulls are up by an average of 16.5% for an annualized gain of 15.3% since the MTI Bull signals an average of 56.4 weeks ago. The DJIA, Dow Composites, and Dow Transports have been Mid-term Bulls since March 22, 2003. The other indices were also bulls on March 22, 2003, but encountered a few bull/bear cycles since then.

The DJIA is up 16.9% (annualized at 12.6%) since the MTI Bull signal on March 22, 2003.  That is up slightly from 14.1% reported forty weeks ago. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.  

The NASDAQ Composite’s Mid-term Bull was up 30.1% (annualized at 22.4%) since the March 22, 2003 MTI Bull signal at expiration this weekend. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth since the Mid-term Bull signal of March 22, 2003. It had fallen nearly 20% since its peak.

The Dow Transports and Dow Composites are up 34.5% (annualized at 25.6%) and 23.8% (annualized at 17.7%), respectively since the Mid-term Indicant Bull signal on March 22, 2003. All indices were down significantly last week.

The S&P500 is up 5.5% (annualized at 6.8%) since the Mid-term Bull signal on October 4, 2003. The S&P100 is up 2.0% since the Mid-term Bull signal on November 1, 2003, which annualizes to 2.8%. The Dow Utilities is up 16.6% (annualized at 17.7%) since the Mid-term Bull signal on August 16, 2003.

As earlier stated, the NASDAQ and NASDAQ100 received Mid-term Bear signals this weekend.

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

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

Mid-term Indicant Positions - International Markets

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

Sixteen of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 101.5% since the Mid-term Indicant signaled bull an average of 94.7 weeks ago for an annualized gain of 55.7%, which is less than the 72.9% reported fifty-nine weeks ago.

In addition to the new bear signals, three indices have been bears for an average of 5.6 weeks. They are down an average of 1.8% since then. The International indices were down slightly last week.

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

July 18, 2004 Indicant.Net Weekly Update

Volume 7, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Is a 1970’s Type Market Unfolding?

We hope not, but current conditions are eerily similar. Oil service stocks and other energy related stocks are skyrocketing, while general equities are expressing bearish behavior. That relationship occurred during the 1970’s, as OPEC demonstrated its might with embargoes and low effort greed.

This time OPEC is not as strong as it once was with Russian oil exports in a competitive mode. The North Sea and North Slope are now mature production zones that would not exist if it were not for that OPEC greed of the 1970’s. The North Sea and North Slope oil was not easy to develop as exploration and development conditions were harsh. Punching a hole in Middle Eastern ground is easy. The wells are shallow and with high bottom hole pressure. It just gushes out and providing the kingdoms and dictators their plush life styles. They spread their wealth around to maintain power. Unfortunately, much of that wealth is delivered to terrorists.

This time is different. Societies in the 1970’s were still bent on socialistic causes, including the U.S. This period came off the heels of FDR’s New Deal and JFK/LBJ Great Society, which failed. High performing societies cannot attain and maintain high performance without the underlying efforts of actually performing at a high level. Communists expanded in Russia and Eastern Europe with their stupid idea of how things are suppose to be, killing the competitive forces and laws of nature. That craziness produced long lines for bread and vodka, which was used to deaden the grief of millions. Socialistic ideals over-powered capitalists during much of the last century. The stock market was flat from 1929 through 1952, with mostly bearish cycles. As socialistic causes increases, the stock market decreases.

In the early 1970’s, the second edition of The Limits to Growth by Dennis and Donella Meadows along with Jergen Randers and William W. Behrens stated the earth had a twenty year supply of petroleum with existing reserves. We did not run out of it in the early 1990’s as more reserves were discovered and brought into production. The Limits to Growth estimated that petroleum would run out in fifty years if five times known reserves in the early 1970’s were discovered. If their projections are accurate, then we have about twenty years before all of the oil is sucked out of the ground. Many modern day prognostications are eerily similar.

The U.S., U.S.S.R. and Japan were the biggest consumers of petroleum in the 1970’s. Those three countries consumed over 51% of the earth’s petroleum production with the U.S and U.S.S.R. as the biggest producers. The U.S. produced 23% of world production and the U.S.S.R. produced 16%. 

Saudi Arabia and Kuwait contained about 32% of the total known reserves of petroleum product in the 1970’s. At that time of the analysis of The Limits to Growth, less than 10% of the world’s population was able to participate in capitalism. China was not a consumer of petroleum at the time. The only oil they needed was for bicycle chains and a few factories. Now, OPEC is owner of well over 50% of the proven reserves and the Chinese poised to consume a big chunk of it.

The Chinese economy is expanding. That will induce much higher demand for petroleum and other natural resources. The Saudi’s are having difficulty getting production levels up enough to put a lid on oil prices to satisfy the changing dynamics of consumption. Greenspan’s future tactics will also be addressing the Chinese economy. He is capable and willing to raise rates high enough so that Americans and other Western nations will be unable to afford products from China.

As OPEC moved the price of oil skyward in the 1970’s, the oil field services companies and other energy related sectors stock prices also sky rocketed. The high profit margins from the OPEC induced high oil prices stimulated increased petroleum production in the U.S. The U.S. was then and had been the swing nation. In other words, as world demand increased for oil, the U.S. was the most flexible in vacillating production to meet those demand levels. The Saudi’s wanted to displace the U.S. as the swing nation.

By the late 1970’s and early 1980’s oil prices begin to collapse as the U.S. had aggressively accelerated production to enjoy the high profits of $30+ oil. Halliburton, Schlumberger, and others like them enjoyed stock price increases during the 1970’s exceeding 1,000%. The increased production of petroleum in the U.S. pressured OPEC to lower prices. Capitalism once again prevailed. OPEC had a formidable competitor.

Harvard educated Sheik Yamani of Saudi Arabia, who guided OPEC through their increasing power in the 1970’s and early 1980’s, determined the breakeven point for U.S. oil production at about $18 per barrel. He decided to cut oil prices in the early 1980’s to $18 or less. That would shut off exploration and eventually production in the U.S. and help OPEC dominate the market.

The increased production from the U.S. and Shiek Yamani’s desire to drive the U.S. from producing caused oil prices to plummet to around $9 per barrel by the middle 1980’s. Energy stocks plummeted well ahead of the decline in oil prices. For example, Halliburton’s stock peaked above $80/share by 1980-81 and then plummeted to $19/share by 1983 or about two years before oil prices find their eventual bottom.

