March 26, 2006 Indicant Weekly Stock Market Report

Volume 03, Issue 04 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Boring Market is Threatening Utilities

As you can see, by clicking the following link, the Dow Jones Utilities is on the verge of receiving a bear signal from the Mid-term Indicant.

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

The Mid-term Indicant’s heuristic is designed to avoid bear cycles. As bull markets mature, the designated bear signal is predetermined. That process tends to elevate the next bear signal. This elevating a pre-designated bear signal is to ensure enjoyment of the bullish gains and avoid the sorrows of bearish wipe-outs.

The Dow Utilities is hovering ever so slightly above the trip line, which is the current –pre-designated bear signal. This bull is now three and one-half years old, which is old by historical standards. Looking at chart reveals this index was congruent with historical standards. The first bearish period (white line segment) in 2005 was appropriately bearish. The second bearish period (the second white line segment) in 2005 was also appropriately bearish. However, even with those two bearish expressions, this particular index retained its red bull status. Consequently, the trip line was extended from the peak of the last bearish standard (second white line segment in 2005).

The Dow Utilities never climbed back to the peak of the second standard bearish period in 2005. It has simply been meandering with a slight bearish bias the past several weeks.

The Mid-term Indicant’s heuristic requires two reasons for signal bear, while there is only one reason for signaling bull. That is because bulls are more common than bears. A bear signal requires that the underlying index fall below both the red curve and the trip line under the current configuration. The Dow Utilities is already below the trip line. So, the first reason is already in play for the bear signal. If the Dow Utilities falls below the red curve, the Mid-term Indicant will signal bear. It is very close to its bullish red curve.

Five of the sixteen Utility stocks have been receiving a hold signal since October – November 2002. Four of those five stocks are up by triple digit amounts. The AES Corp is up by 847.2% since its November 22, 2002 buy signal. The weakest, Dominion Resources, is up by only 56.7% since its buy signal on October 25, 2002, which was the week of the buying spree.

If you scanned all of the Dow Utility stocks, you will notice many are very close to their long-term blue curves. Some are even below it. The Utility Index, itself, is up 110.1% since the Mid-term Indicant signaled bull on October 25, 2002. This particular index has been the most dynamic and consistent bull the past three and a half years, but has expressed a bearish bias the past few weeks.

Some of you will have a tough decision to make in the event the Mid-term Indicant signals bear in the next few weeks. This particular weekly report addresses you so that you can allow your problem to gestate before executing whatever decision you have to make.

Some of you bought on the advice of the Indicant in late 2002. Even before the October 2002 buying spree, the Indicant Stock Market Report suggested buying for long-term reasons based on the high dividend yields at that time. Their low stocks prices in 2002 resulted in relatively high dividend yields.

Since that time, many of you have enjoyed triple digit gains and nice quarterly dividend checks. The problem you are now facing is whether to continue to hold, or not hold, in the event of a bear signal, which will set aggressive sell signals for each of the individual stocks.

If you knew the bear would be shallow and not long lasting, it would be advantageous to hold, depending on your mid-to-long-term investment goals. If you are nearing retirement and enjoy significant income from the dividend yields, holding regardless of the depth of the bear may be a good choice. If you are young and did not buy enough shares for the dividend checks to pay the household bills, then you may consider selling on the bear/sell signals in the event that occurs.

What makes this even trickier is up-coming presidential pre-election year. It is, historically, the most bullish year on the four-year cycle. A sound strategy may include holding in this mid-term election year on the belief that any bearish cycle will be more than offset by the combination of the heart and soul of bullish seasonality and normal bullishness next year.

The Indicant does not forecast the market. It does not waste time or resources attempting to forecast the magnitude or duration of any bullish or bearish cycle. It will signal bear and continue to do so until the next bull signal is generated. The Indicant is not strategic or even tactical. It does not care if a bear is only down by one percent or 90%. It only recognizes a bear and that is it. It does not even care how long it will last. The Indicant is simply interested in recognizing a bear or bull and does not care about depth, elevation, or duration. The model is designed to simply recognize the dominant influence on the stock market.

Do your own planning or speak to your advisor, and make your own decisions. You always know more about your goals and finances more than anyone else does. The Indicant will not hesitate in signaling bear and corresponding sell signals in the event the Dow Utilities falls below the trip line in the next week or so. On some of the triple digit gainers, it may seek guidance from ETF#12, XLU, Utilities. You may want to keep your eye on this particular ETF. The Consolidated Indicant for ETF’s signaled buy for this fund on April 15, 2003.

Weekly Buy/Sell Summary – Stocks and Funds

The Mid-term Indicant generated no buy signals and no sell signals.

