Jun 26, 2005 Indicant.Net Weekly Update

Volume 06, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

Bearish Seasonality and the Threat of a 1970’s Like Market

The Dow Transports fell dramatically last week. As you can see, it is nearing a MTI-RYS bear signal for the second time this year. Other major indices also fell sharply last week with the exception of the Dow Utilities.

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

It is common for this configuration to induce increased bearish behavior. Do not be surprised with increased bearish behavior in the transportation industry in the immediate future. Remember, the June and July rolling thirds are horrendously bearish.

It should be noted the Dow Utilities continue to resist bearish ambition. The simple law of supply and demand helped this index express bullish behavior last week. As money rotated out of the transport sector and other sectors, much of it rolled into the utility sector. Holders of utility stocks are locked into nice dividends form the late 2002 buying spree. Those stocks are safest at this point. Continue holding until you see the MTI-RYS model signal bear for the Dow Utilities and sell signals for individual stocks.

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

The market’s bearish behavior last week was accompanied by increasing volume. That is an ominous combination. Mentally prepare for increased selling activity. The Mid-term Bull market that was born in March 2003 appears nearing an end.

Fundamentally, the equity markets are being bothered by increasing oil prices and rising interest rates. The rising energy costs threaten corporate profits. Also, the CPI is being threatened. Remember, the market does not like an absolute value of eight percent in combined interest rates and inflation.

The message this week is short. Mentally prepare yourselves to abandon your hold positions over the next few weeks. The depth of the impending bear is not known. The Indicant does not care about depth. A bear is a bear. The Indicant will accelerate sell signals in the event the various models consistently signal bear.

Weekly Buy/Sell Summary

The Mid-term Indicant generated two buy signals and twelve sell signals for stocks and funds. As you can see, selling activity is accelerating.

In addition to the sell signals, the Mid-term Indicant is avoiding 110 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 26.6% since the Mid-term Indicant signaled sell an average of 61.0 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.

In addition to the 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 106.1%. That annualizes to 57.9%, 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 95.3-weeks.

One year ago, the Mid-term Indicant was holding 248-stocks and funds out of the 296 tracked at that time for an average of 53.0-weeks. They were up 73.9% (annualized at 72.5%). The Mid-term Indicant was signaling hold for 277-stocks and funds two years ago on June 28, 2003. They were up by an average of 42.6% (annualized at 99.7%) since their respective buy signals an average of 22.2-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. The market is still elevated as a function of the typical fourth quarter rally in 2004.

Unfortunately, the Quick-term Bear that plagued normal bullish seasonality for the second consecutive year is challenging this elevated position. Bullish seasonality ended on April 30, 2005. The market is now situating into bearish seasonality, based on historical norms. So far, the market appears to be configuring to support historical standards by expressing bearish behavior. Although May, which is historically one of the most bearish months, 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 20-weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with a bullish spurt. That bullish spurt was weak but possessed enough bullish steam to thwart increasing aggressive 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 last weeks strong bearish response 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 this bullish movement is 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 16-weeks. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis. 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. Last week’s bearish behavior was 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% last weekend because of the expectation of increased bearish influence. As you can see, that is exactly what 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 diverged with bullish behavior. The other sectors converged on bearish behavior. That combination suggests continuing bearish behavior.

As stated the past six weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture. Last week’s bearish behavior demonstrated the underlying weakness in these Mid-term Bulls.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues to strengthen against world currencies with the exception of the Canadian dollar. Long-term potential for a significantly stronger Canadian dollar parallels the potential of the vast Athabasca Tar Sand Oil.

As stated last week, the U.S. Dollar continues building a base rising from its most recent cyclical minimum. As stated the last five 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 third consecutive week. Its increasing weakness is impressive.

As stated the past two 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 the Eurodollar expresses increasing potential for a new trend in euro weakness. 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.

After showing weakness the last eleven weeks, commodity prices rebounded significantly last week on record high oil prices. Two consecutive weeks of bullish movements in commodity prices is vectoring Greenspan and politicians into a tough spot. High oil prices will suck money from domestic producers of product, while plowing it to non-productive segments of the world economy. This will cool the economy while at the same time, inflation will continue to mount. Greenspan will bias his reaction to fending off inflation, even at the expense of economic health. The politicians will voice opinions for economic stimulants by the mid-term election year. The Bush administration will bias bearish behavior in sections of the country under democratic control in an effort to get more seats. The problem is that some of that bias can back fire if it spills over to Republican controlled states. This is tricky, but that is the way politicians think. It is all about selfishness as opposed to doing what is right.

This paragraph remains unchanged from the past 29-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-seven weeks ago since the MTI buy signal in April 2001. One-hundred and fifty weeks ago, it closed up 30.1%. Last week it closed up 139.5%, which is higher than the 75.9% reported 101-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 32.7%, which is higher than 23.1% reported 101-weeks ago. After moving north the past five weeks, this fund fell sharply last week.

Fidelity Gold, Fund #28, is up 7.8% 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 also fell last week.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 191.2% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 66.0%. Vanguard Energy #18, VGENX, is up 108.1% (annualized at 48.0%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 72.4% (annualized at 46.0%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 81.8% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 43.5%.

