Jul 31, 2005 Indicant.Net Weekly Update

Volume 07, Issue 05 ISSN 1526 6516 © The Indicant Stock Market Report

Mid-term Indicant Bulls Remain Strong, but Watch Out

July, just completed, was the most bullish July since 1997. The Dow30 and S&P500 were up 3.6%. The NASDAQ was up a whopping 6.2%. That was the NASDAQ’s fourth most bullish July since 1972. That performance was indeed impressive, since the NASDAQ July is historically the second most bearish month. An investor that bought and held only during July since 1972 would have lost money until this year.

The NASDAQ has demonstrated a recent pattern that should be noted. After falling in January, February, March, and April of this year, it rebounded with a bullish spurt in May. The January-April rolling third is traditionally bullish, but the NASDAQ was uncharacteristically bearish this year. June 2005 followed May 2005 with a bearish response, which was consistent with historical standards. July followed June with a bullish response, which aborted historical standards. If the recent pattern holds, August should be bearish.

Clicking the following hyperlink could add some insight to this.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-03-NASDAQ%20Curr.htm

As you can see, the NASDAQ is now approximating its most recent cyclical peak, which occurred in December 2004. Such events, without strong fundamental bullish support, typically result in a bearish response. Fundamentals remain strong at this time, but the market will attempt to determine fundamentals in the first quarter of next year. If it senses high oil prices will unfavorably impact corporate profits at that time, expect the market to fall.

The NASDAQ nearing its prior peak is a major observation. Some refer to this phenomenon as a psychological barrier. You should notice the NASDAQ flattened out last week, indicating some resistance to moving off its prior cyclical peak. Although not ominous, it should not be ignored with respect to any new money earmarked for equity investments.

You will also notice the NASDAQ is well above both bullish red and the incumbent trip line (the green dashed line on the chart). The incumbent trip line is where the next bear signal would occur before the next deep bearish seasonal period begins, which is on September 1. After that period, a new incumbent trip line will be constructed.

You will also notice from the below link that the Dow Jones Industrial Average is having difficulty moving above its bullish red curve.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-01-DJIA-Curr.htm

As you can see, it also is flattening the past two weeks on the chart. Recent attempts by the Dow to cross above its bullish red curve have been met with bearish responses. As stated most of the year, these bearish expressions were expected to be mild, which is what has been occurring. None of the Quick-term, Short-term, and Mid-term attributes suggest otherwise in the immediate future.

The worse best case right now is continuing meandering behavior, even though the most recent bullish spurt has not been a meanderer. However, the Quick-term Indicant continues to signal bear, which suggest the recent bullish spurt will not sustain itself into a meaningful Quick-term Indicant bull.

The extraordinary bullish NASDAQ July suggest profit taking is in order for August. That should dampen bullish enthusiasm. There are some other technical issues as well. The NASDAQ July-September rolling quarter is, historically, the most bearish of the year. The surprisingly bullish July, just completed, does not support continuing bullish behavior in August. The August-October rolling quarter is the second most bearish, adding to a bearish prognosis on the immediate horizon. Deep bearish seasonality begins on September 1, adding even more bearish sentiment. All that coupled with the post presidential election year historical bearishness does not support continued bullish behavior off the recent bullish spurt.

Read your daily reports as the Indicant will keep you posted, as we progress through the next few critical weeks.

Weekly Buy/Sell Summary

The Mid-term Indicant generated five buy signals and no sell signals for stocks and funds. Again, these buy signals were driven by moving above their bullish red curves, which is heavily weighted in the buying algorithm. It basically overrides bearish seasonality and the Quick-term Indicant. As stated last week, do not be surprised if many of these same securities receive sell signals before the end of September.

Although there were no sell signals, the Mid-term Indicant is avoiding 91-stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 16.5% since the Mid-term Indicant signaled sell an average of 18.9-weeks ago.

There were 129-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 13.6% since their respective sell signals an average of 21.8-weeks earlier. Two years ago, on August 2, 2003, the Mid-term Indicant was avoiding only 27-stocks and funds that were down an average of 23.3% since their respective sell signals an average of 28.0-weeks earlier.

In addition to the buy signals, the Mid-term Indicant is signaling hold for 224 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 105.0%. That annualizes to 61.3%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 224-stocks and funds for an average of 89.1-weeks.

One year ago, the Mid-term Indicant was holding 165-stocks and funds out of the 296 tracked at that time for an average of 62.2-weeks. They were up 82.9% (annualized at 68.3%). The Mid-term Indicant was signaling hold for 260-stocks and funds two years ago on August 2, 2003. They were up by an average of 44.8% (annualized at 85.9%) since their respective buy signals an average of 27.1-weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term 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 to 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 and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence 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. The only positive political influence on the economy is to undo its prior damage.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions change, there will be modifications to it to maintain a balanced frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time, contrary to historical standards. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004.

Bullish seasonality ended on April 30, 2005. The market remains firmly situated into bearish seasonality. The market continues to configure itself to support historical standards by expressing bearish behavior, although mild as of this date. Although May is historically one of the most bearish months, it expressed significant bullish behavior in 2005. That was a bullish spurt based on the Quick-term Indicant attributes. A bullish spurt is a micro-burst that has no sustainability. This is where day traders and herky-jerky market players typically lose their money. June 2005 followed May with bearish behavior. July followed June with uncharacteristic bullish behavior. Continuing meandering behavior is expected to resume in August. That suggests August will be bearish.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality standards. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but 25-weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with several bullish spurts. Those bullish spurts were weak but possessed enough bullish steam to thwart increasing bearish behavior. However, residual components of the prior Quick-term Bull and the constitution of the current Mid-term Bull are exhausted from having to thwart bearish ambition. The bullish spurt in July has positioned the Mid-term Indicant bull to have minimal threats from potential bearish ambitions.

The current bullish spurt propelled many stocks and to catapult their bullish red curve. That is indeed non-bearish. On the contrary, this is not necessarily bullish. However, it does provide a forum for a relaxed view of your hold positions. Stocks and funds seldom endure deep bearish behavior while they reside above their respective bullish red curves. Also, the most recent bullish spurt shifted the Quick-term Indicant from a bearish bias to nearly neutral. Although, the Quick-term attributes still did not signal bull, the mild bearish bias is reason for continued relaxation with respect to your longer-term hold positions.

All the Quick-term attributes remain biased with bearish tendencies even though the Mid-term Bull continues to demonstrate significant resistance to bearish ambition. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions. However, the recent bullish spurts have been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality. The Quick-term attributes remain poised in neutrality and that threatens the continuation of the bullish spurt underway. On the other hand, those attributes are not yet encouraging the bear to express its desired dominance. In other words, meandering behavior continues as the underlying market theme.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Quick-term and Short-term Indicant continue signaling bear, as they have been doing since early January 2005. The Mid-term and Long-term Indicant models continue to signal bull. The mid-term and long-term trends have exerted their authority over the shorter cycles the past three weeks. Fortunately, these safe positions were supported with a bullish spurt during the month of May. June followed with mild bearishness and July concluded with a bullish result.

As previously stated these bullish spurts and the uncharacteristic bullish May and July added continued life to the Mid-term Bulls. This has deferred massive selling that will unfold at the expiration of these Mid-term Bull markets. As stated the past few weeks, do not be surprised with increased bearish behavior over the next few weeks. Of course, you have noticed during the past few weeks, the bullish spurt has disallowed bearish behavior. However, this comment, although not completely accurate the past few weeks, will remain until such time it is appropriate to delete it.

With the exception of the S&P400 (Mid-caps) and S&P600 (Small-caps), the market has been in a meandering configuration for well over a year. The mid-caps and small-caps are purely bullish and have been buoyant to strong bearish desires.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of the Quick-term Bear. This stop loss was changed from 8% several weeks ago because of the expectation of increased bearish influence.

If you are up by 50% or more, you may find it advantageous to set your stop-loss at 15% 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 a 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 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons. If the market emulates a 1970’s configuration, most stocks will plummet, but energy related stocks will skyrocket. It is unusual that energy has been skyrocketing the past three years, of which two of those years enjoyed bullish market behavior. The coexistence of a bullish energy sector and general equities does not make much fundamental sense, but the underlying economic fundamentals have supported this phenomenon.

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.

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 can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

There was a solid convergent pattern last week. That supports a bullish bias. However, that is the first week of this and quite often during meandering market, a bearish response is ignited.

As stated the past 11-weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture. There is not enough bullish convergence to ignite strong bullish behavior.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues expressing strength. The Canadian dollar is also expressing weakness against the U.S. Dollar. It appears a new cycle has begun in favor of a strengthening dollar. Ignore the news on the Chinese yuan. The dollar should continue to strengthen as long as Greenspan is bent on increasing interest rates.