Although there were no sell signals, the Mid-term Indicant is avoiding 57-stocks and funds of the 345 tracked by the Indicant. The avoided stocks and funds are down an average of 8.0% since the Mid-term Indicant signaled sell an average of 23.2-weeks ago.

There were 84-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 28.6% since their respective sell signals an average of 52.3-weeks earlier. Two years ago, on March 26, 2004, the Mid-term Indicant was avoiding only 30-stocks and funds that were down an average of 25.4% since their respective sell signals an average of 38.7-weeks earlier. Three years ago on March 29, 2003, there were 36-avoided stocks and funds. They were down 29.7% from their respective sell signals an average of 27.5-weeks earlier.

Although there were no buy signals this weekend, the Mid-term Indicant is signaling hold for 288 of the 345-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 115.4%. That annualizes to 62.3%. The Mid-term Indicant has been signaling hold for these 288-stocks and funds for an average of 96.3-weeks.

One year ago on March 25, 2005, the Mid-term Indicant was holding 232-stocks and funds out of the 320 tracked at that time for an average of 75.3-weeks. Those 232-stocks and funds were up 85.8% (annualized at 59.3%). The Mid-term Indicant was signaling hold for 249-stocks and funds of the 296 tracked two years ago on March 26, 2004. They were up by an average of 71.1% (annualized at 77.4%) since their respective buy signals an average of 47.8-weeks earlier. There were 241-stocks and funds with hold signals on March 29, 2003 since their buy signals an average of 12.6-weeks earlier. They were up 18.3% (annualized at 75.6%).

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

NYSE Indicant Volume Indicator: Lethargy continuing, biased in favor of meandering.

NASDAQ Indicant Volume Indicator: Robust cycle completed and returning to lethargy.

DJIA Short-term Indicant: Signaling bear since February 7, 2006.

NASDAQ Short-term Indicant: Signaling bear since February 3, 2006.

Consolidated Quick-term/Short-term Indicant ETF: Bullish bias; long-term hold signals strong.

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

Quick-term Indicant ETF: Weakening bullish bias.

Quick-term Bearish Yellow: Strong non-bearishness preventing immediate dynamic bearishness of sustainable duration.

Quick-term Bullish Red: Red bulls are still high in number and solid for hold positions.

Quick-term and Short-term Conflicts: Majority with bullish harmony, but not complete consensus. One ETF suggesting complete bearish consensus but of minor concern.

Robust Force Vectors: None are robust and direction has shifted back to the south. Most are now in bearish domains.

Vector Pressure Position: Majority are in bullish domains, but flattening out, diminishing bullish bias.

Short-term Indicant Breakout (Bullish) Configuration: Four ETF’s are contacting breakout.

Short-term Indicant Breakdown (Bearish) Configuration: Non-bearish bias continues. None contacting breakdown.

Vector Pressure Crossings Put Option Activity: No signals today.

Vector Pressure Crossings Call Option Activity: No signals today.

Writing Covered Call Options: Not recommended.

Number of Consolidated Quick/Short Term Indicant ETF sell signals today. None

Number of Short-term Indicant ETF sell signals today. None

Number of Quick-term Indicant ETF sell signals today. None

Number of Consolidated Quick/Short Term Indicant ETF buy signals today. None

Number of Short-term Indicant ETF buy signals today. None

Number of Quick-term Indicant ETF buy signals today: None

Number of Consolidated Quick/Short Term Indicant ETF hold signals today: 29

Number of Short-term Indicant ETF hold signals today: 29

Number of Quick-term Indicant ETF hold signals today: 29

Number of Consolidated Quick/Short Term Indicant ETF avoid signals today: One

Number of Short-term Indicant ETF avoid signals today: One

Number of Quick-term Indicant ETF avoid signals today: One

Overall Quick-term Market Bias: Decreasing bullishness; strong non-bearish support.

Overall Short-term Market Bias: Decreasing bullishness; strong dynamic non-bearish support.

Quick-term/Short-term Indicant Stock Market Report Details

Today’s volume was mixed on today’s mild bullish expression, biasing in favor of meandering behavior. The NYSE volume was much higher than the past few days while the NASDAQ volume was pathetic. The NASDAQ Indicant Volume Indicator continues leveling off and headed for another lethargic configuration. As sated the past few days, market indecisiveness and meandering expressions appear dominant.

The Dow Jones Industrial Average is up 4.9% since the Short-term Indicant signaled bear on February 8, 2006. The NASDAQ is up 2.2% since the Short-term Indicant signaled bear February 3, 2006. The Short-term Indicant for these two major market indices continues with a bearish bias, although mildly so. Click here to see the Short-term Indicant’s history. Although the Short-term Indicant is wrong at this point, it believes the market will be lower than what it was at the time of the bear signals before October of this year.