Oil prices collapsed in the mid-1980’s so much that King Fahd of Saudi Arabia fired Sheik Yamani and announced he wanted oil prices to be at $18 per barrel. Within months, the price of oil rose from the low teens to $18 per barrel, just as the King had directed. U.S. rotary rig count peaked in 1981 at about 5,000 and fell to pre-WWI levels by the mid 1980’s. By the late 1980’s OPEC has much more control over energy prices.

Supply side economics gained popularity in the early 1980’s at the same time oil prices were plummeting. Ronald Reagan was elected to promote private industry and cut the influence of big government and big taxes. Consequently, entrepreneurialism raged by the late 1980’s and still carries forward today. The combination of the decline in oil prices and the corresponding disinflation, coupled with rising capitalism caused the stock market to rise with unheralded bullishness in the 1980’s and 1990’s. Americans voted against the Great Society and the New Deal for the first time in several decades. They said, yes we can do better with our money than the government.

Those dynamics were fuel for the stock market. In the crash of 1987 less than one in four American homes were invested in the stock market. At the peak of the NASDAQ in early 2000 more than one in two households were in the stock market. The NASDAQ collapse since 2000 drove many investors from the market and many will never return. That will help influence a ceiling on bullish expressions. Stock prices are also under the influence of supply and demand just like everything else.

Is this the 1970’s all over again? Will the Saudi’s attempt to keep the price of petroleum high? If they do, the U.S. will again attempt to become the swing nation. The problem is the U.S. has sucked nearly 75% or more of its reserves from the ground. There is simply not enough oil in the ground for the U.S. to become the swing nation even with all the technological advances in recovery methods.

Another problem is that it takes quite a bit of time and capital to move from exploration, and drilling to production. All the Saudi’s need to do is open a valve. The U.S. was fooled a few times in the 1990’s with rising oil prices only to watch the Saudi’s assume the role of swing nation status. The required capital in the U.S. will be slow in coming as investors have burned too many times in their past ventures in the petroleum industry. If the Saudi’s feel too much exploration and development is going on, they will flood the market and cause prices to plummet. At least that has been their prior strategy, but the demand for oil in China may prevent the prior ease of Saudi manipulations in oil prices.

There are enough risk takers and students of the industry to take the gamble. With China increasingly becoming a massive consumer of natural resources, the Saudi’s may not be able to lower the price. It is looking more like that all the time. It would not upset the Saudi Royal family if that were too happen. They may reason, there is plenty of demand for petroleum products for both the U.S. and other producing nations and the Saudi’s to participate. The U.S.S.R. could throw a wrench into that line of thinking as their capitalistic ways can generate an accelerated ability to increase production. Only time will tell is enough reserves are available. They have demonstrated capital know-how. The question now is how much is there that can be developed and marketed.

That leads to the next question. Is the prognosis from The Limits to Growth accurate? If indeed there are only twenty years or so of petroleum reserves remaining, the price of oil would approach infinity without rapid and severe infrastructural changes. Can the internal combustion engine become a dinosaur in the next twenty years? Many companies would fall on the path of extinction, but replaced by new companies providing alternate sources of energy. These alternate sources of energy, whether it is fuel cells or Tesla’s energy field, will not be policy driven successfully. Such swift changes in the infrastructure will only occur by hardworking capitalists. The infrastructural transfer from the candlestick maker to the light bulb was not policy driven or legislatively legalized. It was for the sole purpose of profit; the only reliable source of solving problems. Hard work and an unrelenting desire to achieve success came from the heart and soul of Thomas Edison; not from political mumbo-jumbo.

It is estimated total petroleum reserves are around two to three trillion barrels. We have consumed nearly a trillion. It took a little over a hundred years to do that. Many prognosticate that it will take less than thirty years to consume the remaining trillion or two. The Chinese economy is expanding rapidly. It will be thirsty for fuel at a rate much higher than the western civilizations of the past one-hundred years.

Production continues to increase. We may be entering the last hoorah for the petroleum industry. OPEC possesses about 75% of the remaining reserves of petroleum. It is ironic that the predominant supplier to the western lifestyle despises those they supply. It is also interesting that the U.S. and Britain are camped out right in the middle of OPEC land. That may very well indeed be a justification for George W. Bush, but many Americans are not capable of comprehending the dynamics of economics and the amount of fuel they each use, including those Green Peace folks who drive automobiles to places to protest.

Regardless of military presence, the law of supply and demand will dictate energy prices. The alternative to petroleum will initially be expensive until Ford like production systems are installed and only after the replacement product is invented and introduced. The only group of people that will successfully drive that solution are capitalists. No other group can solve the problem. There will be many to talk about it, but that will be the limits of their participation; just cheap talk. The capitalists burning the midnight effort with hard-working nitty-gritty effort and a desire for wealth will be the problem solver.

Social causes will have to take a back seat. If governments around the world attempt legislative solutions, expect a profound bear market that would make the Great Depression look like a family picnic. Civil strife in Iraq would look like that family picnic. Politicians will jawbone it a bunch, but if they are not burning mid-night oil on converting hydrogen to useable energy, their talk is cheap and mind-wasting.

So far, the energy sector is configured in a manner that suggests more oil is going to be discovered and sucked from the ground. As long as oil prices are above $40 per barrel, expect that sector to continue to express bullish behavior. Hopefully, your portfolio mix contains some of those energy companies or related funds. Some of the related funds are discussed in “Fear and Terrorism” section of this report. You will see the strongest fund is State Street Global Research, Mutual Fund #9 – SSGRX. It is up 110.3% since the Mid-term Indicant signaled buy on August 16, 2002, a couple of months before the October-November 2002 buying spree in all stocks tracked by the Indicant.

So far, it looks like it could very well be the 1970’s again for different reasons, but with the same undercurrent; high energy costs, high inflation, and high interest rates. That means the middle of this decade could endure a deep and severe bear market. The big blow should not occur until the post election year, 2005 or about five and a half months from now. Greenspan will be much more aggressive when his boss, whoever it may be, will be gainfully employed for at least four more years. That is one reason why the post election year is the most bearish on the presidential election cycle.

Until then, the Mid-term Indicant Bull continues to live, although hanging on by a thread.

You will notice several stocks and a few funds are configured for sell, but still receiving a hold signal from the Mid-term Indicant. In other words, they are below bearish yellow and many have recently fallen below their long-term blue curves.