As stated the past six weeks, the U.S. Dollar continues building a base rising from its most recent cyclical minimum. As stated the last ten weeks, this is not a Greenspan objective, but a fallout from his primary focus of fending off inflationary threats. The European Dollar remained in bearish domains for the eighth consecutive week, although it rebounded slightly last week. Its increasing weakness is impressive. As stated three weeks ago, the other currencies seem bent on following that pattern of accelerating weakness.

As stated the past seven weeks, there remains no cyclical shift in direction on the U.S. Dollars recent strengthening. Cyclically, it is still weak, but the cyclical shift in foreign currencies expresses increasing potential for a new trend in the greenbacks strengthening. The continued rise in interest rates, of which no end is in sight, supports continuing strength in the U.S. Dollar.

This paragraph will remain unchanged until such time conditions change. Rising interest rates tend to strengthen the dollar. That will damage export business and eventually hurt the U.S. economy. This is consistent with historical “political management” of the U.S. Economy. In other words, the political community understands power retention is a function of economic health on Election Day. After presidential elections, there is no immediate concern for economic health. That is the case right now. That sort of thing is typically more pronounced in a lame duck term, which is underway.

As stated three weeks ago, commodity prices continue showing nervous behavior, but their trend to the north will continue as long as oil prices continue in that direction. The Mid-term Indicant Bull’s resilience in the face of this inflationary threat is indeed impressive.

This paragraph remains unchanged from the past 33-weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. The stock market is now obviously being bothered by these unfavorable relationships. The bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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 sixty-two weeks ago since the MTI buy signal in April 2001. One-hundred and fifty-five weeks ago, it closed up 30.1%. Last week it closed up 159.3%, which is higher than the 75.9% reported 106-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 36.6%, which is higher than 23.1% reported 106-weeks ago. After falling sharply six weeks ago, the fund bounced north the past five weeks. This fund moved mildly to the north last week.

Fidelity Gold, Fund #28, is up 8.3% since the Mid-term Indicant signaled sell on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market. The Mid-term Indicant is near signaling buy for it, but continues resisting until meandering behavior expires. This fund moved south last week.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 226.2% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 75.5%. Vanguard Energy #18, VGENX, is up 122.5% (annualized at 52.1%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 96.7% (annualized at 48.8%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 96.7% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 48.8%.

These energy related funds again moved significantly to the north last week, after moving bearishly two weeks ago. These funds should do well even if the market turns extremely bearish. Continue to hold them.

The Gold/Silver Index is up 5.1% since the Mid-term Indicant signaled bear on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal. This index moved up slightly last week.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for 29.4-weeks. As stated the past several weeks, that is a long period of survival spanning four months of the six months of bullish seasonality. The market is now mired inside bearish seasonality. It is now inside the most bearish rolling quarter on a historical basis. Do not be surprised at increased bearish activity in the next few weeks. The market was surprisingly bullish the past few weeks, but underlying Quick-term attributes suggest there is little substance to those bullish expressions. The impending bearishness will most likely be mild. The market is not configured for strong bullish movements in the next few days, but several quick-term attributes have shifted into a non-bearish configuration.

The indices continue determining any potential comfort zones around bullish red. As stated the past ten weeks, such comfort around their respective bullish red curves should not be expected. Ten weeks ago all eight indices were above bullish red. Nine weeks ago, six were above bullish red. Eight weeks ago, only three were above bullish red. Four weeks ago, three were above bullish red and three were below bearish yellow. Now, all eight are back above bullish red for the third consecutive week. That is a testament to the strength of this Mid-term Bull market. It is favorable to your hold positions the market did not find a comfort zone below bearish yellow and the continued interaction with bullish red is a certain non-bearish attribute in terms of deep bearish expressions. It is likely the market will not find significant comfort at their current elevated heights.

The eight major indices are up by an average of 4.9% since the Quick-term Indicant signaled bear on January 4, 2005. That is the highest error rate the Quick-term Indicant has endured this year, exceeding last week’s error rate by 0.2%. Expect a correction in the next few days. The Quick-term Indicant is seldom wrong for long periods and two weeks is a long period on a quick-term basis.

Read the daily emails for more about the Quick-term Indicant. It is still a Quick-term Bear.

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 Indicant Volume Indicator shifted configuration in mild support for the recent bullish spurts. However, deep bearish seasonality is due in about four weeks. This is heavily weighted in the Quick-term Indicant and thus there is little reason to expect the Quick-term Indicant to signal bull in the immediate future.

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

The Dow is up 1.6% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is up 5.1% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears.

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

Nothing has changed in the past several weeks. Six of the eight major indices continue to threaten contact with their respective breakdown lines. Contact with them will support increased bearish behavior. However, the S&P400 and S&P600 continue contacting their breakout lines, lending significant support to bullish desires. The problem is the other indices. They continue to threaten contact with their breakdown lines, which supports a bearish bias. Overall, this meanderer continues to pester desires of rampant bullish expressions. Please read the daily reports, as this element will offer greater insight in the next few weeks.

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

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

Refer to the daily reports for more information about the Quick-term Indicant.

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 eight major indices are up an average of 32.5% since the Mid-term Indicant signaled bull an average of 92.8-weeks ago. That annualizes to 18.2%. The Dow Transports is the strongest bull. It is up 67.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 24.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 46.6% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 67.3% since the Mid-term Indicant bull signal on August 16, 2003. The Utilities continues to impress with strong bearish resistance. It actually continues to move in a decidedly bullish direction and is showing absolutely no respect for the tremendous consistency of bearish seasonality in a presidential post election year.

Seven of the eight major indices remain as red bull. Bullish spurts the past three weeks continue providing support for the longevity of these Mid-term Bulls. The only non red-bull index is the Dow30.

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 – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 120.9% since the Mid-term Indicant signaled bull an average of 123.7-weeks ago for an annualized gain of 50.8%, which is less than the 72.9% reported 119-weeks ago. International indices moved north the past three weeks. As stated the past seven weeks, do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 13.0% since the Mid-term Indicant signaled bear 29.0-weeks ago. It is the Chinese market that endures this bear signal. As stated the past few weeks, the Chinese continue cooling their economy. They also recently strengthened their currency. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious. The Chinese economy will most likely not start heating up again until after the mid-term elections next year.

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

Jul 24, 2005 Indicant.Net Weekly Update

Volume 07, Issue 04 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

A Long-term Fundamental View

General Motors was encouraged by China’s strengthening of the yuan. Although logic would suggest a reduction of price competitiveness by Chinese manufacturing operations, GM believes the stronger Chinese yuan will lead to a stronger Japanese yen. GM management actually believes that will help them regain some of their profound market share losses. This view by General Motors management suggests they still do not get it.

The Japanese yen was at about 300 in the early 1980’s. The U.S. protectionists policies drove the Japanese yen down to around 100 by the early 1990’s. That tripled the strength of the Japanese yen. Even with that profound yen strength, Japanese automobiles continued to increase U.S. and worldwide market share against the North American automobile industry. That manipulation of the yen in the 1980’s led to Japanese automobile manufacturers to invest in U.S. production facilities. A strengthening yen will have no impact on these transplant production facilities. GM is still at a huge disadvantage in terms of productivity and product quality.

There are a couple of points to be made about North American management. It is true that car sales are price elastic. The lower the price; the more car sales. After purchasing the car, consumers become aware of additional costs, such as towing charges, broken parts, and other dysfunctional features inherent in North American domestic automobiles. Many former Japanese buyers will be shocked in the differences in performance and warranties. The recent surge in GM sales will only accelerate the next cyclical decline, as consumer dissatisfaction returns to its former state and after consumers have a year or two experience with GM products.

Last week’s Enron buy signal did not turn out too well. The stock plummeted by over 70% last week. That is the problem with penny stocks. Their prices vacillate wildly, much like roulette table performance. It is also a testimonial for establishing stop losses. Stop losses are no guarantees as their must be a willing buyer at the prescribed price. Trading low volume stocks with little broad interest is not much different from gambling. Penny stocks seldom have buyers in ready mode. Read last week’s report for more information that led to this decision. It is last part of the first section, entitled “cautionary buy signals.”

Utilities dropped slightly last week. That suggest the market has pinnacled on a Mid-term Indicant basis. The market needs to cool off and appears ready to do so in the immediate future. The cooling can be mild and many of the Quick-term attributes suggest that will be case. The question is, what will follow this cooling period. If the market does not cool mildly in the next several weeks, the impending drop will be much steeper and will occur suddenly. However, your longer-term hold positions remain safe. It is the recent buy signals that should be cause of concern. Make certain your stop losses are in place.

Weekly Buy/Sell Summary

The Mid-term Indicant generated two buy signals and one sell signal for stocks and funds. Again, these buy signals were driven by moving above their bullish red curves, which is heavily weighted in the buying algorithm. It basically overrides bearish seasonality and the Quick-term Indicant. As stated last week, do not be surprised if many of these same securities receive sell signals before the end of September.

In addition to the sell signal, the Mid-term Indicant is avoiding 95-stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 6.0% since the Mid-term Indicant signaled sell an average of 17.3-weeks ago.