SQI Report Card (Consolidated Short/Quick), Status, and Charts

There were no buy signals and no sell signals today. Although there were no buy signals, the SQI is signaling hold for 29-ETF’s. They are up 66.2% (annualized at 32.7%) since their respective buy signals an average of 103.9-weeks ago. Although there were no sell signals, the SQI is avoiding one ETF at this time. It is down 0.3% since its sell signal 3.0-weeks ago.

The SQI model is the one that most of you will prefer for your trading decisions. It generates fewer signals than the other two models and represents consistencies in the Quick-term and Short-term outlooks for the specific ETF’s. It also beats buy and hold on a regular basis, although there is only seven years of proof. The quality of that proof is high since this period includes a powerful bull and bear. The model sours a little during meandering markets with an excessive number of signals from time to time. Research toward perfecting continues.

Short-term Indicant Report Card, Status, and Charts

There were no buy signals and no sell signals. Although there were no buy signals, the Short-term Indicant is signaling hold for 29-ETF’s. They are up an average of 70.2% (annualized 36.3%) since the STI signaled, buy, an average of 99.4-weeks ago. Although there were no sell signals, the Short-term Indicant is avoiding one ETF. It is down 0.3% since its sell signal 3.0-weeks ago.

Keep in mind, the Short-term Indicant is much more active in buying/selling than the Consolidated model, above. The Quick-term Indicant, which follows, is even more active.

Quick-term Report Card, Status, and Charts

There were no buy signals and no sell signals today. Although there were no buy signals, the Quick-term Indicant is signaling hold for 29-ETF’s. They are up 30.0% (annualized at 34.6%) since the QTI signaled buy an average of 58.0-weeks ago. Although there were no sell signals, the Quick-term Indicant is avoiding one ETF. It is down 0.3% since its sell signal 3.0-weeks ago.

Quick-term Indicant Bull/Bear Health Report

All 30-ETF’s are above their respective bearish yellow curves by average of 9.9%. That is up from yesterday. This attribute remains with strong non-bearish configurations, which suggests no immediate dynamic bearishness with sustainable duration. However, this non-bearish attribute continues to weaken.

Twenty-five ETF’s are above their respective bullish red curves. All thirty average positions are above the bullish red curve by 1.7%. The number of ETF’s with red bull status is flat from yesterday. This attribute remains with a significant bullish bias.

Keep in mind, as long as there is one Red Bull, other than contrarian sectors, the market will not move into a deep bearish slide. It can meander and even dip to the south, but red bulls protect against nasty protracted deep bearish declines. Contrarian indices are those such as Gold, Energy, and other sectors that respond well to inflation or economic chaos.

Short-term Indicant Bull/Bear Health Report

The above heading is linked to the Short-term Indicant table. This paragraph is repeated daily as a reminder of accurately interpreting the charts. By clicking the charts on the table you can review potential contact with the breakdown lines (bearish) and potential contact with breakout lines (bullish). It is extremely bearish when several ETF’s are contacting their respective breakdown lines. The breakdown lines are the yellow lines (bearish). The breakout lines are the red ones (bullish). Close proximity to breakout implies an increased probability of an actual breakout occurring. It is certainly bullish and you will want to be in a hold position for those few days a year when the breakout occurs. Conversely, significant contact with yellow (breakdown) suggests “avoid” positions are best.

Four of the 30-ETF’s are contacting their breakout lines (bullish), which is flat from yesterday. Limited contact with breakout lines means the bull is not expressing any dominant interest.

The average distance from breakout contact is 2.3% which is 0.2% more bullish from yesterday. Bullish bias continues, but with a meandering influence.

The average distance from the price and breakdown is 24.8%, which is 0.4% more non-bullish from yesterday. None of the ETF’s are contacting their respective breakdown lines. That is exceedingly non-bearish. The probability of immediate contact remains low and thus a significant non-bearish bias prevails. Although the market can be bearish in the immediate future, this non-bearish bias mitigates threats of dynamic bearishness. Contact with the breakdown line will induce bearish dominance.

Overall, there is more gravitational force from bullish domains than bearish domains on a Short-term Indicant basis. The Short-term perspective remains bullish for these ETF’s and the overall stock market. As stated the last few weeks, do not be surprised at reduced bullishness and an increase in bearish expressions in the next few weeks. However, none of the Quick-term and Short-term attributes support that prognosis at this time. The prognosis is based on historical standards, but wait until The Indicant Stock Market Report advises of historical conformance.