The energy related funds fell last week but maintained their red bull status. Some of that fall was due to profit-taking after five consecutive weeks of bullish behavior.

The Gold/Silver Index is up 7.2% 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 24.4-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 four weeks, such comfort around their respective bullish red curves should not be expected. Five weeks ago all eight indices were above bullish red. Four weeks ago, six were above bullish red. Three weeks ago only three were above bullish red. None are above bullish red at this point.

The indices are not expressing any comfort zones above their respective bullish red curves. Fundamentally, the S&P400 and S&P600 can express comfort, but only to the extent they have some company. Unfortunately, the large caps will have difficulty maintaining that position during bearish seasonality and during the presidential post election year. At least that should be the case until later this year.

The eight major indices are down by an average of 0.4% 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

Volume increased late last week on pronounced bearish behavior. As stated earlier in this report, that is an ominous combination, supporting increased bearish behavior.

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

The Dow is down 1.7% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 1.3% 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 continuing 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 25.4% since the Mid-term Indicant signaled bull an average of 87.8-weeks ago. That annualizes to 15.0%. The Dow Utilities is the strongest bull. It is up 60.3% since the Mid-term Indicant signaled bull on August 16, 2003. The Dow Jones Industrial Average is up 20.8% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 38.6% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Transports is up 50.7% 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 bullish behavior last week.

One of the eight major indices remain as red bulls, which is down from six, 15-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 114.6% since the Mid-term Indicant signaled bull an average of 118.7-weeks ago for an annualized gain of 50.2%, which is less than the 72.9% reported 114-weeks ago. International indices moved in a slight bullish direction last week, contrasting significantly with domestic market’s bearish behavior. As stated the past two weeks, do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 11.5% since the Mid-term Indicant signaled bear 24.0-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

Jun 19, 2005 Indicant.Net Weekly Update

Volume 06, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Mid-term Indicant Bull Continues Stalemate with Bearish Ambitions

A 1950 $10,000 investment in the Dow 30 only in the June-September rolling third would be down by 25% to $7,434. The June-September rolling third is the most bearish. It is the only rolling third where money is lost in the S&P500 Index since 1950. Even a 1971 $10,000 in the NASDAQ in the June-September rolling third would now only be worth $7,866.

The above seasonal phenomenon alone is not enough to increase selling activity by the Mid-term Indicant. The Mid-term Bull attributes are bullish. However, the current Mid-term Bull is relatively old and is configured along historical norms.

Also influencing the quiet nature of the Mid-term Indicant is the Indicant Volume Indicator’s lethargic pattern. Although the market can shift from bull or bear mode on low volume, the new direction is seldom sustainable with a lethargic Indicant Volume Indicator.

The recent bullish spurt provided a few characteristics of a Quick-term Bull, but without volume support. Rather than signaling buy, shortly followed by sell signals, the Mid-term Indicant is simply not signaling buy or sell for stocks and funds.

The normally bearish presidential post election year, coupled with bearish seasonality, and the threat of the June-September rolling third is reason to be cautious about new money investing in equities. Rising interest rates and rising commodity prices will also impose a fundamental lid on rising stock prices.

However, with all those technical and fundamental bearish attributes, the current Mid-term Bull’s obstinate behavior is indeed impressive. That bodes well for your high double and triple digit hold positions.

Although interest rates remain at historically low levels, the current cyclical direction continues to pester the bull. It is favorable, though, that the bull’s response is of a meandering nature, as opposed to outright bearishness.

http://www.indicant.net/Members/Updates/Economic/E06.htm

The following link will illustrate the NASDAQ’s July-September rolling quarter is the most bearish. Generally, none of the indices performs well during the summer months. That is because people are too distracted with the longer days, vacations, twilight golf, etc.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0010.htm

Commodity prices continue to rise. If this does not eventually impact the consumer price index, it will then deflate corporate profit margins. Either way, the equity markets are being pestered by this continuing fundamental threat to prospering economic activity.

http://www.indicant.net/Members/Updates/Economic/E03.htm

Scroll downward and look at the CRB Bridge Futures. This index continues to rise, setting record highs. Only a few short years ago, this was the benchmark index where economist felt that it falling below 180 would set off a rapid deflationary cycle. This concern was highly touted by the press near the same time of Greenspan’s irrational exuberance commentary. That, along with other factors, caused the market to peak in 2000.

The Indicant Volume Indicator may be finding a bottom on its current lethargic cycle. It will be interesting to observe the market’s behavior if the Indicant Volume Indicator delivers a robust cycle in the next few weeks. Historical standards and underlying fundamentals favor bearish behavior in the equity markets.

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

The Mid-term Bull’s obstinate behavior is impressive. It, so far in this bearish period, is not conforming to historical norms. The most impressive index is the Dow Utilities. Holders are not selling. The laws of supply and demand will continue to elevate this index.

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

Bullish behavior the past two weeks flies in the face of normal behavior. The Mid-term Indicant continues signaling hold for the underlying stocks in this index. There is more about this later in this report.