There were 83-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 26.3% since their respective sell signals an average of 41.8-weeks earlier. Two years ago, on July 26, 2003, the Mid-term Indicant was avoiding only 16-stocks and funds that were down an average of 29.1% since their respective sell signals an average of 30.2-weeks earlier.

In addition to the buy signals, the Mid-term Indicant is signaling hold for 222 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 103.6%. That annualizes to 60.7%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 203-stocks and funds for an average of 88.7-weeks.

One year ago, the Mid-term Indicant was holding 166-stocks and funds out of the 296 tracked at that time for an average of 62.2-weeks. They were up 80.7% (annualized at 67.5%). The Mid-term Indicant was signaling hold for 265-stocks and funds two years ago on July 26, 2003. They were up by an average of 46.2% (annualized at 92.9%) since their respective buy signals an average of 25.9-weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term 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 to 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 and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence 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. The only positive political influence on the economy is to undo its prior damage.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions change, there will be modifications to it to maintain a balanced frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time, contrary to historical standards. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004.

Bullish seasonality ended on April 30, 2005. The market remains firmly situated into bearish seasonality. The market continues to configure itself to support historical standards by expressing bearish behavior, although mild as of this date. Although May is historically one of the most bearish months, it expressed significant bullish behavior in 2005. That was a bullish spurt based on the Quick-term Indicant attributes. A bullish spurt is a micro-burst that has no sustainability. This is where day traders and herky-jerky market players typically lose their money.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality standards. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but 24-weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with several bullish spurts. Those bullish spurts were weak but possessed enough bullish steam to thwart increasing bearish behavior. However, residual components of the prior Quick-term Bull and the constitution of the current Mid-term Bull are exhausted from having to thwart bearish ambition. You had seen the consequences of that exhaustion the past few weeks with each bullish spurt, followed by a stronger bearish response.

The current bullish spurt propelled many stocks and to catapult their bullish red curve. That is indeed non-bearish. On the contrary, this is not necessarily bullish. However, it does provide a forum for a relaxed view of your hold positions. Stocks and funds seldom endure deep bearish behavior while they reside above their respective bullish red curves. Also, the most recent bullish spurt shifted the Quick-term Indicant from a bearish bias to nearly neutral. Although, the Quick-term attributes still did not signal bull, the mild bearish bias is reason for continued relaxation with respect to your longer-term hold positions.

All the Quick-term attributes remain biased with bearish tendencies even though the Mid-term Bull continues to demonstrate significant resistance to bearish ambition. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions. However, the recent bullish spurts have been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality. The Quick-term attributes remain poised in neutrality and that threatens the continuation of the bullish spurt underway. On the other hand, those attributes are not yet encouraging the bear to express its desired dominance. In other words, meandering behavior continues as the underlying market theme.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Quick-term and Short-term Indicant continue signaling bear, as they have been doing since early January 2005. The Mid-term and Long-term Indicant models continue to signal bull. The mid-term and long-term trends have exerted their authority over the shorter cycles the past two weeks. Fortunately, these safe positions were supported with a bullish spurt during the month of May. June followed with mild bearishness and July so far has been bullish. That is the nature of meandering markets.

As previously stated these bullish spurts and the uncharacteristic bullish May added continued life to the Mid-term Bulls. This has deferred massive selling that will unfold at the expiration of these Mid-term Bull markets. As stated the past few weeks, do not be surprised with increased bearish behavior over the next few weeks. Of course, you have noticed during the past few weeks, the bullish spurt has disallowed bearish behavior. However, this comment, although not completely accurate the past few weeks, will remain until such time it is appropriate to delete it.

With the exception of the S&P400 (Mid-caps) and S&P600 (Small-caps), the market has been in a meandering configuration for well over a year. The mid-caps and small-caps are purely bullish and have been buoyant to strong bearish desires.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of the Quick-term Bear even though there is a decreased bearish bias on a quick-term basis. This stop loss was changed from 8% several weeks ago because of the expectation of increased bearish influence.

If you are up by 50% or more, you may find it advantageous to set your stop-loss at 15% 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 a 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 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons. If the market emulates a 1970’s configuration, most stocks will plummet, but energy related stocks will skyrocket. It is unusual that energy has been skyrocketing the past three years, of which two of those years enjoyed bullish market behavior. The coexistence of a bullish energy sector and general equities does not make much fundamental sense, but the underlying economic fundamentals have supported this phenomenon.

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.

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 can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

There is little difference from last week. The energy sector, small caps, and mid-caps remain solidly in bullish domains. Technology also converged into a bullish pattern two weeks ago and held up this past week. General equities, although not completely in bullish domains, are converging into a bullish pattern. As stated last week, .divergent behavior is less apparent, which is certainly non-bearish, but not enough to signal strong bullish sentiment. After diverging with bearish expressions three weeks ago, the international sector resumed its bullish pattern the past two weeks. There are definitely increasing converging bullish attributes, which at this point should be considered as non-bearish, as opposed to complete bullish dominance.

As stated the past ten weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture. There is not enough bullish convergence to ignite strong bullish behavior.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues expressing a new cycle of strength. The Canadian dollar, after expressing strength last week, is also joining forces with those who are weakening. It appears a new cycle has begun in favor of a strengthening dollar. Ignore the news on the Chinese yuan. The dollar should continue to strengthen as long as Greenspan is bent on increasing interest rates.

As stated the past five weeks, the U.S. Dollar continues building a base rising from its most recent cyclical minimum. As stated the last nine weeks, this is not a Greenspan objective, but a fallout from his primary focus of fending off inflationary threats. The European Dollar remained in bearish domains for the seventh consecutive week. Its increasing weakness is impressive. As stated two weeks ago, the other currencies seem bent on following that pattern of accelerating weakness.

As stated the past six weeks, there remains no cyclical shift in direction on the U.S. Dollars recent strengthening. Cyclically, it is still weak, but the cyclical shift in foreign currencies expresses increasing potential for a new trend in the greenbacks strengthening. The continued rise in interest rates, of which no end is in sight, supports continuing strength in the U.S. Dollar.

This paragraph will remain unchanged until such time conditions change. Rising interest rates tend to strengthen the dollar. That will damage export business and eventually hurt the U.S. economy. This is consistent with historical “political management” of the U.S. Economy. In other words, the political community understands power retention is a function of economic health on Election Day. After presidential elections, there is no immediate concern for economic health. That is the case right now. That sort of thing is typically more pronounced in a lame duck term, which is underway.

As stated two weeks ago, commodity prices continue showing nervous behavior, but their trend to the north will continue as long as oil prices continue in that direction. The Mid-term Indicant Bull’s resilience in the face of this inflationary threat is indeed impressive.

This paragraph remains unchanged from the past 32-weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. The stock market is now obviously being bothered by these unfavorable relationships. The bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

June’s CPI was modest, which supports no immediate concern for an inflationary spiral. It was up 2.5% year over year and a mere 0.1% over May 2005. Those are good numbers, but Greenspan and others in Washington will not allow the economy to over heat at this time. Expect interest rates to continue to climb, regardless of what the CPI is doing. It is the politically favorable time to not be overly concerned about the well being of the populace. That will not occur until November 2008.

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 sixty-one weeks ago since the MTI buy signal in April 2001. One-hundred and fifty-four weeks ago, it closed up 30.1%. Last week it closed up 158.8%, which is higher than the 75.9% reported 105-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 36.6%, which is higher than 23.1% reported 105-weeks ago. After falling sharply five weeks ago, the fund bounced north the past foru weeks. Last weeks bullish bounce was big.

Fidelity Gold, Fund #28, is up 10.2% since the Mid-term Indicant signaled sell on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market. The Mid-term Indicant is near signaling buy for it, but continues resisting until meandering behavior expires. This fund moved slightly to the north last week.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 222.2% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 74.7%. Vanguard Energy #18, VGENX, is up 120.7% (annualized at 51.8%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 86.2% (annualized at 52.3%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 94.6% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 48.2%.

These energy related funds moved significantly to the north last week, after moving bearishly last week. These funds should do well even if the market turns extremely bearish. Continue to hold them.

The Gold/Silver Index is up 7.9% since the Mid-term Indicant signaled bear on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal. This index moved up slightly last week.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for 28.4-weeks. As stated the past several weeks, that is a long period of survival spanning four months of the six months of bullish seasonality. The market is now mired inside bearish seasonality. It is now inside the most bearish rolling third on a historical basis. Do not be surprised at increased bearish activity in the next few days. That bearishness will most likely be mild. The market is not configured for strong bullish movements in the next few days, but several quick-term attributes have shifted into a non-bearish configuration.