Conflicts Between the Short-term and Quick-term Indicants

Complete bullish consensus between the Short-term Indicant and the Quick-term Indicant remains absent. Although there are no ETF’s with conflicting signals between the Quick-term and Short-term models, there is one ETF receiving a bear (avoid) signal from all three models. This complete bearish consensus is of minor concern at this point.

ETF Robust Force Vector Configurations

You can scan the Quick-term Indicant for Exchange Traded Funds table and click on the charts to observe Force Vector configurations. Scroll down each of the charts, where a quick link has been added to take you to the next series of Quick-term ETF charts. Use you back arrow on your browser in the event you want to return to the previous page.

Force Vectors movement is to the south and most are in bearish domains. This supports an increased bearish bias, but of a minor nature.

Only one of the ETF Force Vectors are in bullish domains, which is the same as yesterday and down from twenty-eight on March 17. The reduction from bullish domain population last Thursday is increased favorability to a slight bearish bias.

As stated a few weeks ago in the Daily Stock Market Report, Force Vectors peaked lower than the prior cyclical peak. That suggests future bullish spurts will not move higher than the current Short-term and Quick-term Bull peaks. In other words, the current Quick-term Bull and Short-term Bull most likely will not enjoy new peaks in this bullish cycle, which has recently soured. It is now obvious the recent northward trek did not achieve a new peak, as prognosticated by the Indicant the past few weeks. The question now is, will a new minimum point be found.

To understand potential financial opportunities, click here to learn to identify Robust Force Vectors. They are visible on the Quick-term Indicant charts.

ETF Force Vectors/Vector Pressure Crossings/Option Signals

Remember, the links contained herein are more visible when reading this on the website.

Click this sentence for Vector Pressure Option Signals. There were no option signals today.

Remember this market remains a bull and that is not favorable to put option plays. Unfortunately, there is little volatility right now with this meandering behavior.

Make certain you sell naked options when the Force Vectors shift direction or within two days of the purchase, whichever occurs first. If you are unfamiliar with this, take the options tour.

Remember options trading is risky. Never offer “market prices.” Always bid low in hopes of an intraday contrarian movement to the underlying assumption of directional behavior. Always place day-orders only. That keeps the floor folks out of your pocket book. Do not despair if your order does not take. There are plenty of opportunities throughout the course of the year. Remember, stalking is the key to success here. Although not necessary for stock market success, those of you who have a gambling instinct will enjoy this. For those of you with a longer-term perspective, it does not hurt to see what the short-term folks are thinking. The Indicant indicates both perspectives.

Twenty-seven Vector Pressures are in bullish domains. That is flat from yesterday and down by one from March 3.

There is very little distance from current position and bearish domains. The average positive (bullish) pressure is minimal and is decreasing. If the average Vector Pressure turns negative, watch out. As of today, all 30 Vector Pressures are measured at 1.0038, which is down from yesterday after moving higher for five consecutive trading days. The previous mild bullish support is now shifting to an increased potential for mild bearish support.

Quick-term and Short-term Indicant Summary

As stated the past several weeks, discontinue writing covered call options. The market’s bullish bias, although declining, remains with too much risk for this tactic.

The Quick-term Bull remains in tact but weakening.

Continue avoiding ProFunds Ultra Short mutual fund. Remember, it moves inversely to the QQQQ by exponential amounts.

Overall, the bullish bias on a Quick-term and Short-term basis continues, but not as strongly as it was in early January. Bullish bias has weakened significantly the past several weeks, but it remains a bullish bias.

To familiarize yourself with viewing the market from an ETF perspective, click the following update links.

Quick-term ETF Options

Quick-term Indicant for ETF’s

Short-term Indicant for ETF’s

Consolidated Quick-term/Short-term Indicant for ETF’s

Click here to the report card, which is updated weekly, to link to related tours.

Links to the Short-term Indicant and Indicant Volume Indicator are below:

Short-term Indicant for DJIA and NASDAQ

Short-term Indicant Tables for the Dow Jones Industrial Average Index

Short-term Indicant Table for the NASDAQ Composite Index

Indicant Volume Indicator

The Indicant Stock Market Report’s Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. Although appearing redundant at times, it is important to read this section each week to keep abreast of secular market shifts. Remember, secular shifts can last twenty-five or more years. Fortunately, secular market movements do not deter mid-term, short-term, and quick-term profit opportunities. However, they can wreak havoc to the long-term investors’ plans and those that buy and hold.

The current Mid-term Bull market and buying barrage started over three years ago in late 2002, the last mid-term election year. We are nearing the conclusion of the third month of this mid-term election year, which historically finds a market bottom. The last mid-term election year of 2002 conformed perfectly to historical standards. The mid-term presidential election year phenomenon was consistent with history in 2002 with deep bearish expressions. Will it be consistent in 2006? Bearish behavior before October will be required for historical conformance. So far this year, the market is not complying with this historical standard.