Although the Mid-term Indicant generated the highest number of sell signals in nearly ten months this weekend, many were held due to several reasons. Many of you incur capital gains taxes, while some can avoid that liability in your Keoghs and 401K’s. Although many of the greater capital gains are over a year old, you would still incur the long-term capital gains tax. Late last year, several sell signals were induced and were quickly followed by buy signals in September. That caused a few of you to incur capital gains tax liabilities. We have since coded that variable into the Mid-term model. However, a bear is a bear and tax threats are not a good reason for enduring a bear leg; especially when depth and breadth are unknown.

The Mid-term Indicant is conservative in generating sell signals until the current Mid-term Bull expires. The NASDAQ is very near expiration now.

Finally, many of the stocks and funds just fell below their long-term blue curves. It is not uncommon to experience a technical rebound with that configuration at the top of a long-running bull. Sell signals will accelerate on the second downward pass through the long-term blue curve. A second downward pass is not possible at this point without a rebound in the market. Expect a technical market rebound to the north over the next few weeks. When and if the market collapses below blue again, sell signals will accelerate. If this is 1970 all over again, you will not see sell signals for energy related stocks and funds. Enjoy holding them even if the market turns bearish with a 1970’s type of flavor. They will skyrocket if the 2000 decade is a carbon copy of the 1970’s.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and thirty-four sell signals for stocks. No funds received any buy or sell signals. Be extremely conservative in any buying at this time as we remain in bearish seasonality and the post-election-year phenomenon is now in the market’s sight. Also, place your stop loss order immediately on buying and each week thereafter. Deep bearish seasonality is coming up in a few weeks. Save your cash for a potential play in ProFunds Ultra Short.

In addition to the sell signals, the Mid-term Indicant is avoiding fifty stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 29.9% since the Mid-term Indicant signaled sell an average of 45.0 weeks ago.

There were thirteen stocks and funds avoided at this time last year in addition to six sell signals. The avoided stocks and funds one year ago were down an average of 28.1% since their respective sell signals an average of 29.6 weeks earlier. This contrasts strongly with the avoided stocks and funds two years ago. On July 19, 2002, the Mid-term Indicant was avoiding two-hundred and forty-one stocks and funds that were down an average of 27.7% since their respective sell signals an average of 10.4 weeks earlier.

Although there were no buy signals this weekend, the Mid-term Indicant is currently signaling hold for 212 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 79.1%. That annualizes to 69.0%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 212 stocks and funds for an average of 59.6 weeks.

One year ago, the Mid-term Indicant was holding 277 stocks and funds for an average of 24.8 weeks. They were up 44.4% (annualized at 93.2%). That contrasts significantly with the Mid-term Indicant signaling hold for thirty-nine stocks and funds two years ago on July 19, 2002. They were up by an average of 38.4% since their respective buy signals an average of 44.4 weeks earlier.

This paragraph is a repeat from last several weeks with a few modifications. The current bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection with normal seasonality in 2002. The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market. Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways; manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth.

This paragraph is repeated from the past several weeks, but it does not hurt to reread it each week during bearish seasonality. You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy. Bearish expressions on a Mid-term basis in 2004 between May and October should not be surprising. So far, this year has been consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule.

The second most bullish year along the presidential election cycle is the election year, which is underway in 2004. We are anticipating enjoyment of that as well, but its bullish fervor may not unfold until just before the election this year. The following link will take you to charts that explain this phenomenon, which is currently underway. It is in a “members only” section. This paragraph will repeat throughout this year.

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. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know.

Right now, the Mid-term Indicant continues to signal bull. There is more about that later in this report.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of bearish seasonality. If you are up by 50% or more you may find it advantageous to set your stop loss at 10% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% 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 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% 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.

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. 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

Commodity indices remained flat after rising last week. As stated last week, the markets are not showing respect for Greenspan’s rate hike. Foreign indices remained flat while the U.S. indices dropped. Some foreign indices moved aggressively to the north last week. The Internet and Technology sectors plummeted last week. The Medical sector also expressed bearishness. Two sectors maintaining red bull status were counter-cyclicals and energy.

As stated last week, the convergence of bearish expressions along with the rising counter-cyclicals and energy provides significant bearish sentiment. However, the Mid-term Indicant Bull continues to live and until it expires, sell signals will be held to a minimum.

It would not be surprising to see a technical rebound in the next few weeks, as many funds and stocks fell below their long-term blue curve. Typically, there is at least once bounce back to the north before outright bearish dominance. All in all, there is an obvious bearish convergence and that is bearish.

Economic Outlook

It appears interest rates are about to begin a long and arduous rise to the north. Their recent bottoms are historically low and their current values are low.

Commodity prices are not yet plummeting. They are showing little respect for Greenspan’s policy shift on increasing debt expenses. Many corporations are flush in cash and thus the meager rate increases are not yet threatening capital spending or working capital requirements.

The dollar has been slipping again. World currency traders are not yet showing much respect for Greenspan’s rate hike. The dollar seems comfortable with its current weak position, although not falling anymore.

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 eight weeks ago since the MTI buy signal in April 2001. One-hundred and one weeks ago, it closed up 30.1%. Last week it closed up 99.0%, which is higher than the 75.9% reported fifty-two weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 30.0%, which is higher than 23.1% reported fifty-two weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%. This fund was up slightly last week.

The Fidelity Gold Fund #28 is up 8.8% since the Mid-term Indicant signaled sell on April 30, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.7% profit. This fund was down slightly this past week and still receiving the avoid signal.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 110.3% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 56.7%. Vanguard Energy #18, VGENX, is up 49.8% (annualized at 38.3%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 25.8% (annualized at 41.7%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 33.0% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 35.5%.

There is more about mutual funds later in this report and the links to the mutual fund tables can be found there.

The Gold Index is down 2.4% since the bull signal last week. This bull is only one week old and is very vulnerable.

As repeatedly stated in this weekly report, gold prices will tumble if terrorism and inflationary threats subside. There is a “perception” that inflationary threats will subside, as demonstrated by the plummeting gold prices of the recent past.

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

http://www.indicant.net/Members/Updates/MTI-Mkts-Index%20Options/I05.htm#25

Quick-term and Short-term Indicant Update

The eight major indices are down 1.0% since the Quick-term Indicant signaled bull on May 25, 2004. The Dow Composite of Sixty-Five Stocks is the most bullish. It is up 2.1% since the Quick-term Bull signal of May 25, 2004. That is no change from last week. The least bullish is the NASDAQ Index. It is down 4.1% since the May 25, 2004 Quick-term Bull signal.

As stated the past three weeks, the indices continue to move laterally with little chance of robust bullish expressions on a Quick-term basis.

None of the eight major indices are red bulls.