The indices continue determining any potential comfort zones around bullish red. As stated the past nine weeks, such comfort around their respective bullish red curves should not be expected. Nine weeks ago all eight indices were above bullish red. Eight weeks ago, six were above bullish red. Seven weeks ago, only three were above bullish red. Three weeks ago, three were above bullish red and three were below bearish yellow. Now, all eight are back above bullish red for the second consecutive week. That is a testament to the strength of this Mid-term Bull market. It is favorable to your hold positions the market did not find a comfort zone below bearish yellow and the continued interaction with bullish red is a certain non-bearish attribute in terms of deep bearish expressions. It is likely the market will not find significant comfort at their current elevated heights.

The eight major indices are up by an average of 4.7% since the Quick-term Indicant signaled bear on January 4, 2005. That is the highest error rate the Quick-term Indicant has endured this year. Expect a slight correction in the next few days. The Quick-term Indicant is seldom wrong and thus the reason for meandering to mild bearish expectations in the next few days.

Read the daily emails for more about the Quick-term Indicant. It is still a Quick-term Bear.

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 Indicant Volume Indicator revealed some early support for the bearish dominance five weeks ago, but petered out. That bodes well for those desiring, at worse, a continuation of the meandering market. Keep your eye on this attribute. If it resumes robustness, coupled with bearish behavior, expect expiration of the current Mid-term Indicant Bulls. The last three weeks of the current bullish spurt was not supported with significant volume. The Indicant Volume Indicator appears to be configuring into a lethargic pattern again. That supports, at best, meandering behavior.

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

The Dow is up 1.7% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is up 4.8% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears. Both indices have recently returned to a bearish direction when at these bullish levels and contrary to the bearish signal so far this year. Expect more of the same.

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

Nothing has changed in the past several weeks. Six of the eight major indices continue to threaten contact with their respective breakdown lines. Contact with them will support increased bearish behavior. However, the S&P400 and S&P600 continue contacting their breakout lines, lending significant support to bullish desires. The problem is the other indices. They continue to threaten contact with their breakdown lines, which supports a bearish bias. Overall, this meanderer continues to pester desires of rampant bullish expressions. Please read the daily reports, as this element will offer greater insight in the next few weeks.

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

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

Refer to the daily reports for more information about the Quick-term Indicant.

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 eight major indices are up an average of 32.0% since the Mid-term Indicant signaled bull an average of 91.8-weeks ago. That annualizes to 18.1%. The Dow Transports is the strongest bull. It is up 67.0% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 25.0% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 46.1% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 65.5% since the Mid-term Indicant bull signal on August 16, 2003. The Utilities continues to impress with strong bearish resistance. It actually continues to move in a decidedly bullish direction and is showing absolutely no respect for the tremendous consistency of bearish seasonality in a presidential post election year.

Seven of the eight major indices remain as red bulls, which is down from six, 19-weeks ago. Bullish spurts the past two weeks continue providing support for the longevity of these Mid-term Bulls. The only non red-bull index is the Dow30.

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 – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 119.4% since the Mid-term Indicant signaled bull an average of 122.7-weeks ago for an annualized gain of 50.6%, which is less than the 72.9% reported 118-weeks ago. International indices moved north the past two weeks. As stated the past six weeks, do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 15.9% since the Mid-term Indicant signaled bear 28.0-weeks ago. It is the Chinese market that endures this bear signal. The Chinese continue cooling their economy. They also strengthened their currency, as stated earlier in this report. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious. The Chinese economy will most likely not start heating up again until after the mid-term elections next year.

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

Jul 17, 2005 Indicant.Net Weekly Update

Volume 07, Issue 03 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Cautionary Buy Signals

Last week’s buy signals for stocks held above their respective bullish red curves on a Mid-term basis. Additional stocks climbed above their respective bullish red curves this past week. Even the residual components of Enron moved above the bullish red curve last week for the first since 2001. Several mutual funds and major indices did likewise. These events and the underlying Mid-term configurations set off several new buy signals.

This is no October 2002 or March 2003 buying spree. You should not view this as the birth of a new bullish surge. Although there were twenty buy signals this weekend, bringing the total to thirty the past four weeks, that pales in comparison to over 200 buy signals in October 2002 and 119 buy signals on March 22, 2003.

All Indicant models are not synchronized with bullish configurations, which is a prerequisite to dynamic and long-last bullish movements. As you know from the daily reports, the Quick-term Indicant continues to signal bear. The primary Quick-term attribute not supporting a bullish theme is the Indicant Volume Indicator. There is not enough bullish volume to sustain significant bullish behavior. Although there can be sharp increases and decreases during periods of low volume, long-term trends and mid-term cycles do not continue for very long in the same direction as the initial burst in prices. Low volume invites a reversal in the underlying direction.

The Mid-term Indicant signaled buy this weekend for several stocks and funds. They are not expressing discomfort above their respective bullish red curves. Regardless of other underlying configurations, the Mid-term Indicant heavily weights the importance of prices moving above their respective bullish red curves. Stocks and funds seldom move deeply to the south when configured in that manner. Also, one or two of the stocks will continue moving north regardless of what the market does. The funds will track more closely to the market except those in contrarian sectors, such as energy. Current fundamentals suggest energy related funds heading north even if the stock market turns deeply bearish.

Technically, the Quick-term Indicant is not favoring extreme bullish behavior next week. These buy signals are not likely to receive much quick-term support in terms of aggressive bullish behavior. The best scenario is for Monday to be aggressively bearish allowing you to get buy at cheaper prices. Make certain you are conservative in these buys as bearish seasonality continues and deep bearish seasonality begins on September 1.

Stock and fund prices do not always continue moving north when they climb above their bullish red curves. However, the financial risk of avoiding stocks that are above their red curves is much higher that in owning them. The problem here is these buy signals are occurring at a time when there is little underlying support for continuing to move to the north. However, if you spread these purchases around there is an excellent chance that some of them will continue to move north regardless of what the market does. That is more true for stocks than funds. Funds typically parallel the overall stock market.

Fundamentally, the economy is healthy, while there are underlying concerns, such as rising interest rates, rising oil prices, and a strengthening dollar.

The Mid-term Indicant signaled buy for Enron this past weekend. The Mid-term Indicant had no choice but to signal buy when it breached its bullish red curve. The charted data is one of the components to breaking up Enron. This component was the only one that consistently traded since its bankrupt filing. The Indicant staff will research fundamentals. If there is substance, the Mid-term Indicant may continue tracking this residual part of Enron. The Mid-term Indicant signaled sell on February 23, 2001 at $70.47. The buy signal was at $0.35 this past weekend. The symbol is now ECSPQ.PK. It is recommended you research fundamentals before buying.

The link to Enron residuals is below:

http://www.indicant.net/Members/Updates/MTI-Stks-DJU/DJU-02.htm#10

Stupidity Is Not Illegal

Many of you recall how Arthur Andersen’s guilty verdict was overturned by the U.S. Supreme Court a few weeks ago. That was a legal decision. The fact that 28,000 people lost their jobs at that company will not change as a function of the legal mumbo-jumbo. The fact that even more people lost their retirement nest egg will not change. The fact that cronyism and dilettante management existed then and still does so will not change. Watch companies that you are interested in. Study the habits and backgrounds of management.

Weekly Buy/Sell Summary

The Mid-term Indicant generated twenty buy signals and no sell signals for stocks and funds. The market’s contrarian behavior to bearish seasonality continues to be impressive. As stated last week, that could anger the bear and may instill deeper bearish expressions within the next two months. The buy signals should be conservatively implemented with a mindset of quickly selling within the next few weeks. The Mid-term Indicant reluctantly signaled buy, but had no choice since the stocks catapulted their respective bullish red curves.

Although there were no sell signals, the Mid-term Indicant is avoiding 97-stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 6.2% since the Mid-term Indicant signaled sell an average of 16.5-weeks ago.

There were 50-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 29.2% since their respective sell signals an average of 45.0-weeks earlier. Two years ago, on July 19, 2003, the Mid-term Indicant was avoiding only 13-stocks and funds that were down an average of 28.1% since their respective sell signals an average of 29.6-weeks earlier.

In addition to the buy signals, the Mid-term Indicant is signaling hold for 203 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 107.9%. That annualizes to 59.8%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 203-stocks and funds for an average of 93.8-weeks.

One year ago, the Mid-term Indicant was holding 212-stocks and funds out of the 296 tracked at that time for an average of 59.6-weeks. They were up 79.1% (annualized at 69.0%). The Mid-term Indicant was signaling hold for 277-stocks and funds two years ago on July 19, 2003. They were up by an average of 44.4% (annualized at 93.2%) since their respective buy signals an average of 24.8-weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term 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 to 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 and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence 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. The only positive political influence on the economy is to undo its prior damage.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions change, there will be modifications to it to maintain a balanced frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time, contrary to historical standards. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004.