The only major index revealing some shaky behavior is the NASDAQ100. However, it is expressing normal behavior, using the historical patterns of presidential post election years after the BRS cycle. Do not be surprised to see the major indices express bearish behavior over the next few weeks.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-05-NAS100-Curr.htm

The magnitude of the impending bearish expressions is not predictable, but a meandering bear would not be bad, when compared to the potential, based on historical standards.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and no sell signals for stocks and funds. The various Indicant models, bearish seasonality, and bullish obstinacy continue resistance to buy/sell signal activity.

Although there were no sell signals, the Mid-term Indicant is avoiding 112 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 24.7% since the Mid-term Indicant signaled sell an average of 59.7 weeks ago.

There were 42-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 18.2% since their respective sell signals an average of 26.3-weeks earlier. Two years ago, on June 21, 2003, the Mid-term Indicant was avoiding only three stocks and funds that were down an average of 27.5% since their respective sell signals an average of 27.2-weeks earlier.

Although there were no buy signals, the Mid-term Indicant is signaling hold for 208 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 103.4%. That annualizes to 59.0%, 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 208-stocks and funds for an average of 91.1-weeks.

One year ago, the Mid-term Indicant was holding 249-stocks and funds out of the 296 tracked at that time for an average of 52.8-weeks. They were up 72.0% (annualized at 70.8%). The Mid-term Indicant was signaling hold for 289-stocks and funds two years ago on June 21, 2003. They were up by an average of 44.5% (annualized at 110.4%) since their respective buy signals an average of 21.0-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. The market is still elevated as a function of the typical fourth quarter rally in 2004.

Unfortunately, the Quick-term Bear that plagued normal bullish seasonality for the second consecutive year is challenging this elevated position. Bullish seasonality ended on April 30, 2005. The market is now situating into bearish seasonality, based on historical norms. So far, the market appears to be configuring to support historical standards by expressing bearish behavior. Although May, which is historically one of the most bearish months, 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 19-weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with a bullish response. That bullish response was weak but possessed enough bullish steam to thwart increasing aggressive 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 the past three weeks has been impressive. The market moved north with significant gusto. However, this movement is without substance. The lack of volume support with recent bullish behavior is a glaring testament this bullish movement is 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 15-weeks. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis. However, the recent bullish spurts has been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality. Last week’s behavior consisted of several consecutive days of mild bullishness, culminating in a fairly significant bullish week. That performance was a significant variance from historical standards and with surrounding unfavorable fundamentals.

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. However, 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 is a change from last weeks 8% because of this 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.

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

After several weeks of inconsistent patterns, last week demonstrated convergent behavior supporting a bullish theme. The prior two weeks were also convergent but supporting a bearish theme. This behavior supports continued meandering expressions with a bearish bias.

As stated the past six weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues to strengthen against world currencies. It continues building a base rising from its most recent cyclical minimum. As stated the last four 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 second consecutive week.

As stated last week, there remains no cyclical shift in direction on the U.S. Dollars recent strengthening. Cyclically, it is still weak. Although the trend favors continued weakness, the cyclical configuration appears to be building a foundations to support a shift in trend. This contradicts last weeks report where it was stated the dollars recent strengthening was likened to bullish spurts. 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.

As stated the past ten weeks, commodity prices continue to weaken, even though the past few weeks have demonstrated a bullish spurt. Last weeks bullish spurt in commodity prices was strong. Keep in mind commodities remain at stratospheric levels. They need to fall considerably to excite any potential equity market bull. It is encouraging to observe what is believed to be a current topping of commodities. If the political community continues its exercises along historical standards, commodity prices should be significantly down by the mid-term election year, 2006. The next major bull leg may not start until then. That prognosis is consistent with historical standards.

Commodities have risen above their respective neutral zones the past few weeks. However, that appears to be bullish spurt. Economic cooling in the United States and China should reduce demand and put less upward pressure on prices. However, one-billion new capitalists will want things. So, there is an obvious long-term trend in rising commodity prices. The equity markets would feel more comfortable if commodities fell into bearish domains. The economy needs to be weakened considerably for that to happen. On the other hand, the markets like the increasing number of capitalists. There will be more producers and consumers, which is the heart and soul of any sustainable economy.

This paragraph remains unchanged from the past 28-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-six weeks ago since the MTI buy signal in April 2001. One-hundred and forty-nine weeks ago, it closed up 30.1%. Last week it closed up 146.4%, which is higher than the 75.9% reported 100-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 34.5%, which is higher than 23.1% reported 100-weeks ago. After falling significantly six weeks ago, this fund moved north the past five weeks.

Fidelity Gold, Fund #28, is up 8.9% 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.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 197.6% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 68.6%. Vanguard Energy #18, VGENX, is up 111.0% (annualized at 49.7%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 74.2% (annualized at 47.8%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 84.2% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 45.2%.

All of these energy related funds are up the past five weeks after falling significantly five weeks ago. Is this the early stage of a 1970’s market configuration with the energy sector skyrocketing and the remaining equity markets nose-diving? So far, the market is expressing tremendous resistance to this theme by merely meandering as opposed to nose-diving.

The Gold/Silver Index is up 7.5% 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 23.4-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 three weeks, such comfort around their respective bullish red curves should not be expected. Four weeks ago all eight indices were above bullish red. Three weeks ago, six were above bullish red. Two weeks ago only three were above bullish red. Last week, seven of the eight major indices were above bullish red.