Only two indices of the eight are above the bearish yellow curve; Dow Composites and Small Caps (S&P600). And they are just barely above it and thus the reason for the Quick-term Indicant not signaling bear last Friday.

Force Vectors are moving south for all eight major indices. That is up from six last week. All eight indices’ Force Vectors now reside in bearish domains, adding significantly to a bearish bias.

All eight Vector Pressures are in bearish domains. Two weeks ago, all eight were in bullish domains. Last week, two were in bearish domains. As you can see, the market is increasingly expressing bearish behavior on a Quick-term basis. All eight Vector Pressures are moving south. Five weeks ago, all eight were moving north.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. About a year ago, one of our members, a Mechanical Engineer, made some suggestions that appear to be promising for plotting. Until then, we will continue to use words to describe them.

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

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

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

As stated in daily reports last week, the NASDAQ’s Indicant Volume Indicator’s recent increase with bearish expressions is ominous. Such a relationship has not existed for quite some time. This is increasingly bearish on a Quick-term basis.

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

The Dow Jones Industrial Index is down 0.3% since the Short-term Indicant signaled bear on July 8, 2004. The NASDAQ is down 2.7% since the Short-term Indicant signaled bear on July 8, 2004.

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

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

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

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

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

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

Perspectives

There is nothing different to report here. The remainder of this paragraph remains unchanged from the last nine weeks. As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions.

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

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

Overall, this Quick-term Bull continues to weaken. The Mid-term Indicant appears positioned for a technical bounce to the north within a few weeks, but it would not be surprising for the Quick-term Indicant to endure a bear cycle before then.

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

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

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

The Dow Utilities, Dow Transports, and Dow Composites remain above their respective bullish red curves. Two weeks ago, all eight major indices were above their bullish red curves. Bearish expressions the past three weeks have not yet destroyed the current Mid-term Bull, which as born on March 22, 2003.

The eight major indices are up an average of 18.7% for an annualized gain of 17.3% since the MTI Bull signals an average of 56.0 weeks ago. The DJIA, NASDAQ, Dow Composites, and Dow Transports have been Mid-term Bulls since March 22, 2003. The other four indices were also bulls on March 22, 2003, but encountered a few bull/bear cycles since then.

The DJIA is up 19.0% (annualized at 14.3%) since the MTI Bull signal on March 22, 2003.  That is up slightly from 14.1% reported thirty-nine weeks ago. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.  

The NASDAQ Composite continues to be the strongest Mid-term Bull. It is up 32.5% (annualized at 24.5%) since the March 22, 2003 MTI Bull signal, which is down, significantly, from 33.2% reported thirty-nine weeks ago. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth since the Mid-term Bull signal of March 22, 2003.

The Dow Transports and Dow Composites are up 36.4% (annualized at 27.5%) and 25.9% (annualized at 19.6%), respectively since the Mid-term Indicant Bull signal on March 22, 2003.

The S&P500 is up 6.9% (annualized at 8.8%) since the Mid-term Bull signal on October 4, 2003. The S&P100 is up 3.1% since the Mid-term Bull signal on November 1, 2003, which annualizes to 4.3%. The Dow Utilities is up 18.8% (annualized at 20.4%) since the Mid-term Bull signal on August 16, 2003.

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

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

Mid-term Indicant Positions - International Markets

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

Nineteen of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 90.5% since the Mid-term Indicant signaled bull an average of 87.7 weeks ago for an annualized gain of 53.7%, which is less than the 72.9% reported fifty-eight weeks ago.

In addition to the new bear signal, two indices have been bears for an average of 6.9 weeks. These two bears are down an average of 0.3% since then. The International indices were up last week contrary to the U.S. market’s behavior.

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

July 11, 2004 Indicant.Net Weekly Update

Volume 7, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Greenspan Passivity and a Billion New Capitalists

The markets are expressing behaviors consistent with Greenspan being too passive in addressing inflationary threats. The equity market’s bearish expressions the past two weeks are most likely not the result of this perception of Greenspan passivity. A rising Indicant Volume Indicator is not supporting the selling activity. That means big money is not massively selling their holdings. Many of them are enjoying the same double and triple digit gains that you are enjoying. It is tough to sell such positions at this time of year, although most of the gains would be long-term capitals gains.

So far, it appears big money is being allocated (or rotated) into inflation-friendly investments, such as gold and energy. The rotation is not being supplied by equity money since the Indicant Volume Indicator is declining. The increased prices on inflation-friendly investments is being driven by new money. The Mid-term Indicant even signaled new bull for the Gold Index, although reluctantly. The bear signal for the Gold Index a few weeks ago may have been premature. The new bull signal has a few remaining configurations suggesting it will be short-lived.

The recent spike in inflation-friendly investments is not very robust, but certainly noticeable. Understanding the political influence on these dynamics is important.

Greenspan and other Fed Chiefs in the past do all they can to not be disruptive to the political cycle. They reason that it is politically appropriate to implement fiscal policies in a time manner that will not influence presidential elections, if possible. All those employed in power positions of public service fully understand that Americans simply vote their pocket books. Therefore, Fed Chiefs and incumbent politicians like unemployment to be low on Election Day.

If unemployment is high, the incumbent is voted out of office, regardless of the level of competence or international concerns. FDR’s four-term election was an exception as he simply employed a whole bunch of naïve people at less than minimum wages and expanded employment in the government. The stock market obviously did not like that political behavior as it took over twenty-five years for it to break-even from 1929 through the early 1950’s. FDR’s policies and isolationism before him held the country back and hurt the livelihoods of a generation of people in the 1930’s and 1940’s. The recent twenty-five basis point increase in interest rates by Greenspan will not propel the economy off into a tailspin before Election Day 2004. That is why the second most bullish year on the presidential election cycle is the Election Year. That is also why the least bullish year on the presidential election cycle is the post election year that confronts us in 2005.

Do not be surprised at accelerating Greenspan aggressiveness anti-inflation policies toward the end of the year. He will see nothing wrong in implementing recessionary policies that will drive the post election year of 2005 into a recessionary tailspin. After all, the incumbent, who is his boss on February 1, 2005, will be employed for at least four more years. So what if there is a recession in 2005? Who cares in the political arena? They have their jobs, regardless of economic performance. They typically get to work on improving the economy in the mid-term election year, which is when the market typically bottoms. In addition, the only contribution politicians can apply to improving the economy is to undo their prior damage.