Bullish seasonality ended on April 30, 2005. The market remains firmly situated into bearish seasonality. The market continues to configure itself to support historical standards by expressing bearish behavior, although mild as of this date. Although May is historically one of the most bearish months, it expressed significant bullish behavior in 2005. That was a bullish spurt based on the Quick-term Indicant attributes. A bullish spurt is a micro-burst that has no sustainability. This is where day traders and herky-jerky market players typically lose their money.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality standards. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but 23-weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with several bullish spurts. Those bullish spurts were weak but possessed enough bullish steam to thwart increasing bearish behavior. However, residual components of the prior Quick-term Bull and the constitution of the current Mid-term Bull are exhausted from having to thwart bearish ambition. You have seen the consequences of that exhaustion the past few weeks with each bullish spurt, followed by a stronger bearish response.

The current bullish spurt propelled many stocks and to catapult their bullish red curve. That is indeed non-bearish. On the contrary, this is not necessarily bullish. However, it does provide a forum for a relaxed view of your hold positions. Stocks and funds seldom endure deep bearish behavior while they reside above their respective bullish red curves.

All the Quick-term attributes remain biased with bearish tendencies even though the Mid-term Bull continues to demonstrate significant resistance to bearish ambition. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions. However, the recent bullish spurts have been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality. The Quick-term attributes remain poised in neutrality and that threatens the continuation of the bullish spurt underway.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Quick-term and Short-term Indicant continue signaling bear, as they have been doing since early January 2005. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your longer-term hold positions still appear safe. Fortunately, these safe positions were supported with a bullish spurt during the month of May. June followed with mild bearishness and July so far has been bullish. That is the nature of meandering markets.

As previously stated these bullish spurts and the uncharacteristic bullish May added continued life to the Mid-term Bulls. This has deferred massive selling that will unfold at the expiration of these Mid-term Bull markets. As stated the past few weeks, do not be surprised with increased bearish behavior over the next few weeks.

With the exception of the S&P400 (Mid-caps) and S&P600 (Small-caps), the market has been in a meandering configuration for well over a year. The mid-caps and small-caps are purely bullish and have been buoyant to strong bearish desires.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of the Quick-term Bear and an increasing bias for bearish behavior. This stop loss was changed from 8% several weeks ago because of the expectation of increased bearish influence. As you can see, that is exactly what has occurred.

If you are up by 50% or more, you may find it advantageous to set your stop-loss at 15% 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 a 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 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons.

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.

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 can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

The energy sector, small caps, and mid-caps remain solidly in bullish domains. Technology also converged into a bullish pattern last week. Divergent behavior is less apparent, which is certainly non-bearish, but not enough to signal strong bullish sentiment. After diverging with bearish expressions two weeks ago, the international sector resumed its bullish pattern last week. There are definitely increasing converging bullish attributes, which at this point should be considered as non-bearish, as opposed to complete bullish dominance.

As stated the past nine weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture. There is not enough bullish convergence to ignite strong bullish behavior.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues expressing a new cycle of strength. The Canadian dollar, however, is again expressing strength against the U.S. dollar.

As stated the past four weeks, the U.S. Dollar continues building a base rising from its most recent cyclical minimum. As stated the last eight weeks, this is not a Greenspan objective, but a fallout from his primary focus of fending off inflationary threats. The European Dollar remained in bearish domains for the sixth consecutive week. Its increasing weakness is impressive. As stated last week, the other currencies seem bent on following that pattern of accelerating weakness.

As stated the past five weeks, there remains no cyclical shift in direction on the U.S. Dollars recent strengthening. Cyclically, it is still weak, but the cyclical shift in foreign currencies expresses increasing potential for a new trend in the greenbacks strengthening. The continued rise in interest rates, of which no end is in sight, supports continuing strength in the U.S. Dollar.

This paragraph will remain unchanged until such time conditions change. Rising interest rates tend to strengthen the dollar. That will damage export business and eventually hurt the U.S. economy. This is consistent with historical “political management” of the U.S. Economy. In other words, the political community understands power retention is a function of economic health on Election Day. After presidential elections, there is no immediate concern for economic health. That is the case right now. That sort of thing is typically more pronounced in a lame duck term, which is underway.

As stated last week, commodity prices continue showing nervous behavior, but their trend to the north will continue as long as oil prices continue in that direction. The Mid-term Indicant Bull’s resilience in the face of this inflationary threat is indeed impressive.

This paragraph remains unchanged from the past 31-weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. The stock market is now obviously being bothered by these unfavorable relationships. The bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

The May CPI dropped to 2.8%, which when coupled with the Fed Funds lending rate of no longer threatens the market. However, it will be interesting to see June’s CPI, which should be published late next 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 sixty weeks ago since the MTI buy signal in April 2001. One-hundred and fifty-three weeks ago, it closed up 30.1%. Last week it closed up 145.6%, which is higher than the 75.9% reported 104-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 33.7%, which is higher than 23.1% reported 104-weeks ago. After falling sharply four weeks ago, the fund bounced north the past three weeks.

Fidelity Gold, Fund #28, is up 7.3% since the Mid-term Indicant signaled sell on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market. The Mid-term Indicant is near signaling buy for it, but continues resisting until meandering behavior expires. This fund moved slightly to the south last week.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 202.6% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 68.5%. Vanguard Energy #18, VGENX, is up 113.8% (annualized at 49.2%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 72.4% (annualized at 44.4%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 85.6% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 44.1%.

These energy related funds moved south last week, after moving north in the prior two weeks. These funds should do well even if the market turns extremely bearish. Continue to hold them.

The Gold/Silver Index is up 4.3% since the Mid-term Indicant signaled bear on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal. This index fell sharply last week.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for 27.4-weeks. As stated the past several weeks, that is a long period of survival spanning four months of the six months of bullish seasonality. The market is now mired inside bearish seasonality. It is now inside the most bearish rolling third on a historical basis. Do not be surprised at increased bearish activity in the next few days. That bearishness will most likely be mild. The market is not configured for strong bullish movements in the next few days, but several quick-term attributes have shifted into a non-bearish configuration.

The indices continue determining any potential comfort zones around bullish red. As stated the past eight weeks, such comfort around their respective bullish red curves should not be expected. Eight weeks ago all eight indices were above bullish red. Seven weeks ago, six were above bullish red. Six weeks ago, only three were above bullish red. Two weeks ago, three were above bullish red and three were below bearish yellow. Now, all eight are back above bullish red. That is a testament to the strength of this Mid-term Bull market. It is favorable to your hold positions the market did not find a comfort zone below bearish yellow and the continued interaction with bullish red is a certain non-bearish attribute in terms of deep bearish expressions. It is likely the market will not find significant comfort at their current elevated heights.

The eight major indices are up by an average of 3.7% since the Quick-term Indicant signaled bear on January 4, 2005.

Read the daily emails for more about the Quick-term Indicant. It is still a Quick-term Bear.

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 Indicant Volume Indicator revealed some early support for the bearish dominance four weeks ago, but petered out. That bodes well for those desiring, at worse, a continuation of the meandering market. Keep your eye on this attribute. If it resumes robustness, coupled with bearish behavior, expect expiration of the current Mid-term Indicant Bulls. The last two weeks of the current bullish spurt was not supported with significant volume. The Indicant Volume Indicator appears to be configuring into a lethargic pattern again. That supports, at best, meandering behavior.

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

The Dow is up 1.2% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is up 3.7% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears. Both indices have recently returned to a bearish direction when at these bullish levels and contrary to the bearish signal so far this year. Expect more of the same.

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

Nothing has changed in the past several weeks. Six of the eight major indices continue to threaten contact with their respective breakdown lines. Contact with them will support increased bearish behavior. However, the S&P400 and S&P600 continue contacting their breakout lines, lending significant support to bullish desires. The problem is the other indices. They continue to threaten contact with their breakdown lines, which supports a bearish bias. Overall, this meanderer continues to pester desires of rampant bullish expressions. Please read the daily reports, as this element will offer greater insight in the next few weeks.

Read your daily emails.

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

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

Refer to the daily reports for more information about the Quick-term Indicant.

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 eight major indices are up an average of 30.7% since the Mid-term Indicant signaled bull an average of 90.8-weeks ago. That annualizes to 17.6%. The Dow Utilities is the strongest bull. It is up 65.4% since the Mid-term Indicant signaled bull on August 16, 2003. The Dow Jones Industrial Average is up 24.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 44.5% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Transports is up 61.1% since the Mid-term Indicant bull signal on March 22, 2003. The Utilities continues to impress with strong bearish resistance. It actually continues to move in a decidedly bullish direction and is showing absolutely no respect for the tremendous consistency of bearish seasonality in a presidential post election year.

Four of the eight major indices remain as red bulls, which is down from six, 18-weeks ago. Bullish spurts the past two weeks continue providing support for the longevity of these Mid-term 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 – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 117.6% since the Mid-term Indicant signaled bull an average of 121.7-weeks ago for an annualized gain of 50.2%, which is less than the 72.9% reported 117-weeks ago. International indices moved north last week after moving south in the prior two weeks. As stated the past five weeks, do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 17.6% since the Mid-term Indicant signaled bear 27.0-weeks ago. It is the Chinese market that endures this bear signal. The Chinese continue cooling their economy. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious. The Chinese economy will most likely not start heating up again until after the mid-term elections next year.