The market synchronized with near perfection to normal seasonality in 2002. The rolling half of April-October period is typically bearish. The 2002 seasonal bear leg was dynamic. The current mid-term election year of 2006, fundamentally, supports historical standards. In other words, expect no bullish enthusiasm in the first half of 2006 with rising interest rates and rising energy costs.

The current Mid-term Bull has been surprisingly strong with weak fundamentals and the normal political threat of post-election-year traditions. The market was mixed in 2005 with some bearishness and bullishness in the broader indices. The lack of dynamic presidential post-election -year bearishness imposes a historical need to induce bearishness in the first half of 2006.

Keep in mind, the heart and soul of bullish seasonality (Nov-Jan) is historically bullish regardless of fundamental reason. The market can find a cyclical bottom in this year’s mid-term election year since the heart and soul of bullish seasonality elevated the market right on cue. The market, so far, has accommodated with typical bullishness since last October. As stated for several weeks, it would not be surprising for a nice rise during the current heart and soul of bullish seasonality only to be followed with bearish expressions after January 2006. That configuration has been occurring with some minor disruptive bullish behavior in two of the last four weeks.

The heart and soul of bullish seasonality, ending January 31, 2006, demonstrated bullish normalcy. Since then, the market has been more or less a meanderer. Since January 31, 2006, the S&P500 is up 1.8%, the NASDAQ is up 0.3%, and the Dow is up 3.8%. Recent bullish spurts have shoved the indices back into a bullish position since the heart and soul of bullish seasonality expired last January.

The heart and soul of bullish seasonality, which ended on January 31, 2006 produced gains of 2.8%, 4.2%, and 7.2% for the Dow, S&P500, and NASDAQ, respectively. Historical standards suggest those gains will be wiped out before October of this year. Historical standards also suggest the market should be down from September 30, 2005 so it can advance during the 2006 heart and soul of bullish seasonality.

The Dow30 found bottom in the last presidential mid-term election year on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11.Finding cyclical bottoms in mid-term election years is common. The Dow is up 54.8% from the last mid-term presidential election year bottom. The NASDAQ is up a whopping 107.6% since October 9, 2002.

The NASDAQ is down 54.2% from its historical high of 5048.62 on March 9, 2000. The Dow is down 3.8% from its historical high of 11723 on January 13, 2000. The S&P500 is down 14.7% since its all time high of March 23, 2000. So far, the new century, 2000 inclusive, has not been kind to long-term investors. Historical standards suggest the NASDAQ will not return to historical high until 2025 or so.

Many investors divorced themselves from their stock market relationship during the extended bear from 2000 to 2002. Many will never return to the stock market. That will reduce the demand for stocks for an entire generation. Those of you still participating avoided the losses earlier this century and reinvested in late 2002. Your retirement plans or desire for money is in good shape.

Economic or corporate earnings fundamentals did not support the stock market’s meteoric rise since 1990. Unprecedented demand for stocks skewed the supply demand ratio. The simple law supply and demand propelled stock prices dynamically to the north in the 1990’s. The great bear leg of 2001 and 2002 has depressed sources of demand. The market now has to wait for a new generation of investors to enjoy dynamic secular bullishness. The great bull leg of 2003 was a relatively short bullish spurt that has not enjoyed follow-on bullish behavior due to this lack of demand with the exception of normal bullish expressions during the heart and soul of bullish seasonality in 2004 and 2005.

The market has been slightly bullish since late 2003 with pronounced meandering behavior. The only significant bullish expressions not followed by bearish expressions occurred in the heart and soul of bullish seasonality in 2003, 2004, and 2005. Other than those “heart and soul” bullish cycles, the market has been relatively flat since early 2004.

As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market. There were 239 buy signals between October 5, 2002 and November 9, 2002 out of the 296 stocks and funds tracked by the Mid-term Indicant at that time. Even badly managed companies received a buy signal, which is a common attribute of sustainable new bull markets. As many of you noticed, those companies eventually dipped back to the south after the euphoria of new bullishness.

Some of you recall the Indicant Stock Market Report tracking the Short-term Indicant Bear for the NASDAQ in 2002. It was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence tech stocks have on the economy.

There are two important axioms to remember and are always repeated in this report. 1) Real economic wealth is created in only three ways - manufacturing, agriculture, and extraction. 2) The only positive influence politicians have on the economy is to undo their prior damage. They are now doing their damage, some of which will be undone in 2007; the next presidential pre-election year. That is why the market typically finds a bottom in the mid-term election year. That is also why the presidential pre-election year is historically the most bullish on the four-year cycle. If the strength of the current Mid-term Bull can be subjected only to meandering behavior, like 2004 and 2005, then it is possible for the current Mid-term Bull to be a record setting one in terms of duration.