Big money is not always right in their strategic assessments about the long-term, but the recent spike in inflation-friendly investments along with the recent bearish expressions by the equity markets support this theory. The leading mutual fund is the State Street Research Global. It is up 106.1% since the Mid-term Indicant signaled buy on August 16, 2002. Vanguard’s Gold Fund is the second most bullish fund. It is up 97.0% since the Mid-term Indicant signaled buy on April 13, 2001. The energy services stocks and indices have been extremely bullish the past two weeks. Strategic themes are aligned in the belief that the burgeoning capitalistic societies around the world are going to impose excessive demands against finite resources.

It will be interesting to see how bullish seasonality behaves in the latter part of this year, which is when Greenspan may indeed implement aggressive policies to fend off inflationary threats at the expense of economic growth. There is no direct correlation between equity market performance and interest rate changes. There is a direct correlation between the combination of interest rates and the absolute value of inflation/deflation and equity markets on a long-term basis. If Greenspan remains passive and allows inflation to kick in, the stock market will move south.

If interest rates increase, along with rising inflation or decreasing deflation, rest assured the equity markets will react with a bearish fervor. Greenspan’s responsibility is directed at the economy and not the stock market. However, capital funding is required for an expanding economy and that is the purpose of the stock market within the confines of economic contributions. The stock market serves other purposes as well, including the gambling tactics practiced by all those poor day-traders.

The recent inflation-friendly bullish spikes may be short-lived. They could reverse their bullish direction just as quickly as they configured bullish sentiment at the expense of the equity markets. However, until they do, there is an obvious lack of interest in equity related investments at this time. Human emotion can change that quickly, which sometimes is absent of rationality.

The opposite paradigm is the one-billion plus added capitalists to the international economic system. That is extraordinarily bullish in the long-term. That is also inflationary on raw materials and commodities in the short-term. It takes time for raw materials and commodities to work through the hands of capitalists before enjoying the best anti-inflation weapon there is; productivity growth. The demand for raw material and commodities should explode, driving prices to the north in the short-term. That will definitely dampen profit margins for the dilettante-managed companies, who have no idea on how to direct productivity gains.

Non-dilettante capitalistic productivity will transforms raw materials and commodities into saleable product. If the productivity continues to rise, then consumer prices will fall. That will provide Greenspan enough reason to stifle rate increases and thus stimulatd the economy. The problem for the equity markets is to endure the commodity bubble first before the transformation of saleable product by the capitalists. The dilettante-infested S&P500 companies will not deliver productivity growth. The small caps and foreign companies will deliver it. In other words those that are hungry will perform. Those receiving seven digit salaries will most likely not perform.

It is a short-term issue bouncing against the long-term benefits. The equity markets will not like the commodities bubble and therefore endure deep bearish expressions. If the one-billion new capitalists join the ranks of the dilettante management, then no productivity will be enjoyed. In that event, dilettante pricing will ensue by virtue of dilettante productivity, which moves south. That will drive consumer prices north. Greenspan or his replacement will have to force recession/depression to root out the non-productive. All this makes since under Darwinian law, but in socialistic settings, it can take several generations to weed through the process.

All in all, sell on the sell signals, buy on the buy signals and read the daily reports. Maintain the discipline to set your stop losses each week. This strategic thinking is sometimes wasteful and sometimes meaningful. However, bearish markets will be avoided by the Indicant regardless of depth or breadth; even if for generations.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and fourteen sell signals for stocks. No funds received any buy or sell signals. Be conservative in any buying at this time as we remain in bearish seasonality and the post-election-year phenomenon is now in the market’s sight. Also, place your stop loss order immediately on buying and each week thereafter.

In addition to the sell signals, the Mid-term Indicant is avoiding thirty-six stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 31.2% since the Mid-term Indicant signaled sell an average of 53.7 weeks ago.

There were ten stocks and funds avoided at this time last year in addition to one sell signal. The avoided stocks and funds one year ago were down an average of 29.0% since their respective sell signals an average of 29.1 weeks earlier. This contrasts strongly with the avoided stocks and funds two years ago. On July 12, 2002, the Mid-term Indicant was avoiding two-hundred and twenty stocks and funds that were down an average of 26.6% since their respective sell signals an average of 10.7 weeks earlier.

Although there were no buy signals this weekend, the Mid-term Indicant is currently signaling hold for 246 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 67.8%. That annualizes to 65.6%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 246 stocks and funds for an average of 53.7 weeks.

There was one buy signal on this weekend one year ago. At that time, the Mid-term Indicant was holding 278 stocks and funds for an average of 23.9 weeks. They were up 47.5% (annualized at 103.2%). That contrasts significantly with the Mid-term Indicant signaling hold for fifty stocks and funds two years ago on July 12, 2002. They were up by an average of 40.3% since their respective buy signals an average of 45.0 weeks earlier.

This paragraph is a repeat from last several weeks with a few modifications. The current bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection with normal seasonality in 2002. The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market. Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy.

This paragraph is repeated from the past several weeks, but it does not hurt to reread it each week during bearish seasonality. You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in 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. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy. Bearish expressions on a Mid-term basis in 2004 between May and October should not be surprising.

The second most bullish year along the presidential election cycle is the election year, which is underway in 2004. We are anticipating enjoyment of that as well, but its bullish fervor may not unfold until just before the election this year. The following link will take you to charts that explain this phenomenon, which is currently underway. It is in a “members only” section. This paragraph will repeat throughout this year.

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. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know. Right now, the Mid-term Indicant continues to signal bull. There is more about that later in this report.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of bearish seasonality. If you are up by 50% or more you may find it advantageous to set your stop loss at 10% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% 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 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% 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.

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. 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

Commodity indices rose last week. This is either a technical recoil or an underlying market theme that Greenspan is being too passive in addressing the inflation threat. Foreign and U.S. Indices also dropped, as did the Internet, Large Caps, Mid Caps, and Technology. Last week’s bearish expression has breadth. Two sectors maintaining red bull status were counter cyclical and energy. The convergence of bearish expressions along with the rising counter-cyclicals and energy provides significant bearish sentiment. However, the Mid-term Indicant Bull continues to live and until it expires, sell signals will be held to a minimum.

Economic Outlook

Commodity prices and the U.S. Dollar are not impressed with Greenspan’s rate hike last week. Oil prices continued back to the north, while several other commodities held their ground. With the exception of the Reuter U.K. Index, commodity prices are maintaining their red bull stature.

The U.S. Dollar weakened last week. That is contrarian behavior to rate hikes. The international community and currency traders apparently believe Greenspan’s rate hikes last week were not enough.