The indices are not expressing any comfort zones above their respective bullish red curves. Fundamentally, the S&P400 and S&P600 can express comfort, but only to the extent they have some company. Unfortunately, the large caps will have difficulty maintaining that position during bearish seasonality and during the presidential post election year. At least that should be the case until later this year.

The eight major indices are up by an average of 2.0% since the Quick-term Indicant signaled bear on January 4, 2005.

The current Quick-term Bear has been pestered by a bullish spurt the in four of the past six weeks. Recent bullish spurts consumed a tremendous amount of energy that depletes possibilities of the birth of a new Quick-term Bull. The current Quick-term Bear is now consistent with normal bearish seasonality, even though it was born during the heart and soul of bullish seasonality.

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 both the NASDAQ and NYSE continue in their respective patterns of lethargy. Do not expect any significant and sustainable bullish behavior with that configuration. Recent behavior suggest an increasing probability this lethargic pattern is expiring. If the Indicant Volume Indicator develops a robust cycle, the meandering nature of the market will also expire.

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

The Dow is up 1.4% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is up 0.5% 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 continuing bearish behavior. All bullish spurts off the breakdown lines are short-lived and typically do not exceed the peak of the last bullish spurt. Even without that contact, the current bullish spurt is not configured for sustainability.

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 28.3% since the Mid-term Indicant signaled bull an average of 86.8-weeks ago. That annualizes to 17.0%. The Dow Utilities is the strongest bull. It is up 59.0% since the Mid-term Indicant signaled bull on August 16, 2003. Last weeks report erroneously stated the bull signal on March 22, 2003. The Dow Jones Industrial Average is up 24.7% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 42.5% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Transports is up 58.7% since the Mid-term Indicant bull signal on August 16, 2003. The Utilities continues to impress with strong bearish resistance.

Three  of the eight major indices remain as red bulls, which is down from six, 14-weeks ago, but up from one five weeks ago. Just when the survivability of these bulls was in question several weeks ago, they responded with a bullish fervor, in the form of minor bullish spurts, and in the face of the Quick-term Bear. That was a testament to the strength of this Mid-term Bull market. However, as stated the last several weeks, they are being threatened with the potential of rising inflation and interest rates.

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 114.1% since the Mid-term Indicant signaled bull an average of 117.7-weeks ago for an annualized gain of 50.1%, which is less than the 72.9% reported 113-weeks ago. International indices moved north last week in step with domestic indices. As stated last week, do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 12.7% since the Mid-term Indicant signaled bear 23.0-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

Jun 12, 2005 Indicant.Net Weekly Update

Volume 06, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Mid-term Indicant Bull Is Threatened

You may want to read the first section of the May 22, 2005 weekly report. It will take less than three minutes to do so.

http://www.indicant.net/Non-Members/Back%20Issues/Archives/May/May05-Wkly.htm#May%2022,%202005%20Indicant.Net%20Weekly%20Update

As you can see, the market typically turns bearish during presidential post election years if the BRS-1 cycle expressed bullish behavior. As is typical, the Bush administration reported a weaker economic outlook this past week. You never hear any incumbent administration offer pessimistic projections during an election year. After the incumbent is elected, though, the concern for economic prosperity is no longer a priority. Economic prosperity is not a political agenda item until the presidential mid-term and pre-election years.

You can see what may turn out to be typical market behavior in this economic and political environment. Let us take a quick tour to get this perspective.

The Dow Jones Industrial Average is wavering after demonstrating bullish expressions in the BRS-1 cycle. The BRS-1 cycle is the white segment on the charts. Notice how it increased in value a few weeks ago. Keep in mind a 1900 $10,000 investment would be around $4,000 now if invested only in the five-week period that ended on May 22. The newly forming pink segment on the charts is historically bullish, but typically does not enjoy bullish behavior after a bullish BRS-1 cycle in presidential post election years.

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

You will notice the S&P500 is expressing similar attributes. However, the S&P500 is a red bull, while the Dow Jones Industrial Average is not. The S&P500 is above its bullish red curve. One can enjoy some comfort with their hold position since the market seldom crashes from the lofty position of red bull status.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-02-SP500-Curr.htm

The NASDAQ is favoring slightly more bearish behavior the past two weeks. It also lost its red bull status last week. It will be interesting to see if this index will put up a battle and retain its red bull status. The Quick-term Indicant attributes are mixed right now, but with a slight bias in favor of the NASDAQ not regaining its red bull status in the immediate future.

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

You will also notice the S&P100 lost it red bull status. It is also revealing some lost bullish steam from the recent bullish spurt.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-04-SP100-Curr.htm

The same configurations are displayed on the NASDAQ100 index.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-05-NAS100-Curr.htm

The Dow Transports, one of the most impressive performing indices, has a more pronounced loss in bullish behavior and an equally pronounced acceleration in bearish behavior. Amazingly, the Dow Transports rose rapidly during tremendous unfavorable news the past two years. Remember, the market does not behave according to contemporary news and observations. It is generally focused six to nine months into the future.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-05-NAS100-Curr.htm

The Dow Utilities is a classic demonstration of the laws of supply and demand for stocks. As you can see, it continues demonstrating significant bullish behavior. Investors, of which several of them are you, are not selling their utility stocks. The high dividends enjoyed by them are locked from the March 2003 prices. The utilities are up by triple digit amounts since the March 2003 buying spree. And the dividend yields enjoyed by those who participated are based on the depressed price levels of late 2002 and early 2003.