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

Jul 10, 2005 Indicant.Net Weekly Update

Volume 07, Issue 02 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Stocks March to Their Own Cadence

You will notice there were eight buy signals for stocks. There were no buy signals for mutual funds. Mutual funds track closely to stock market or specific sector performance. Mutual funds consist of both strong and weak stocks in their respective sectors. During bearish cycles, the weak members of funds drop more deeply than the stronger members. Those deep drops damage the funds performance metric. Conversely, bullish cycles catapult the stronger stocks higher while the weak ones lag. This mitigates risk to the investor and thus the popularity of mutual funds. The price one pays for the mitigate risk is the dampened performance of the fund during bullish cycles. That dampened performance is due to the lagging weak members.

The Quick-term Indicant continues to signal bear. Many of the attributes are in bearish domains and recent bullish spurts have been phony. However, some of those spurts moved some of the funds above their bullish red curves. That would normally prompt the Mid-term Indicant to signal buy. Many of the avoided funds are linked to the NASDAQ, NASDAQ100, and other growth oriented indices. Those indices are weak and contain significant bearish attributes. Thus, the Mid-term Indicant continues to avoid those funds even though they possess a bullish one-dimensional attribute by being above bullish red.

Fundamentals are also weighted. Rising interest rates, if left unchecked, will eventually take its toll on the underlying Mid-term Bulls. That coupled with rising oil prices and other commodities will eventually penetrate the consumer price index. The stock market will not like that. Rising productivity and lower wages and salaries are stifling some of the negative influence of rising commodity prices on corporate earnings. However, commodity prices are not merely rising. They are skyrocketing. The stock market has been tolerant of this, but that tolerance has its limits.

Reducing wage rates and salaries will eventually lead to reduced demand for stocks. Highly paid middle America can shuffle a percentage of their income into mutual funds and stocks via their 401K’s. However, as salaries continue to reduce, the individual’s budget tightening may be applied to 401K’s. Although reduced wages and salaries will help elevate corporate earnings, the stock market bull cycles are more influenced by supply and demand than corporate earnings. There is little corporate earnings relationship to stock prices on a historical basis with short-term and mid-term perspectives, while the supply and demand factor are highly correlated to stock market performance over the long term.

The presidential post election year is historically the most bearish. There are of course exceptions to historical standards. However, it is not wise to exclude this influence in weighing investment decisions in equities.

As you can see, there are underlying fundamentals that support a bearish bias.

The market has a history of climbing walls of worry. It also has a history is quickly adjusting to walls of worries. The Quick-term Indicant continues to signal bear and thus the reason there are no buy signals for funds.

On the other hand, individual stocks can march to the north in the most severe of bear markets. Those are companies whose supply of stocks (for sell) is less than the compelling demand for them. Although, fundamentals and technical indicators suggest these buy signals have a high probability of being reversed to sell signals before the end of September, there is an even higher probability that one of the eight stocks will continue to rise even if the market falls into a deep bearish cycle.

So, as always, if you elect to buy on these signals, do so conservatively. Do not believe the stocks will perform based on glowing earnings reports. That has very little to do with individual stock performance in the short-term. The Mid-term Indicant signaled buy for these stocks for several reasons, but the buy signal is relatively weak due to underlying fundamentals and the Quick-term Indicant’s continuing to signal bear. The Mid-term Indicant is highly weighted on buying decisions when a stock crosses above its bullish red curve, which is not the case for mutual funds. This is weighted in this manner due to the high probability of short-term bullish behavior by a single individual stock. This is why the Indicant continues reminding investors to never invest more than 10% of their investment resources into an individual stock.

A company can report an earnings increase of 30% or more and the stock can stay flat or even go down. That is because of the truth to the old axiom; buy on the rumor and sell on the news. The reason current news is irrelevant is because everyone has access to it. Not everyone can be winner in the stock market. It takes losers to make winners. Thus, contemporary news is simply a waste of time to study.

If you elect to buy some of the recommended stocks this weekend, do so conservatively and manage your stop loss. The market’s underlying configurations offer no support for any sustainable bullish behavior, overall. However, the utility sector continues expressing significant bullish behavior, although it was bearish last week. There are no buy signals for utilities, but for those of you who bought on the buy signals, maintain a feeling of comfort in your hold positions.

Weekly Buy/Sell Summary

The Mid-term Indicant generated eight buy signals and one sell signal for stocks and funds. The market’s contrarian behavior to bearish seasonality is impressive. However, that is angering the bear and may instill deeper bearish expressions within the next two months. The buy signals should be conservatively implemented with a mindset of quickly selling within the next few weeks. The Mid-term Indicant reluctantly signaled buy, but had no choice since the stocks catapulted their respective bullish red curves.

In addition to the sell signal, the Mid-term Indicant is avoiding 116-stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 25.4% since the Mid-term Indicant signaled sell an average of 61.3-weeks ago.

There were 36-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 31.2% since their respective sell signals an average of 45.9-weeks earlier. Two years ago, on July 12, 2003, the Mid-term Indicant was avoiding only 10-stocks and funds that were down an average of 29.0% since their respective sell signals an average of 29.1-weeks earlier.

In addition to the buy signals, the Mid-term Indicant is signaling hold for 195 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 110.7%. That annualizes to 59.2%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 195-stocks and funds for an average of 97.3-weeks.

One year ago, the Mid-term Indicant was holding 246-stocks and funds out of the 296 tracked at that time for an average of 53.7-weeks. They were up 67.8% (annualized at 65.6%). The Mid-term Indicant was signaling hold for 278-stocks and funds two years ago on July 12, 2003. They were up by an average of 47.5% (annualized at 103.2%) since their respective buy signals an average of 23.9-weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term 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 to 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 and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence 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. The only positive political influence on the economy is to undo its prior damage.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions change, there will be modifications to it to maintain a balanced frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time, contrary to historical standards. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004.

Bullish seasonality ended on April 30, 2005. The market is firmly situated into bearish seasonality, based on historical norms. The market continues to configure itself to support historical standards by expressing bearish behavior. Although May is historically one of the most bearish months, it expressed significant bullish behavior in 2005. That was a bullish spurt based on the Quick-term Indicant attributes. A bullish spurt is a micro-burst that has no sustainability. This is where day traders and herky-jerky market players typically lose their money.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality standards. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but 22-weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with several bullish spurts. Those bullish spurts were weak but possessed enough bullish steam to thwart increasing bearish behavior. However, residual components of the prior Quick-term Bull and the constitution of the current Mid-term Bull are exhausted from having to thwart bearish ambition. You have seen the consequences of that exhaustion the past few weeks with each bullish spurt, followed by a stronger bearish response.

The bullish expressions late last week are configured with characteristics consistent with bullish spurts.

All the Quick-term attributes remain biased with bearish tendencies even though the Mid-term Bull continues to demonstrate significant resistance to bearish ambition. That bullish resistance weakened the past 18-weeks. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions. However, the recent bullish spurts have been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Quick-term and Short-term Indicant continue signaling bear, as they have been doing since early January 2005. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your longer-term hold positions still appear safe. Fortunately, these safe positions were supported with a bullish spurt during the month of May. That added continued life to the Mid-term Bulls. This has deferred massive selling that will unfold at the expiration of these Mid-term Bull markets. As stated the past few weeks, do not be surprised with increased bearish behavior over the next few weeks.

With the exception of the S&P400 (Mid-caps) and S&P600 (Small-caps), the market has been in a meandering configuration for well over a year. The mid-caps and small-caps are purely bullish and have been buoyant to strong bearish desires.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of the Quick-term Bear and an increasing bias for bearish behavior. This stop loss was changed from 8% several weeks ago because of the expectation of increased bearish influence. As you can see, that is exactly what has occurred.

If you are up by 50% or more, you may find it advantageous to set your stop-loss at 15% 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 a 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 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons.

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.

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 can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

The energy sector, small caps, and mid-caps remain solidly in bullish domains, while most of the remaining sectors are now expressions divergent behavior. Most notably is last week’s bearish expressions in the international sector. That supports continuing bearish bias for the overall stock market, while the energy sector continues its own bullish path. Continuing bullish behavior by the small-caps and mid-caps will continue to buoy against bearish aggressions. That can support continued meandering behavior, but the bias is still bearish.

As stated the past eight weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture. There is not enough bullish convergence to ignite strong bullish behavior.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues expressing a new cycle of strength. Even the Canadian dollar, which has been the strongest, seems intent in continuing to join a pattern of weakness against the U.S. dollar.

As stated the past three weeks, the U.S. Dollar continues building a base rising from its most recent cyclical minimum. As stated the last seven weeks, this is not a Greenspan objective, but a fallout from his primary focus of fending off inflationary threats. The European Dollar remained in bearish domains for the fifth consecutive week. Its increasing weakness is impressive. The other currencies seem bent on following that pattern of accelerating weakness.