The one-month CD remained flat, while the six-month CD fell by 2.7%. That was the first drop in CD yield in several months.

It appears the money markets feel Greenspan needs to continue jacking rates higher. It is still a guessing game on how the market will react to rising rates that continue to be historically low.

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 seven weeks ago since the MTI buy signal in April 2001. One-hundred weeks ago, it closed up 30.1%. Last week it closed up 97.0%, which is higher than the 75.9% reported fifty-one weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 29.5%, which is slightly higher than 23.1% reported fifty-one weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%. This fund was up significantly last week.

The Fidelity Gold Fund #28 is up 10.0% since the Mid-term Indicant signaled sell on April 30, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.7% profit. This fund was up significantly this past week and still receiving the avoid signal.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 106.1% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 55.1%. Vanguard Energy #18, VGENX, is up 47.3% (annualized at 36.9%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 20.8% (annualized at 34.7%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 30.2% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 33.1%.

There is more about mutual funds later in this report and the links to the mutual fund tables can be found there.

The Mid-term Indicant signaled New Bull for the Gold Index. It has configured itself for this change in position but do not be surprised if it signals bear again. The markets apparently believe that Greenspan is being too passive on addressing the inflationary threat.

As repeatedly stated in this weekly report, gold prices will tumble if terrorism and inflationary threats subside. There is a “perception” that inflationary threats will subside, as demonstrated by the plummeting gold prices of the recent past.

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

http://www.indicant.net/Members/Updates/MTI-Mkts-Index%20Options/I05.htm#25

Quick-term and Short-term Indicant Update

The eight major indices are up 0.4% since the Quick-term Indicant signaled bull on May 25, 2004. That annualizes to 3.4%, which is down considerably the past two weeks. The Dow Composite of Sixty-Five Stocks is the most bullish. It is up 2.1% since the Quick-term Bull signal of May 25, 2004. The least bullish is the NASDAQ Index. It is down 0.9% since the May 25, 2004 Quick-term Bull signal.

As stated the past two weeks, the indices continue to move laterally with little chance of robust bullish expressions on a Quick-term basis.

None of the eight major indices are red bulls. The S&P600 (small caps) was the only red bull last week, but fell victim to last week’s bearish behavior. The indices continue not expressing much confidence in bullish expressions. For more information about the Quick-term Indicant, refer to last week’s daily reports.

It has been awhile since any discussion about the bearish yellow curve. Unfortunately, the NASDAQ fell below the bearish yellow curve. It is the only one below that curve, while the S&P500 and S&P100 are setting on it. Will bearish yellow act as a floor or ceiling? The answer to that particular attribute should be apparent next week.

Force Vectors are moving south for six of the eight major indices. All eight indices’ Force Vectors now reside in bearish domains, adding to an increasingly bearish bias.

Six of the eight Vector Pressures are in bearish domains. Last week all eight were in bullish domains. The only two indices remaining in bullish domains are the S&P400 and S&P600. All eight Vector Pressures are moving south. Four weeks ago, all eight were moving north. You can see the market is shifting from a slight bullish bias to a bearish bias on a Quick-term basis.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. About a year ago, one of our members, a Mechanical Engineer, made some suggestions that appear to be promising for plotting. Until then, we will continue to use words to describe them.

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

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

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

Both Indicant Volume Indicators are again moving south. For a few days it moved north with mixed market direction. During that short northward spurt to the north, the market endured one healthy bullish expression while many more days resulted in severe bearish expressions. Although the Indicant Volume Indicator is again revealing passivity, its minor rise adds fuel to bearish aspirations.

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

The Short-term Indicant signaled bear last Thursday for both the Dow and the NASDAQ. This also adds fuel to bearish aspirations. As stated last week, it was highly expected the Short-term Indicant will signal bear and it did.

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

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

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

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

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

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

Perspectives

There is nothing different to report here. The remainder of this paragraph remains unchanged from the last eight weeks. As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions.

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

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

Overall, this Quick-term Bull continues to weaken. It is teetering on signaling bear. If the market does not provide a significant bounce to the north next week, it is highly likely the Quick-term Indicant will signals bear.

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

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

Only the Dow Utilities and Transports remain above their respective bullish red curves. Last week, all eight major indices were above their bullish red curves. Bearish expressions the past two weeks did not destroy the current Mid-term Bull which as born on March 22, 2003.

The eight major indices are up an average of 19.8% for an annualized gain of 18.7% since the MTI Bull signals an average of 55.0 weeks ago. The DJIA, NASDAQ, Dow Composites, and Dow Transports have been Mid-term Bulls since March 22, 2003. The other four indices were also bulls on March 22, 2003, but encountered a few bull/bear cycles since then.

The DJIA is up 19.9% (annualized at 15.2%) since the MTI Bull signal on March 22, 2003.  That is up slightly from 14.1% reported thirty-eight weeks ago. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.  

The NASDAQ Composite continues to be the strongest Mid-term Bull. It is up 37.0% (annualized at 28.3%) since the March 22, 2003 MTI Bull signal, which is up, slightly, from 33.2% reported thirty-eight weeks ago. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth since the Mid-term Bull signal of March 22, 2003.

The Dow Transports and Dow Composites are up 36.4% (annualized at 27.9%) and 25.9% (annualized at 19.9%), respectively since the Mid-term Indicant Bull signal on March 22, 2003.

The S&P500 is up 8.1% (annualized at 10.5%) since the Mid-term Bull signal on October 4, 2003. The S&P100 is up 4.4% since the Mid-term Bull signal on November 1, 2003, which annualizes to 6.3%. The Dow Utilities is up 16.2% (annualized at 18.0%) since the Mid-term Bull signal on August 16, 2003.

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

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

Mid-term Indicant Positions - International Markets

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

Twenty of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 84.8% since the Mid-term Indicant signaled bull an average of 82.6 weeks ago for an annualized gain of 53.4%, which is less than the 72.9% reported fifty-seven weeks ago.

Although there were no new bear signals, two indices have been bears for an average of 5.9 weeks. These two bears are down an average of 0.1% since then. The International indices were down last week following the same pattern as the U.S. Indices but not as deep to the south.

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

July 05, 2004 Indicant.Net Weekly Update

Volume 7, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report 

The News Was Good and Market Ho-Hum

That is because the market had already anticipated the 25 basis point increase. The market is still uncertain on how to react to events in Iraq. Its expertise is in addressing stock valuations on the economic fundamentals of the Federal Reserve Board. The market has little experience interpreting the politics of a small oil rich nation in the Middle East. However, the market has tremendous experience in dealing with high energy costs and inflation. If the market becomes convinced that inflation is around the corner, rest assured this bull will expire.