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

Based on the strength of the Dow Utilities and Transports, the Dow Composite continues with red bull status.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-08-DJC-Curr.htm

The mid-caps of the S&P400 Index continue mounting a bullish charge. This index has been the least bearish since the beginning of the year.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-09-SP400-Curr.htm

Like the mid-caps, the small caps also continue with bullish persistence.

http://www.indicant.net/Members/Updates/MTIRYS-Mkts-US/MTI-RYS-09-SP400-Curr.htm

The small-caps and mid-caps have been in favor for quite some time. The dilettantes of the larger companies will continue cause investor bias of more money into small and mid-caps over the long term. Large companies attract employees who are looking for security. Whereas the smaller companies attract those who do not mind performing at higher levels each and every day.

The larger cap companies are noisy places with more promotions to the politically skilled as opposed to those who work hard for their employer. That is why the bigger companies tend to cheat more on their income statements and balance sheets. The performance ability is simply not there. The big company folks become envious at the higher performance of the smaller companies. The politically skilled of the large companies never learned how to do the job right and thus the tendency to lie, cheat, and steal, which are the attributes of the politically skilled. That is what they learn in the larger companies. Therefore, the underlying behavior for many of the larger companies is to mislead just like politicians. That leads many investors to the smaller cap companies.

If you have not done so, it will be helpful to read the May 22, 2005 weekly report to put all of this in a balanced perspective. Just read the first section. It only takes a few minutes. The link is repeated here.

http://www.indicant.net/Non-Members/Back%20Issues/Archives/May/May05-Wkly.htm#May%2022,%202005%20Indicant.Net%20Weekly%20Update

Remember the Indicant does not forecast the market. It merely identifies bull and bear cycles. This analysis is not projecting a profound bear. It is merely sharing with the tendencies of the market with the incumbent political and economic environment. Do not be surprised at bearish expressions over the next several weeks, while at the same time do not overreact unless the various Indicant models are signaling bear.

Weekly Buy/Sell Summary

The Mid-term Indicant generated one buy signal and no sell signals for stocks and funds. The various Indicant models, bearish seasonality, and bullish obstinacy continue resistance to buy/sell signal activity.

Although there were no sell signals, the Mid-term Indicant is avoiding 112 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 58.7 weeks ago.

There were 40-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 14.6% since their respective sell signals an average of 20.2 weeks earlier. Two years ago, on June 14, 2003, the Mid-term Indicant was avoiding only two stocks and funds that were down an average of 26.1% since their respective sell signals an average of 26.6-weeks earlier.

In addition to the buy signal, the Mid-term Indicant is signaling hold for 207 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 100.0%. That annualizes to 57.5%, 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 207-stocks and funds for an average of 90.5-weeks.

One year ago, the Mid-term Indicant was holding 242-stocks and funds out of the 296 tracked at that time for an average of 53.0-weeks. They were up 72.0% (annualized at 70.6%). The Mid-term Indicant was signaling hold for 289-stocks and funds two years ago on June 14, 2003. They were up by an average of 44.6% (annualized at 116.3%) since their respective buy signals an average of 20.0-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. The market is still elevated as a function of the typical fourth quarter rally in 2004.

Unfortunately, the Quick-term Bear that plagued normal bullish seasonality for the second consecutive year is challenging this elevated position. Bullish seasonality ended on April 30, 2005. The market is now situating into bearish seasonality, based on historical norms. So far, the market appears to be configuring to support historical standards by expressing bearish behavior. Although May, which is historically one of the most bearish months, expressed significant bullish behavior in 2005. That was a bullish spurt based on the Quick-term Indicant attributes.

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 18-weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with a bullish response. That bullish response was weak but possessed enough bullish steam to thwart increasing aggressive 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 the past three weeks has been impressive. The market moved north with significant gusto. However, this movement is without substance. The lack of volume support with recent bullish behavior is a glaring testament this bullish movement is a mere bullish spurt and not the foundation for 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 14-weeks. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis. However, the recent bullish spurts has been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality. Last week’s behavior was mildly bearish, which performed to Indicant expectations that the bullish spurt was deplete of any sustainable gusto.

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. However, 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 is a change from last weeks 8% because of this 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.

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 convergent behavior five weeks ago, which is a bullish configuration. It was followed by divergent behavior, which is a bearish configuration, the next week. This was followed by two weeks convergent behavior, which is the basis for forming a solid foundation for bull markets. Divergent behavior has been demonstrated the past two weeks. A solid bull/bear market requires three or more weeks of convergent behavior. The market has consistently demonstrated an inability of producing three or more consecutive weeks of convergence. Therefore, expect a meandering market, at best. Keep in mind, though, that bearish configurations are increasing in intensity. Also, note that this is the second consecutive to convergent bearish behavior. Do not be surprised at increasing bearish action the next few weeks.