As stated the past four weeks, there remains no cyclical shift in direction on the U.S. Dollars recent strengthening. Cyclically, it is still weak, but the cyclical shift in foreign currencies expresses increasing potential for a new trend in the greenbacks strengthening. The continued rise in interest rates, of which no end is in sight, supports continuing strength in the U.S. Dollar.

This paragraph will remain unchanged until such time conditions change. Rising interest rates tend to strengthen the dollar. That will damage export business and eventually hurt the U.S. economy. This is consistent with historical “political management” of the U.S. Economy. In other words, the political community understands power retention is a function of economic health on Election Day. After presidential elections, there is no immediate concern for economic health. That is the case right now. That sort of thing is typically more pronounced in a lame duck term, which is underway.

As stated last week, commodity prices continue showing nervous behavior, but their trend to the north will continue as long as oil prices continue in that direction. The Mid-term Indicant Bull’s resilience in the face of this inflationary threat is indeed impressive.

This paragraph remains unchanged from the past 30-weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. The stock market is now obviously being bothered by these unfavorable relationships. The bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

The May CPI dropped to 2.8%, which when coupled with the Fed Funds lending rate of no longer threatens the market. However, it will be interesting to see June’s CPI, which should be published late next 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 fifty-nine weeks ago since the MTI buy signal in April 2001. One-hundred and fifty-two weeks ago, it closed up 30.1%. Last week it closed up 143.8%, which is higher than the 75.9% reported 103-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 33.5%, which is higher than 23.1% reported 103-weeks ago. After falling sharply three weeks ago, the fund bounced north the past two weeks.

Fidelity Gold, Fund #28, is up 8.5% since the Mid-term Indicant signaled sell on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market. The Mid-term Indicant is near signaling buy for it, but continues resisting until meandering behavior expires. This fund moved north slightly last week.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 204.8% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 69.8%. Vanguard Energy #18, VGENX, is up 116.6% (annualized at 50.9%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 75.5% (annualized at 46.9%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 88.9% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 46.3%.

The energy related funds moved north the past two weeks with rising oil prices. These funds should do well even if the market turns extremely bearish. Continue to hold them.

The Gold/Silver Index is up 6.7% since the Mid-term Indicant signaled bear on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for 26.4-weeks. As stated the past several weeks, that is a long period of survival spanning four months of the six months of bullish seasonality. The market is now mired inside bearish seasonality. It is now inside the most bearish rolling third on a historical basis.

The indices are now determining any potential comfort zones around bullish red. As stated the past seven weeks, such comfort around their respective bullish red curves should not be expected. Seven weeks ago all eight indices were above bullish red. Six weeks ago, six were above bullish red. Five weeks ago only three were above bullish red. Four are now above bullish red. Last week, three were below bearish yellow, but responded with enough bullish emphasis to return to neutral. That is a testament to the strength of this Mid-term Bull market. It is favorable to your hold positions the market did not find a comfort zone below bearish yellow.

The eight major indices are up by an average of 2.3% since the Quick-term Indicant signaled bear on January 4, 2005.

Read the daily emails for more about the Quick-term Indicant. It is still a Quick-term Bear.

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 Indicant Volume Indicator revealed some early support for the bearish dominance three weeks ago, but petered out. That bodes well for those desiring, at worse, a continuation of the meandering market. Keep your eye on this attribute. If it resumes robustness, coupled with bearish behavior, expect expiration of the current Mid-term Indicant Bulls. Last weeks bullish spurt was not supported with significant volume. The Indicant Volume Indicator, although flattening out from a cycle of lethargy remains in a non-robust configuration. That supports, at best, meandering behavior.

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

The Dow is down 0.2% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is up 1.6% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears.

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

Nothing has changed in the past several weeks. Six of the eight major indices continue to threaten contact with their respective breakdown lines. Contact with them will support increased bearish behavior. However, the S&P400 and S&P600 continue contacting their breakout lines, lending significant support to bullish desires. The problem is the other indices. They continue to threaten contact with their breakdown lines, which supports a bearish bias. Overall, this meanderer continues to pester our true desires of rampant bullish expressions. Please read the daily reports, as this element will offer greater insight in the next few weeks.

Read your daily emails.

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

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

Refer to the daily reports for more information about the Quick-term Indicant.

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 eight major indices are up an average of 28.6% since the Mid-term Indicant signaled bull an average of 88.8-weeks ago. That annualizes to 16.6%. The Dow Utilities is the strongest bull. It is up 64.4% since the Mid-term Indicant signaled bull on August 16, 2003. The Dow Jones Industrial Average is up 22.6% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 42.4% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Transports is up 58.6% since the Mid-term Indicant bull signal on August 16, 2003. The Utilities continues to impress with strong bearish resistance. It actually continues to move in a decidedly bullish direction and is showing absolutely no respect for the tremendous consistency of bearish seasonality in a presidential post election year.

Four of the eight major indices remain as red bulls, which is down from six, 17-weeks ago. The survivability of these indices is again in question, but the bullish spurt late last week again provides support for the longevity of these Mid-term 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 – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 114.3% since the Mid-term Indicant signaled bull an average of 120.7-weeks ago for an annualized gain of 49.2%, which is less than the 72.9% reported 116-weeks ago. International indices moved in a slight bearish direction the past two weeks. As stated the past four weeks, do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 18.2% since the Mid-term Indicant signaled bear 26.0-weeks ago. It is the Chinese market that endures this bear signal. The Chinese continue cooling their economy. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious. The Chinese economy will most likely not start heating up again until after the mid-term elections next year.

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

Jul 03, 2005 Indicant.Net Weekly Update

Volume 07, Issue 01 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Bearish Seasonality

The Dow Utilities continue to do its part in violating normal seasonality. This index continues to skyrocket in the face of deep bearish seasonality.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-07-DJU-Curr.htm

This index is up 105.1% since the MTI-RYS bull signal on October 25, 2002. It continues to rise because holders are locked into nice dividend yields. They are not selling their holdings, prompting the simple law of supply and demand to prevail. The demand is not significant at this time, but the supply of these stocks is zilch. The forces of bearish seasonality should eventually take its toll before summer ends. However, the current configuration suggests this index will be immune to deep bearish seasonality.

The AES Corporation is up 832.0% since its buy signal on November 23, 2002. Surprisingly, this stock is one of the higher performing since the October-November 2002 Indicant buying spree.

http://www.indicant.net/Members/Updates/MTI-Stks-DJU/DJU-01.htm#5

Fortunately, the Dow Transport Index rebounded slightly last week. That prevented a MTI-RYS bear signal and helped perpetuate the meandering behavior of the overall stock market.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-06-DJT-Curr.htm

The Dow30 April-June rolling quarter finished down 2.2%. That was somewhat consistent with bearish seasonality. The May-June rolling bi-monthly period finished up 0.8%. That is not consistent with normal seasonal behavior. That variance increases the probability of accelerated bearish behavior in the July-September rolling quarter.

The Dow30’s June-September rolling third is historically the most bearish. A $10,000 1950 investment would be worth only $7,434 as of September 2004. That should further drop by September of this year.

The NASDAQ’s July-October rolling third is the most bearish. A $10,000 1971 investment in the NASDAQ stocks was down to $5,867 by October 2004. That is nearly a 50% drop during an astounding bull market since that time. There is an increasing probability of that account balance dropping further this year and next year.

There is little likelihood of pronounced bullish behavior occurring before October of this year. Bearish seasonality continues to depress any bullish ambition. The best we can hope for is a continuation of meandering market behavior until October. The Quick-term Indicant continues to signal bear, which has been the case since January 5, 2005.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and two sell signals for stocks and funds. Do not be surprised at increased selling activity over the next two months.

In addition to the sell signals, the Mid-term Indicant is avoiding 122-stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 26.4% since the Mid-term Indicant signaled sell an average of 60.3-weeks ago.

There were 35-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 30.4% since their respective sell signals an average of 44.9-weeks earlier. Two years ago, on June 28, 2003, the Mid-term Indicant was avoiding only three stocks and funds that were down an average of 26.9% since their respective sell signals an average of 27.6-weeks earlier.

Although there were no buy signals, the Mid-term Indicant is signaling hold for 196 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 108.0%. That annualizes to 58.7%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 196-stocks and funds for an average of 95.7-weeks.

One year ago, the Mid-term Indicant was holding 257-stocks and funds out of the 296 tracked at that time for an average of 51.7-weeks. They were up 68.9% (annualized at 69.3%). The Mid-term Indicant was signaling hold for 277-stocks and funds two years ago on July 05, 2003. They were up by an average of 44.7% (annualized at 100.2%) since their respective buy signals an average of 23.2-weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term 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 to 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 and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence 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. The only positive political influence on the economy is to undo its prior damage.