Last week’s report mentioned voodoo bookkeeping. The Indicant’s staff had no inside information on the voodoo bookkeeping that hit the news media this past week. The Indicant speculated in last week’s report that such stories could contribute to bearish aspirations. Most of the voodoo bookkeeping sins were committed in the late 1990’s even though much of it was discovered and reported in 2001 and 2002. That helped perpetuate profound bearish expressions.

Indicant Select Stock #14, Cardinal, has been accused of voodoo bookkeeping by the Schatz and Nobel. If you owned the stock and possibly be a part of the class action, contact them at 1-800-797-5499 or by email at sn06106@aol.com.

Most investors review financial information prior to their investments. One has to wonder why review fictional statements for investment purposes. That makes no sense at all. The market is brutally honest. It will show absolutely no respect for voodoo bookkeepers. The problem with Cardinal is that the accusations are not based on a historical sin, but a more current one. Even with all the Enron type securities and legislation, voodoo bookkeeping is not yet dead. Keep in mind it is an accusation only at this time. The public filing of the lawsuit caused the stock to plummet. Cardinal may very well be innocent, but if not and more such stories keep penetrating the news, rest assured the fact-based and emotion-based stock market will deliver a swift blow to fiction producers and fiction readers and fiction believers. The stock market has no room for fiction.

A link to Cardinal is as follows:

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S03.htm##14

As repeatedly stated in this weekly report, stocks can quickly plummet on news about voodoo bookkeeping or dilettante management techniques. That is why you should never have more than 10% of your investment resources in a single stock. Most people live by principle and are honest. The problem is that all people are not that way. Even though Cardinal’s quilt has yet to be validated in court, the news has done severe damage to the stock.

If Cardinal is proven innocent of such charges, a nice buying opportunity will become available. Just wait for the Mid-term Indicant to signal buy. A little over two years ago, Imclone (NAS100 #45) was in a similar situation, although not related to voodoo bookkeeping. The Mid-term Indicant signaled sell a few days before Martha Stewart sold. The stock was devastated on the FDA news of not approving a miracle drug for cancer. However, the Imclone is now up 956.0% since the Mid-term Indicant signaled buy on October 25, 2002. Imclone is now higher than what it was when Martha Stewart sold it. It is not likely that Cardinal will enjoy such a bounce, if found innocent of the charges, but some profits could be made. Just wait for the buy signal. Some companies never recover from news such as this or if they do, the recovery lead time could be years.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS08.htm#45

Indicant Stock#11, Ariba, generated a 6:1 reverse stock split. It is down 36.7% since the Mid-term Indicant signaled sell on March 13, 2004. This stock never participated in the bull move that began in October 2002. It was one of several stocks that received buy signals on October 25, 2002. The Mid-term Indicant signaled sell on June 28, 2003 with only a 44.0% profit before commissions from the October 25, 2002 buy signal. Since then, it has experienced two more buy/sell cycles with dismal performance. Stocks employing reverse stock splits seldom enjoy price growth.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S02.htm##11

All in all, the market was not surprised with Greenspan’s announcement. The market was favorably surprised by events in Iraq, but that was a one-day response. The market will react to news from time to time with its primary focus as of this writing on the First Quarter of 2005. The Quick-term Indicant shifted from a slight bullish bias to a slightly bearish bias last week. Rest assured the market will not have much respect for voodoo bookkeeping practices. If more stories of that nature penetrate the news media, then rest assured this bull would expire to the wrath of the bear.

Weekly Buy/Sell Summary

The Mid-term Indicant generated three buy signals and one sell signal for stocks. Continue to not being aggressive with these buy signals. Be conservative in any buying at this time as we remain in bearish seasonality and the post-election-year phenomenon is now in the market’s sight. Also, place your stop loss order immediately on buying and each week thereafter.

In addition to the sell signal, the Mid-term Indicant is avoiding thirty-five stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 30.3% since the Mid-term Indicant signaled sell an average of 45.1 weeks ago.

There were fourteen stocks and funds avoided at this time last year in addition to one sell signal. The avoided stocks and funds one year ago were down an average of 27.4% since their respective sell signals an average of 28.3 weeks earlier. This contrasts strongly with the avoided stocks and funds two years ago. On July 5, 2002, the Mid-term Indicant was avoiding two-hundred and seventeen stocks and funds that were down an average of 22.3% since their respective sell signals an average of 10.4 weeks earlier.

In addition to the buy signals this weekend, the Mid-term Indicant is currently signaling hold for 257 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 68.9%. That annualizes to 69.2%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 257 stocks and funds for an average of 51.7 weeks.

There was one buy signal on this weekend one year ago. At that time, the Mid-term Indicant was holding 277 stocks and funds for an average of 23.2 weeks. They were up 44.7% (annualized at 100.2%). The contrasts significantly with the Mid-term Indicant signaling hold for sixty-six stocks and funds two years ago on July 5, 2002. They were up by an average of 41.0% since their respective buy signals an average of 44.6 weeks earlier.

This paragraph is a repeat from last several weeks with a few modifications. The current bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection with normal seasonality in 2002. The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market. Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy.

This paragraph is repeated from the past several weeks, but it does not hurt to reread it each week during bearish seasonality. You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in 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. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy. Bearish expressions on a Mid-term basis in 2004 between May and October should not be surprising.

The second most bullish year along the presidential election cycle is the election year, which is underway in 2004. We are anticipating enjoyment of that as well, but its bullish fervor may not unfold until just before the election this year. The following link will take you to charts that explain this phenomenon, which is currently underway and for you to enjoy. It is in a “members only” section. This paragraph will repeat throughout this year.

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. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know. Right now, the Mid-term Indicant continues to signal bull. There is more about that later in this report.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of bearish seasonality. If you are up by 50% or more you may find it advantageous to set your stop loss at 10% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% 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 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% 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.

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. 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

Foreign indices continue to move north, but without crisp robustness. The Internet sector softened last week, as well as Technology stocks. However, their Mid-term Indicant bias remains bullish. Energy is maintaining a strong bullish posture, while Large Caps and generic sectors softened last week, but still maintaining a Mid-term bullish bias. The degree of market divergence remained flat from the prior week, but still favoring a slight bullish bias that is consistent with convergence. As stated last wee, there is more bullish convergence than bearish divergence.