As stated the past five weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues to strengthen against world currencies. It continues building a base rising from its most recent cyclical minimum. As stated the last three weeks, this is not a Greenspan objective, but a fallout from his primary focus of fending off inflationary threats. The European Dollar fell into bearish domains for the first time since early 2002.

However, there has been no cyclical shift in direction on the U.S. Dollars strength. Cyclically, it is still weak. The trend also favors weakness. The recent strength in the dollar is very similar to the recent bullish spurts in the equity markets. However, the dollar should experience a cyclical shift in direction, as well as trend, in the next few weeks. This is supported by a fundamental shift in interest rates, which drives the dollar to stronger positions relative to other currencies.

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.

As stated the past nine weeks, commodity prices continue to weaken, even though the past few weeks have demonstrated a bullish spurt. Keep in mind they remain at stratospheric levels. They need to fall considerably to excite any potential equity market bull. It is encouraging to observe what is believed to be a current topping of commodities. If the political community continues its exercises along historical standards, commodity prices should be significantly down by the mid-term election year, 2006. The next major bull leg may not start until then. That prognosis is consistent with historical standards.

Commodities have risen above their respective neutral zones the past few weeks. However, that appears to be bullish spurt. Economic cooling in the United States and China should reduce demand and put less upward pressure on prices. However, one-billion new capitalists will want things. So, there is an obvious long-term trend in rising commodity prices. The equity markets would feel more comfortable if commodities fell into bearish domains. The economy needs to be weakened considerably for that to happen. On the other hand, the markets like the increasing number of capitalists. There will be more producers and consumers, which is the heart and soul of any sustainable economy.

This paragraph remains unchanged from the past 27-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. However, 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-five weeks ago since the MTI buy signal in April 2001. One-hundred and forty-eight weeks ago, it closed up 30.1%. Last week it closed up 134.2%, which is higher than the 75.9% reported 99-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 31.8%, which is higher than 23.1% reported 99-weeks ago. After falling significantly five weeks ago, this fund moved north the past four weeks.

Fidelity Gold, Fund #28, is up 3.8% 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 so until meandering behavior expires.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 184.1% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 64.4%. Vanguard Energy #18, VGENX, is up 100.9% (annualized at 45.6%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 66.6% (annualized at 43.4%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 75.7% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 41.0%.

All of these energy related funds are up the past four weeks after falling significantly four weeks ago. Last week’s behavior was significantly bullish in the face of mild bearish behavior by the overall equity markets. Is this the early stage of a 1970’s market configuration with the energy sector skyrocketing and the remaining equity markets nose-diving.

The Gold/Silver Index is up 2.5% 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 22.4-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.

The indices are now determining any potential comfort zones around bullish red. As stated the past two weeks, such comfort around their respective bullish red curves should not be expected. Three weeks ago all eight indices were above bullish red. Two weeks ago, six were above bullish red. Last week only three are now above bullish red. The indices are not expressing any comfort zones above their respective bullish red curves. Fundamentally, the S&P400 and S&P600 can express comfort, but only to the extent they have some company. Unfortunately, the large caps will have difficulty maintaining that position during bearish seasonality and during the presidential post election year. At least that should be the case until later this year.

The eight major indices are up by an average of 0.5% since the Quick-term Indicant signaled bear on January 4, 2005.

The current Quick-term Bear has been pestered by a bullish spurt the in three of the past five weeks. Recent bullish spurts consumed a tremendous amount of energy that depletes possibilities of the birth of a new Quick-term Bull. The current Quick-term Bear is now consistent with normal bearish seasonality, even though it was born during the heart and soul of bullish seasonality.

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 both the NASDAQ and NYSE continue in their respective patterns of lethargy. Do not expect any significant and sustainable bullish behavior with that configuration.

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

The Dow is up 0.4% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 0.8% 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 continuing bearish behavior. All bullish spurts off the breakdown lines are short-lived and typically do not exceed the peak of the last bullish spurt. Even without that contact, the current bullish spurt is not configured for sustainability.

Read your daily emails.

To view the Perspective Charts (Quick-term Indicant, please clck 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 85.8-weeks ago. That annualizes to 16.1%. The Dow Utilities is the strongest bull. It is up 57.1% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 23.4% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 40.6% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Transports is up 55.6% since the Mid-term Indicant bull signal on August 16, 2003. The Utilities continues to impress with strong bearish resistance.

Four of the eight major indices remain as red bulls, which is down from six, 13-weeks ago, but up from one four weeks ago. Just when the survivability of these bulls was in question several weeks ago, they responded with a bullish fervor, in the form of minor bullish spurts, and in the face of the Quick-term Bear. That was a testament to the strength of this Mid-term Bull market. However, as stated the last several weeks, they are being threatened with the potential of rising inflation and interest rates.