The remainder of this section, Secular Market Blend, is repeated, in part, from the past several months, but it does not hurt to reread it each week. As time progresses and conditions change, there will be modifications to it to maintain a balanced frame of reference.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality during most of 2003. The market continued moving north during that time, contrary to historical standards. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred.

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. Until last week, several indices remained elevated from the 2004 bottom. Now, some are flat to slightly down from that point.

Bullish seasonality ended on April 30, 2005. The market is firmly situated into bearish seasonality, based on historical norms. The market continues to configure itself to support historical standards by expressing bearish behavior. Although May is historically one of the most bearish months, it expressed significant bullish behavior in 2005. That was a bullish spurt based on the Quick-term Indicant attributes. A bullish spurt is a micro-burst that has no sustainability. This is where day traders and herky-jerky market players typically lose their money.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality standards. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but 21-weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with several bullish spurts. Those bullish spurts were weak but possessed enough bullish steam to thwart increasing bearish behavior. However, residual components of the prior Quick-term Bull and the constitution of the current Mid-term Bull are exhausted from having to thwart bearish ambition. You have seen the consequences of that exhaustion the past few weeks with each bullish spurt, followed by a stronger bearish response.

The bullish spurt in the three weeks prior to strong bearish responses the past two weeks was impressive. The market moved north with significant gusto. As previously stated in the weekly reports, that bullish movement was without substance. The lack of volume support with recent bullish behavior is a glaring testament that bullish movement was a mere bullish spurt and not the foundation of a sustainable Quick-term bull.

All the Quick-term attributes remain biased with bearish tendencies even though the Mid-term Bull continues to demonstrate significant resistance to bearish ambition. That bullish resistance weakened the past 17-weeks. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions. However, the recent bullish spurts have been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality. The last two weeks of bearish expressions were consistent with a following pattern of bullish spurts; that is, each bullish spurt is followed by a stronger bearish response.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Quick-term and Short-term Indicant continue signaling bear, as they have been doing since early January 2005. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your longer-term hold positions still appear safe. Fortunately, these safe positions were supported with a bullish spurt during the month of May. That added continued life to the Mid-term Bulls. This has deferred massive selling that will unfold at the expiration of these Mid-term Bull markets. As stated the past few weeks, do not be surprised with increased bearish behavior over the next few weeks.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0001.htm

Make certain you read the entire pages on the above link. You will see there are exceptions.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because of the Quick-term Bear and an increasing bias for bearish behavior. This stop loss was changed from 8% two weeks ago because of the expectation of increased bearish influence. As you can see, that is exactly what has occurred.

If you are up by 50% or more, you may find it advantageous to set your stop-loss at 15% 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 a 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 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

In a few instances, you will see a hold signal for a stock or fund that is down from its buy signal or below one of the above conditions for selling. If you are more of a trader than an investor, feel free to buy stocks and funds with those “bearish” attributes. They are configured for a possible rebound, while at the same time, it is important to set the stop losses mentioned in this report. Use the Quick-term Indicant as a guide in your decision-making processes. If the stock price is falling in a Quick-term Bear market, it is not advisable to buy.

Do not short on stocks if they are up from an avoid signal. Stocks go up more often than they go down. Stocks have a tendency to march to their own drumbeat when rising. Some stocks rise and continue to rise in the most severe of bear markets. Short selling opens up an opportunity for the snakes on Wall Street to take everything you own. They can cause a stock to rise at their whim and without any regard to fundamental reason. It usually does not make sense to bet against the sweat and toil of hard-working people. There are some instances where stocks rise during bear markets due to legitimate fundamental reasons.

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.

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 can be found from a single page at Indicant.Net. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

The energy sector remains solidly in bullish domains, while most of the remaining sectors continue a path of bearish convergence. That supports continuing bearish bias for the overall stock market, while the energy sector continues its own bullish path.

As stated the past seven weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture. Bearish behavior the last two weeks demonstrated the underlying weakness in these Mid-term Bulls.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar accelerated its strengthening against world currencies last week. Even the Canadian dollar, which has been the strongest, seems intent to join a pattern of weakness.

As stated the past two weeks, the U.S. Dollar continues building a base rising from its most recent cyclical minimum. As stated the last six weeks, this is not a Greenspan objective, but a fallout from his primary focus of fending off inflationary threats. The European Dollar remained in bearish domains for the fourth consecutive week. Its increasing weakness is impressive. The other currencies seem bent on following that pattern of accelerating weakness.

As stated the past three weeks, there remains no cyclical shift in direction on the U.S. Dollars recent strengthening. Cyclically, it is still weak, but the cyclical shift in foreign currencies expresses increasing potential for a new trend in the greenbacks strengthening. The continued rise in interest rates, of which no end is in sight, supports continuing strength in the U.S. Dollar.

This paragraph will remain unchanged until such time conditions change. Rising interest rates tend to strengthen the dollar. That will damage export business and eventually hurt the U.S. economy. This is consistent with historical “political management” of the U.S. Economy. In other words, the political community understands power retention is a function of economic health on Election Day. After presidential elections, there is no immediate concern for economic health. That is the case right now. That sort of thing is typically more pronounced in a lame duck term, which is underway.

Commodity prices continue showing nervous behavior, but their trend to the north will continue as long as oil prices continue in that direction.

This paragraph remains unchanged from the past 30-weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. Until recently, the stock market was not being bothered by this unfavorable direction on a mid-term basis. It is now being bothered by these unfavorable relationships. The bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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 fifty-eight weeks ago since the MTI buy signal in April 2001. One-hundred and fifty-one weeks ago, it closed up 30.1%. Last week it closed up 141.2%, which is higher than the 75.9% reported 102-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 33.0%, which is higher than 23.1% reported 102-weeks ago. After falling sharply two weeks ago, the fund bounced north last week.

Fidelity Gold, Fund #28, is up 8.4% since the Mid-term Indicant signaled sell on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market. The Mid-term Indicant is near signaling buy for it, but continues resisting until meandering behavior expires. This fund moved north last week.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 195.1% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 66.9%. Vanguard Energy #18, VGENX, is up 111.1% (annualized at 48.9%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 73.8% (annualized at 46.3%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 85.0% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 44.6%.

The energy related funds moved north last week after falling in the previous week.

The Gold/Silver Index is up 8.1% since the Mid-term Indicant signaled bear on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for 25.4-weeks. As stated the past several weeks, that is a long period of survival spanning four months of the six months of bullish seasonality. The market is now mired inside bearish seasonality. It is now inside the most bearish rolling third on a historical basis.

The indices are now determining any potential comfort zones around bullish red. As stated the past five weeks, such comfort around their respective bullish red curves should not be expected. Six weeks ago all eight indices were above bullish red. Five weeks ago, six were above bullish red. Four weeks ago only three were above bullish red. None are above bullish red at this point. Contrarily, three are now below bearish yellow. The question now, will they find comfort below bearish yellow?

The eight major indices are up by an average of 0.3% since the Quick-term Indicant signaled bear on January 4, 2005.

Read the daily emails for more about the Quick-term Indicant. It is still a Quick-term Bear.

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 Indicant Volume Indicator revealed some early support for the bearish dominance two weeks ago, but petered out. That bodes well for those desiring, at worse, a continuation of the meandering market. Keep your eye on this attribute. If it resumes robustness, coupled with bearish behavior, expect expiration of the current Mid-term Indicant Bulls.

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

The Dow is down 1.6% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 1.1% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears.

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

Nothing has changed in the past several weeks. The major indices continue to threaten contact with their respective breakdown lines. Contact with them will support increased bearish behavior. Please read the daily reports, as this element will offer greater insight in the next few weeks.

Read your daily emails.

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

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

Refer to the daily reports for more information about the Quick-term Indicant.

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 eight major indices are up an average of 26.6% since the Mid-term Indicant signaled bull an average of 88.8-weeks ago. That annualizes to 15.6%. The Dow Utilities is the strongest bull. It is up 64.4% since the Mid-term Indicant signaled bull on August 16, 2003. The Dow Jones Industrial Average is up 20.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 40.5% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Transports is up 55.0% since the Mid-term Indicant bull signal on August 16, 2003. The Utilities continues to impress with strong bearish resistance. It was the only index expressing aggressive bullish behavior the past several weeks.

One of the eight major indices remain as red bulls, which is down from six, 16-weeks ago. The survivability of these indices is again in question.

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 – MTI-RYS – Ten U.S. Indices

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 113.9% since the Mid-term Indicant signaled bull an average of 119.7-weeks ago for an annualized gain of 49.5%, which is less than the 72.9% reported 115-weeks ago. International indices moved in a slight bearish direction last week. As stated the past three weeks, do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 15.2% since the Mid-term Indicant signaled bear 25.0-weeks ago. It is the Chinese market that endures this bear signal. The Chinese continue cooling their economy. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious. The Chinese economy will most likely not start heating up again until after the mid-term elections next year.

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