Economic Outlook

This section changed quite a bit last week. All interest rates are configuring to a northbound direction. It will be interesting if the new upward cycle will match the prior recent peak over the next few years. Greenspan’s rate hike was consistent with stock market and interest rate market expectations. All dynamics expressed harmony.

Unfortunately, commodities were not impressed with Greenspan’s move last week. Other than the Reuter U.K. commodities index, all other commodities are remaining near their recent peaks in a stubborn manner.

As stated last week, the dollar continues to appear to shifting from a cycle of weakness to a cycle of strength. There were no dynamic movements last week, as currencies were not surprised by Greenspan’s move last week.

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 six weeks ago since the MTI buy signal in April 2001. Ninety-nine weeks ago, it closed up 30.1%. Last week it closed up 92.7%, which is higher than the 75.9% reported fifty weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 28.4%, which is slightly higher than 23.1% reported fifty weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%. This fund was up slightly last week.

The Fidelity Gold Fund #28 is up 5.0% since the Mid-term Indicant signaled sell on April 30, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.7% profit. This fund was down slightly this past week and still receiving the avoid signal.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 102.9% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 54.0%. Vanguard Energy #18, VGENX, is up 45.1% (annualized at 35.8%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 20.6% (annualized at 35.5%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 28.2% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 31.7%.

There is more about mutual funds later in this report and the links to the mutual fund tables can be found there.

The Gold Index is up 11.8% since the Mid-term Indicant signaled bear on May 8, 2004. This index was up significantly last week, but has not configured itself enough to signal bull again. Its contrarian behavior to the Mid-term Indicant signal should be short-lived. It should plummet if the Saudis are successful in elevating their supply of oil. Greenspan did not aggressively raise rates last week and thus the reason for its bullish bounce. Right now, view that bounce as technical and not solidly supporting mid-term to long-term bullish expressions.

As repeatedly stated in this weekly report, gold prices will tumble if terrorism and inflationary threats subside. There is a “perception” that inflationary threats will subside, as demonstrated by the plummeting gold prices of the recent past.

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

http://www.indicant.net/Members/Updates/MTI-Mkts-Index%20Options/I05.htm#25

Quick-term and Short-term Indicant Update

The eight major indices are up 2.2% since the Quick-term Indicant signaled bull on May 25, 2004. That annualizes to 21.3%, which is down considerably since last week. The S&P600 Index is the most bullish. It is up 4.5% since the Quick-term Bull signal of May 25, 2004. The least bullish is the S&P500 and S&P100 Indices. They are up 1.1% and 0.9%, respectively since the May 25, 2004 Quick-term Bull signal. As stated last week, the indices continue to move laterally with little chance of robust bullish expressions on a Quick-term basis.

Only one of the eight major indices are red bulls, which is up from five last week. The red bull is the S&P600 (small caps). The indices continue not expressing much confidence in bullish expressions. However, as stated the last two weeks, the battle for confidence is occurring in bullish domains as opposed bearish domains. For more information about the Quick-term Indicant, refer to last week’s daily reports.

Force Vectors are moving south for the eight major indices. Four of the eight indices’ Force Vectors now reside in bearish domains, converting a slight bullish bias to a bearish one.

Vector Pressure remains in bullish domains, but their direction is now south for seven of the eight indices. Three weeks ago, all eight were moving north. You can see the market is shifting from a slight bullish bias to a bearish bias on a Quick-term basis.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. About a year ago, one of our members, a Mechanical Engineer, made some suggestions that appear to be promising for plotting. Until then, we will continue to use words to describe them.

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

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

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

The recent upturn in the NASDAQ’s Indicant Volume Indicator has shifted back to the south. That supports a return to summertime lethargy. The NYSE’s Indicant Volume Indicator is holding up better, but it has lost its robust expressions.

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

The Dow is down 1.9% since the Short-term Indicant signaled bull on June 7, 2004. The NASDAQ is down 0.7% since the Short-term Indicant signaled bull on the same day. If the market does not express some bullish energy this coming week, it is very likely the Short-term Indicant will signal bear.

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

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

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

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

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

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

Perspectives

There is nothing different to report here. The remainder of this paragraph remains unchanged from the last seven weeks. As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions.

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

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

Overall, this Quick-term Bull weakened last week. The Quick-term configurations, although still signaling bull, are considerably favoring an increased likelihood of Quick-term bearish expressions. It could very well be a short-lived bull. However, the fact that the market allowed its birth is favorable to your hold positions.

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

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

All eight major indices remain above their respective bullish red curves. Last week’s bearish expressions did not destroy the current Mid-term Bull which as born on March 22, 2003. Last week’s behavior did, however, dampen bullish enthusiasm on a Quick-term basis.

The eight major indices are up an average of 21.7% for an annualized gain of 20.9% since the MTI Bull signals an average of 54.0 weeks ago. The DJIA, NASDAQ, Dow Composites, and Dow Transports have been Mid-term Bulls since March 22, 2003. The other four indices were also bulls on March 22, 2003, but encountered bear signals since then.

The DJIA is up 20.7% (annualized at 16.1%) since the MTI Bull signal on March 22, 2003.  That is up slightly from 14.1% reported thirty-seven weeks ago. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.  

The NASDAQ Composite continues to be the strongest Mid-term Bull. It is up 41.2% (annualized at 32.0%) since the March 22, 2003 MTI Bull signal, which is up, slightly, from 33.2% reported thirty-seven weeks ago. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth since the Mid-term Bull signal of March 22, 2003.

The Dow Transports and Dow Composites are up 39.0% (annualized at 30.3%) and 27.2% (annualized at 20.9%), respectively since the Mid-term Indicant Bull signal on March 22, 2003.

The S&P500 is up 9.3% (annualized at 12.4%) since the Mid-term Bull signal on October 4, 2003. The S&P100 is up 5.2% since the Mid-term Bull signal on November 1, 2003, which annualizes to 7.8%. The Dow Utilities is up 17.1% (annualized at 19.4%) since the Mid-term Bull signal on August 16, 2003.

The major indices were down about 1% last week and their annualized performance was down a little under 2.0% last week. However, there should be no major concerns as long as they remain as red bulls.

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

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

Mid-term Indicant Positions - International Markets

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

Twenty of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 85.4% since the Mid-term Indicant signaled bull an average of 81.6 weeks ago for an annualized gain of 54.5%, which is less than the 72.9% reported fifty-six weeks ago.

Although there were no new bear signals, two indices have been bears for an average of 4.9 weeks. These two bears are up an average of 1.2% since then. The International indices were down fractionally last week following the same pattern as the U.S. Indices but not as deep to the south.

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

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