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 112.4% since the Mid-term Indicant signaled bull an average of 116.7-weeks ago for an annualized gain of 50.1%, which is less than the 72.9% reported 112-weeks ago. International indices moved down slightly last week after moving mildly north the prior three weeks. As stated last week, do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 11.0% since the Mid-term Indicant signaled bear 22.0-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

Jun 05, 2005 Indicant.Net Weekly Update

Volume 06, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Mid-term Indicant Bull Is Obstinate – Part 2

The immediate outlook is non-bullish. There are several reasons for this. The Indicant Volume Indicator continues expressing a lethargic pattern. Sustainable bull markets require some early volume robustness. The last series of robust volume expressions accompanied bearish behavior. That configured relationship supports bearish behavior. There is more about the Indicant Volume Indicator later in this report.

This is a presidential post election year. It is the most bearish on the four-year presidential election cycle. However, since 1980 presidential post election years have been increasingly bullish. Unfortunately, an 1832 stock market investor would have lost money up until 1980 in presidential post election years. One-hundred and fifty plus years of bearish performance should not go unnoticed.

Oil prices continue to persist at record high levels. Although China is cooling their economy, the trend for accelerating demand patterns for oil from China will continue. The laws of supply and demand will continue to build upward pressure on oil prices.

Consequently, Greenspan’s interest rate trend continues to move north. Although interest rates remain at low levels, this unfavorable trend in rates is consistent with presidential post-election-year behavior. In the tyranny by the majority schema from democracies, there is no need for political leadership to be concerned about economic activity in presidential post election years.

Even with all these unfavorable fundamentals of political and economic activity, the Mid-term Bull continues to exist. However, these pressures and historical bias suggest the current Mid-term Bull’s existence is nearing an end.

Bearish seasonality started on May 1. The first month of bearish seasonality was extraordinarily bullish. The Dow was up 2.7% in May 2005. The S&P500 was up by 3.0%. The NASDAQ was up by a whopping 7.6% in the first month of bearish seasonality. Even more intriguing is the historically normal bearish behavior in May. A 1950 Dow30 investor would have lost money by May 31, 2005 if invested only in the month of May. However, a 1972 NASDAQ investor would have increased his portfolio by over 50% if invested only during the month of May.

That same NASDAQ investor would have increased their portfolio by nearly 50% if invested only in June. However, twelve bucks before commission is all 1950 Dow30 investor would have made in only with June investments.

July, August, and September are horrendously bearish. A 1950 $10,000 investment in the Dow30 only in the June-September rolling third would be only $7,434. A 1972 NASDAQ $10,000 investment would amount to only $7,866 in that rolling third. That figure drops to $5,867 if invested only in the July-October rolling third.

Regardless of June’s performance, it is appropriate to expect non-bullish behavior in the July – October rolling third. Recent Quick-term Bulls were born in October. So, portions of October can still be extremely bullish. A Quick-term Bull was born on October 2001 shortly after the horrors of 911. That particular Quick-term Bull was short-lived. It had no robust Indicant Volume Indicator to sustain it, while the Quick-term Bulls that were born in October 2002 and again in March 2003 were accompanied with rising volume.

A non-bullish market may not be damaging to your hold positions. So far, the market has meandered during most of 2004 and so far this year. That meandering has not yet caused the extinction of the current mid-term bulls. However, do not be surprised if the Mid-term Indicant Bulls expire this year and sometimes before October 2005.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and one sell signal for stocks and funds. The various Indicant models, bearish seasonality, and bullish obstinacy continue resistance to buy/sell signal activity.

In addition to the sell signal, the Mid-term Indicant is avoiding 112 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 26.0% since the Mid-term Indicant signaled sell an average of 57.8 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 12.9% since their respective sell signals an average of 18.9 weeks earlier. Two years ago, on June 07, 2003, the Mid-term Indicant was avoiding only three stocks and funds that were down an average of 26.0% since their respective sell signals an average of 26.8-weeks earlier.

Although there were no buy signals, the Mid-term Indicant is signaling hold for 207 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 98.8%. That annualizes to 57.4%, 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 207-stocks and funds for an average of 89.5-weeks.

One year ago, the Mid-term Indicant was holding 245 stocks and funds out of the 296 tracked at that time for an average of 52.1-weeks. They were up 70.9% (annualized at 70.8%). The Mid-term Indicant was signaling hold for 289-stocks and funds two years ago on June 07, 2003. They were up by an average of 45.4% (annualized at 124.1%) since their respective buy signals an average of 19.0-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. The market is still elevated as a function of the typical fourth quarter rally in 2004.

Unfortunately, the Quick-term Bear that plagued normal bullish seasonality for the second consecutive year is challenging this elevated position. Bullish seasonality ended on April 30, 2005. The market is now situating into bearish seasonality, based on historical norms. So far, the market appears to be configuring to support historical standards by expressing bearish behavior. Although May, which is historically one of the most bearish months, expressed significant bullish behavior in 2005. That was a bullish spurt based on the Quick-term Indicant attributes.

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 seventeen weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with a bullish response. That bullish response was weak but possessed enough bullish steam to thwart increasing aggressive 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 being followed by a stronger bearish response.

The bullish spurt the past two weeks has been impressive. The market moved north with significant gusto. However, this movement is without substance. The lack of volume support with recent bullish behavior is a glaring testament this bullish movement is a mere bullish spurt and not the foundation for a sustainable bull market.