The political industry reduces wealth. Politicians continually attempt to redistribute wealth, which flies in the face of the laws of nature. They promote “middle class” attainment. The larger the middle class, the more power politicians and their academia brethren have. The communists tried that, resulting 99% poverty, while the ruling 1% lived like kings. In other words, socialism rewards an ability to intellectualize, while capitalism rewards the results of appealing effort.

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

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize with the heart and soul of bullish seasonality from November 2002 through February 2003. December 2002 was the most bearish since 1931, but not nearly as dynamic as the 1931 bearish expression. After the asynchronous behavior in the November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality in 2003. The market continued moving north during that time, contrary to historical standards. As stated in most of 2004, bearish expressions on a Mid-term basis between May and October 2004 should not be surprising. That is exactly what occurred. The result was a meandering market with a slight bearish bias during most of 2004 and 2005.

As stated since late October 2005 and early November 2005, do not be surprised at increasing quick-term and short-term bullish expressions in the immediate future, followed by increased bearish expressions early next year. That prognosis occurred with those expectations with the bullish cycle. However, each bearish cycle since January 31, 2006 has been followed by a bullish response. It is time for the market to turn bearish. Fundamentals and historical standards support that scenario.

The magnitude of early 2006 bearishness is not predictable. Simply wait for the various Indicant model’s advisement of bull/bear status, as forecasting the market is a waste of time. However, it is appropriate to anticipate fundamental shifts before they happen. Keep a close eye on the Fed. It can damage the underlying bull. Keep in mind, the bull market is in tact from both a Mid-term and Quick-term basis. The Indicant models are not sensitive to tradition or fundamentals. They simply read the market and find its directional propensity. Right now, that propensity remains a bull.

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

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

Stop Loss Management

The Mid-term Indicant recommends a stop loss of 5% on recent buys because of the Short-term Indicant’s continuing bear signal and the high probability of bearishness in the current political cycle.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables for your longer-term hold positions. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss.

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

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

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

Stock and Fund Update

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

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

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

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

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

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

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

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

Divergence versus Convergence

Bullish and bearish divergent patterns continue to rotate from bi-weekly period to bi-weekly period. The market expressed bullish convergence the past three weeks. Will this rotating pattern continue? As long as the pattern is divergent bearishness or bullish convergence, there is no threat of dynamic bearishness, especially when coupled to the tremendous non-bearish support from the ETF configurations. Bearish convergence seven weeks ago remains somewhat ominous to the underlying bull market. The strength of the bull replied with disallowing continued bearish convergence. That is a testament to the strength of the underlying bull market.

Economic Conditions – Inflation, Currency, Interest Rates

There is little difference from the last few weeks. Most world currencies continue in their cyclical shift in support of a strengthening U.S. Dollar. Although the cyclical direction remains in favor of a strengthening U.S. Dollar, behavior the past few weeks has been of a meandering nature. However, continued strengthening is expected as long as interest rates continue rising.

There is nothing new. This paragraph remains unchanged from the past several months. As repeatedly stated, the only exception to a strengthening US Dollar is the Canadian Dollar. It has not yet made this cyclical mid-term commitment to weaken against the greenback. It continues to strengthen against the U.S. Dollar. As stated the past several months and first mentioned in 2003, the Athabasca Tar Sand Oil potential continues to threaten the Canadian cost advantage. The perception of huge oil exports to the U.S. and around the globe will provide increased difficulty for the Canadian Dollar to weaken.

Last week’s weakening of the Canadian dollar is an aberration to the underlying cycle of strengthening.

A strengthening Canadian Dollar will hurt Canadian manufacturing. The Canadian government is going to attempt to weaken the Canadian dollar, most likely at the request of General Motors, but $60+ oil will make that difficult. General Motors can benefit tremendously with a weaker Canadian dollar with their massive manufacturing capacity in Oshawa, Ontario, Canada.

Unfortunately, the strengthening Canadian dollar has hurt GM’s bottom line and consequently, much of the Canadian capacity is earmarked for closure. This paragraph will remain unchanged until such time conditions change. The folks in Oshawa do not believe their manufacturing capacity will be closed. That is usually a death sign unless they can accelerate productivity to offset the impending disadvantage of their wage rates.

Keep in mind, the Indicant does not attempt to offer literary entertainment. It will repeat configurations, bias, and facts as long as they persist. That has been the case for the past several weeks. Much of the Canadian dollar’s strengthening is directed toward economic behavior twenty to fifty years from now, much like Dell stock was rewarded ten to fifteen years ago for today’s performance. That is a testament to “buying on the rumor” and selling on the news.

As stated the past few weeks, commodity prices are finally behaving, as the Federal Reserve Board would like them to. The majority of the major commodities remain in the neutral zone, which is a designed result of the Fed’s intention and recent behavior. This configuration supports long-term bullishness in stock equities, provided the Fed policies do not raise interest rates too much and commodity prices fall at a civilized pace.

This paragraph will remain unchanged until conditions change. Although the trend in interest rates continues in an unfavorable direction for the stock market, falling commodity prices will stimulate the Fed into softening rate hikes or deferring them altogether. Interest rates continue their incline, which is politically congruent. Do not be surprised at economically friendly policies in the second half of this year. Expect accelerated troop reductions in Iraq, as well.

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 ninety-six weeks ago since the MTI buy signal on April 13, 2001. One-hundred and eighty-nine weeks ago, it closed up 30.1%. Last week it closed up 268.1%. The current annualized growth rate since the April 13, 2001 buy signal is 53.4%. After falling sharply 40-weeks ago, it bounced north in 30-weeks of the past 40-weeks. This fund moved north the past two weeks after falling sharply three weeks ago.

Fidelity Gold, Fund #28, is up 44.5% since the Mid-term Indicant signaled buy on August 26, 2005. That annualizes to 76.2%, which is not an impossible performance level if oil prices resume their advance. This fund should do well in the event this market turns into a 1970’s type of market. This fund was also up last week, but mildly so.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 263.2% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 72.0%. This fund moved sharply to the north the past two weeks.

Vanguard Energy #18, VGENX, is up 161.6% (annualized at 53.7%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 135.7% (annualized at 58.2%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 131.2% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 49.7%. These energy related funds moved to the north in four of the past five weeks. Investors in these funds are supporting a 1970’s type of market with high inflation and high oil prices. Energy and gold always do well during such times. Fundamentals continue to support holding these.

These funds should do well even if the market turns extremely bearish. Continue to hold them until the Mid-term Indicant signals sell.

The SQI (Consolidated Short-term and Quick-term Indicant) model signaled buy for the GLD-ETF#11 on August 3, 2005. It is up 28.0% since then. It is annualized at 43.2%. This ETF continues to be bullishly biased and moved to the north the past two weeks, after falling sharply three weeks ago.

The SQI signaled buy for ETF#03 – Energy and Natural Resources on March 26, 2003. It is up 150.5% (annualized at 49.5%). It has expressed bearishness in seven of the last thirteen weeks, but it also moved north the past two weeks.

Contrarian sectors such as commodities and petroleum were bullish last week while general equities were also bullish bias. That is a convergent bullish pattern that validates bullish substance. As earlier stated this pattern has been rotating this year as opposed to sustaining momentum. The next two weeks will be interesting.

Mid-term Indicant Positions – Ten U.S. Indices

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

All ten major indices are bulls. They are up by an average of 47.2% since the MTI-RYS signaled bull an average of 108-weeks ago. That annualizes to 22.7%, which is down from last week. The strongest bull is the Dow Utilities. It is up 110.1% since the October 25, 2002 bull signal. Utilities south last week. This index has fallen in four of the last six weeks. Your utility hold positions remain safe, but keep your eye on this particular index. Severe bears show little mercy, regardless of dividend yields. This index has been the strongest, since the bull was born in October 2002. Unfortunately, its current bull cycle appears to be nearing expiration.

Supply and demand relationships may hold Utilities higher than the other indices if the market turns bearish. The October 2002 buyers are locked into some serious dividend yields that will be hard to give up.

The Mid-term Indicant Dow Jones Industrial Average performance is now at $34,169,733. That beats buy and hold performance of $1,726,107 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $168,229. That beats buy and hold’s $127,628 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $193,516 that beats buy and hold’s $80,195 on an October 18, 1985 $10,000 investment. The Mid-term Indicant model beats buy and hold by 1,879.4%, 31.8%, and 141.3%, respectively, for these indices as of this past week.

The Indicant’s percentage advantage over buy and hold does not change during bull signals. The advantage changes only during bear signals. That is because the buy and hold model has to keep holding, while the MTI-RYS model avoids bear markets. The only purpose of the MTI-RYS model is to avoid the bear markets. That is why it beat buy and hold by nearly 2000% over the past 100+ years.

Click here for a tour of the Mid-term Indicant for major market indices.

Mid-term Indicant Positions - NASDAQ100 Stocks

Click here to see NASDAQ100 report card history.