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 thirteen weeks. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis. However, the recent bullish spurts has been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality. Last week’s behavior was flat, which performed to Indicant expectations that the bullish spurt was deplete of any sustainable gusto.

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 and has deferred massive selling that will unfold at the expiration of these Mid-term Bull markets. However, 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 is a change from last weeks 8% because of this 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.

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 convergent behavior four weeks ago, which is a bullish configuration. It was followed by divergent behavior, which is a bearish configuration, the next week. This was followed by two weeks of demonstrated convergent behavior, which is the basis for forming a solid foundation for bull markets. Last week introduced divergence again with the energy sector expressing bullish behavior and most other sectors expressing bearish behavior. A solid bull market requires three or more weeks of convergent behavior. The market has consistently demonstrated an inability of producing three or more consecutive weeks of convergence. Therefore, expect a meandering market, at best. Keep in mind, though, that bearish configurations are increasing in intensity.

As stated the past four weeks, the Mid-term Bull still has some fight in it. However, it continues expending too much energy in a defensive posture.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues to strengthen against world currencies. It continues building a base rising from its most recent cyclical minimum. As stated the last two weeks, this is not a Greenspan objective, but a fallout from his primary focus of fending off inflationary threats. The European Dollar fell into bearish domains for the first time since early 2002.

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.

Also, as stated the past eight weeks, commodity prices continue to weaken. Keep in mind they remain at stratospheric levels. They need to fall considerably to excite any potential equity market bull. It is encouraging to observe what is believed to be a current topping of commodities. If the political community continues its exercises along historical standards, commodity prices should be significantly down by the mid-term election year, 2006. The next major bull leg may not start until then. That prognosis is consistent with historical standards.

Commodities remain mired in their respective neutral zones, which is increasingly favorable to any potential bullish desires in the equity markets. However, the equity markets would feel more comfortable if commodities fell into bearish domains. The economy needs to be weakened considerably for that to happen.

This paragraph remains unchanged from the past 26-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. However, 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-four weeks ago since the MTI buy signal in April 2001. One-hundred and forty-seven weeks ago, it closed up 30.1%. Last week it closed up 133.2%, which is higher than the 75.9% reported 98-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 31.7%, which is higher than 23.1% reported 98-weeks ago. After falling significantly four weeks ago, this fund moved north the past three weeks.

Fidelity Gold, Fund #28, is up 3.2% since the Mid-term Indicant signaled sell six weeks ago 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.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 177.9% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 62.6%. Vanguard Energy #18, VGENX, is up 95.5% (annualized at 43.5%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 61.0% (annualized at 40.3%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 71.3% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 39.0%.

All of these energy related funds are up the past three weeks after falling significantly four weeks ago.

The Gold/Silver Index is up 2.0% since the Mid-term Indicant signaled bear seven weeks ago 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 21.4-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. The indices are now determining any potential comfort zones around bullish red. As stated last week, such comfort around their respective bullish red curves should not be expected. Two of the eight indices fell below bullish red last week, supporting a lack of comfort at those lofty positions.

The eight major indices are up by an average of 0.5% since the Quick-term Indicant signaled bear on January 4, 2005.

The current Quick-term Bear has been pestered by a bullish spurt the in three of the past four weeks. Recent bullish spurts consumed a tremendous amount of energy that depletes possibilities of the birth of a new Quick-term Bull. The current Quick-term Bear is now consistent with normal bearish seasonality, even though it was born during the heart and soul of bullish seasonality.

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 NYSE Indicant Volume Indicator is biased in support of continuing bearish expressions on a quick-term basis. Both the NASDAQ and NYSE Indicant Volume Indicators continue in a lethargic drift to the south, which minimizes the probability of any sustainable bullish move during bearish seasonality.

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

The Dow is up 2.1% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is up 0.9% 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 continuing bearish behavior. All bullish spurts off the breakdown lines are short-lived and typically do not exceed the peak of the last bullish spurt. Even without that contact, the current bullish spurt is not configured for sustainability.

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 27.2% since the Mid-term Indicant signaled bull an average of 84.8-weeks ago. That annualizes to 16.7%. The Dow Transports is the strongest bull. It is up 60.3% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 22.8% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 41.1% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 55.4% since the Mid-term Indicant bull signal on August 16, 2003. The Utilities continues to impress with strong bearish resistance.

Four of the eight major indices remain as red bulls, which is down from six, 12-weeks ago, but up from one three weeks ago. Just when the survivability of these bulls was in question several weeks ago, they responded with a bullish fervor, in the form of minor bullish spurts, in the face of the Quick-term Bear. That was a testament to the strength of this Mid-term Bull market. However, as stated the last several weeks, they are being threatened with the potential of rising inflation and interest rates.

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 113.0% since the Mid-term Indicant signaled bull an average of 115.7-weeks ago for an annualized gain of 50.8%, which is less than the 72.9% reported 111-weeks ago. International indices moved up slightly the past three weeks, after moving south in five of the previous six weeks. Do not be surprised at increased bearish behavior in the next few weeks.

The lone bear is down 18.6% since the Mid-term Indicant signaled bear 21.0-weeks ago. It is the Chinese market that endures this bear signal. As you can see, the Chinese economy is pressured to 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

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