Click the following link to view this group of stocks:

http://www.indicant.net/Members/Updates/All%20Update%20Forms/UD%20MTI-NAS100-STKS.htm

Mid-term Indicant Positions - Dow Jones 30 Industrial Stocks

Click here to see Dow 30 report card history.

Click the following hyperlink to view this group of stocks:

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

Mid-term Indicant Positions - Dow Jones 15 Utility Stocks

Click here to see Dow Utilities Report Card history.

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

Mid-term Indicant Positions - Indicant Selected Stocks  

Click here to see Indicant Select Stock Report Card history.

Click the following hyperlink to view this group of stocks:

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

Mid-term Indicant Positions - Mutual Funds

Click here to see Mutual Fund Report Card history.

The Mid-term Indicant continues avoiding ProFunds Ultra Short due, in part, to the Quick-term Indicant’s bull signal and the heart and soul of bullish seasonality. The SQI (Consolidated Quick-term and Short-term Indicant) is signaling hold for the QQQQ, which is why ProFunds Ultra Short is avoided. It is down 6.4% since the Mid-term Indicant signaled sell on November 11, 2005. This fund may show some significant promise this year. The last time this fund was very profitable was in the first half of 2002, which was also a mid-term election year. This fund disappointed in the meandering markets of 2004 and 2005.

Click here to see all Mutual Funds tracked by the Mid-term Indicant.

Always remember never to keep more than 20% of your investment resources into a single mutual fund. Sector investing in mutual funds is an extremely good way to mix your investments.

Long Term Indicant Positions - Dow Jones Industrial Average

The blue-chip Long-term Indicant Bull signal was at 2895 for the DJIA in November 1991. Keep in mind the Long-term Indicant generated only five bull/bear cycles since 1920.

The Dow is up 289.7% (annualized at 20.1%) since the Long-term Indicant signaled bull 751-weeks ago. Economic data is the primary influence on the Long-term Indicant. The recession, deflation, and inflation have not been strong enough to signal bear. A link to the Long-term Indicant is below:

http://www.indicant.net/Members/Updates/LTI-Markets-DJIA/DJIA.htm

Indicant Conclusion

The Short-term Indicant continues signaling bear for the Dow and NASDAQ. One ETF continues enduring a bear signal from the Short-term Indicant and Quick-term Indicant, but the bias remains overwhelmingly in favor of the bull on a Short-term and Quick-term basis.

As stated for the past few weeks, the Quick-term and Short-term attributes continue with a bullish bias, albeit a slight one. That bullish bias weakened ten weeks ago. The problem for the short-term buyer, internal to the heart and soul of bullish seasonality period, is the endurance of impending bearish expressions.

Nothing is different from the past five-week’s stock market report. The heart and soul of bullish seasonality moved the market higher. Significant bearish expressions can ensue over the next few months without generating a bear signal. That is because the ETF’s are well above their breakdown lines and bearish yellow curves. A retreat to those bearish domains will still leave the longer-term and mid-term investor in healthy profit positions, while the January 2006 buyer will most likely endure losses before October 2006. Mild bearishness during current time to October will ensure some profit from the heart and soul of bullish seasonality after September of this year. Deep bearishness, though, may not be recoverable though during the heart and soul of bullish seasonality later this year.

As stated the past nine weeks, do not be surprised at meandering behavior with possible bearish bias in the immediate future. So far, the market is relatively flat since the expiration of the heart and soul of bullish seasonality. The past three year’s of heart and soul bullishness were followed by pathetic meandering behavior. Historical standards and economic fundamentals do not support a repeat this year. On the contrary, there is much in favor of bearish dominance between now and October, although some bearish fundamentals, such as commodity prices, appear to be weakening. The PPI continues threaten the stock market, as productivity is not over-throwing increased commodity prices.

Keep in mind this is the mid-term election year, which historically finds a market bottom. Since predecessor years leading up to the upcoming presidential mid-term election year have not demonstrated dynamic bearishness, do not be surprised at a bearish cycle this year. As always, await guidance from the various Indicant models. They will let you know when or if this expected bearishness occurs.

Read your daily reports, as quick-term attributes can shift quickly. As stated the past several weeks, the market lacks bullish convergence, even though there has been mild bullish convergence the past few weeks. Eight weeks ago, the market demonstrated bearish convergence for the first time in several months. That is of some concern, but not as ominous as it was a few weeks ago. Convergent bullish patterns the past few weeks are threatening to the expectation of bearishness before October.

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

The daily updates are on the following link.

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

Hyperlinks

To access all major markets, stocks, funds, economic data, charts, statuses, etc, click the following hyperlink:

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

In addition, once you are inside the website, click on "members update" or simply log in. It is on the top of every page in the web site so you can always find your way back.

Happy Investing,