May 30, 2004 Indicant.Net Weekly Update

Volume 5, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

The Mid-term Indicant Remains Bullish During Bearish Seasonality

The Mid-term Indicant has generated twenty-nine buy signals the past three weeks for stocks and funds. It generated only five sell signals during the same period. Do not be aggressive with these buy signals. Buy one-half of what you would normally buy. We are still in the throes of bearish seasonality. See the last paragraph for additional explanations.

The Indicant research staff has made another discovery. There will be more about that in the next several weeks. Charts, tables, and proof are being developed now. They will be available to you in the next several weeks. The new term for this phenomenon will be “deep bearish seasonality.”

Deep bearish seasonality occurs twice a year. We already completed the first period of deep bearish seasonality. The second period of deep bearish seasonality will not arrive for a few more weeks. Now, let’s review normal bearish seasonal performance.

The Dow’s May finished down 0.4%, while the S&P500 finished up by 1.2%. The NASDAQ’s May finished up by a healthy 3.5%, but low compared to last year’s unseasonable increase of 9.0%. This is the NASDAQ’s first back to back years of May being up since 1995-96. The presidential election year’s phenomenon continues to exert its influence. There is more about that later.

The Dow’s April-May bi-monthly was disappointing with a decline of 1.6%. The S&P500 and NASDAQ were also down by smaller amounts. The Dow’s Mar-May rolling quarter was down 3.7% while the S&P500 and NASDAQ were down 2.1% each. The NASDAQ was down the most by 3.8% in the rolling Feb-May rolling third. The Dow was the second most depressed. It was down 2.9%, while the S&P500 held somewhat stronger by losing a mere 0.9%.

Most of the hold positions were okay during the Dow’s Dec-May rolling half, as it gained 4.2% during that time. The S&P500’s Dec-May rolling half was even stronger with a 5.9% gain, while the NASDAQ was up a mere 1.4% in that half of the year. The NASDAQ’s May performance is the only reason it is up in the Dec-May rolling half.

June is historically the second most bearish month of the year for the Dow. It is the fourth most bearish month of the year for the S&P500, while it is the fourth most bullish month of the year for the NASDAQ. Historical standards suggest little reason for bullish optimism this coming month. However, the Mid-term and Quick-term Indicants are suggesting your double and triple digit hold positions are safe.

The June-July rolling bi-monthly period is the fourth most bearish for the Dow and NASDAQ, while it is sixth most bearish for the S&P500, which is in the middle of the pack of bi-monthly performers. Considering bi-monthly historical standards again suggest little reason for bullish optimism. It would not be surprising, though, for the June-July rolling bi-monthly to be up this year. This is especially true if the Mid-term Indicant’s Bull can maintain bullish status. The Quick-term Indicant will guide us through this critical period on a daily basis.

The June-August rolling quarter is the third most bearish for the Dow and the S&P500, while it is the fourth most bearish rolling quarter for the NASDAQ.

The bad news is that the June-September rolling third of the year is the most bearish for the Dow and S&P500. It is the second most bearish rolling third for the NASDAQ. The Dow and the NASDAQ historically endure reductions in value in the June-September rolling third of the year. This is because this particular rolling third includes September, which is a notoriously bad month for stocks.

The Dow’s and NASDAQ’s June-November rolling half is the second most bearish, while it is the third most bearish for the S&P500. Summer time distractions and the reduced volume contribute to this lackluster stock market performance.

The Dow is actually down 0.9% for the year, which is the index used primarily for computing political influences on the market. The S&P600 is up a healthy 5.5% for the year, although depressed from the last two years explosive bullish cycles. The other six indices are also up for the year by an average of 2.2%, which includes the S&P600 performance.

The average stock market gain during presidential election years is 7.3%, which is the second most bullish on the four year cycle. Since 1832, twenty-eight presidential election years have finished up while half that amount finished down. The Dow finished down by 6.2% in the last presidential election year in 2000. The last back to back down presidential election years occurred in 1913 and 1917. This supports an increased probability the Dow will finish up for the year.

Without expressed optimism from the monthly seasonal patterns, the presidential election year phenomenon is reason enough to expect a bounce to the north before the end of the year.

Historical standards suggest the market will rise over the next several weeks, although meekly, and will be followed by deep bearish seasonality prior to an explosive bounce to the north prior to year-end.

There is no need to forecast, though. The Mid-term Indicant is now a red bull again for all eight major indices. The Quick-term Indicant is signaling bull for the eight major market indices. The Long-term Indicant continues to signal bull. Only the Short-term Indicant is signaling bear. Overall, there is a slight bias favoring bullish expressions over the next few weeks. That means your double and triple digit hold positions are still safe.

Historical standards are not without variance. There are always exceptions to these standards, which we enjoyed in 2003. 

The next “deep bearish period” on a Mid-term Indicant basis and based on historical standards does not occur for a few more weeks. The Mid-term Indicant, as well as the Quick-term and Short-term Indicant does not blindly follow seasonal configurations. The current Mid-term Indicant’s Bull market remains in tact; especially with the recent climb back above the bullish red curve, although by an infinitesimal amount. Your double and triple digit holdings are safe.

Weekly Buy/Sell Summary

The Mid-term Indicant generated sixteen buy signals and one sell signal. Do not be aggressive with these buy signals. Some of the stocks will produce a small profit before the next Quick-term Bull/Bear cycle. Some will immediately incur a sell signal. One or two may zoom to new heights, so be very conservative in any buying at this time. Also, place your stop loss order immediately on buying.

In addition to the sell signal, the Mid-term Indicant is avoiding fifty stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 12.6% since the Mid-term Indicant signaled sell an average of 18.4 weeks ago.

There were only six stocks and funds avoided at this time last year even though there were no sell signals. The avoided stocks and funds one year ago were down an average of 24.9% since their respective sell signals an average of 27.3 weeks earlier. This contrasts strongly with the avoided stocks and funds two years ago. On May 31, 2002, the Mid-term Indicant was avoiding one-hundred and twenty-three stocks and funds that were down 21.4% since their respective sell signals an average of 10.8 weeks earlier.

In addition to the buy signals this weekend, the Mid-term Indicant is currently signaling hold for 229 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 79.7%. That annualizes to 73.7%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 229 stocks and funds for an average of 56.3 weeks.

There were three buy signals on this weekend one year ago. At that time, the Mid-term Indicant was holding 286 stocks and funds for an average of 18.2 weeks. They were up 41.5% (annualized at 118.7%). The contrasts significantly with the Mid-term Indicant signaling hold for 157 stocks and funds two years ago on May 31, 2002. They were up by an average of 27.6% since their respective buy signals 28.4 weeks earlier.

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

This paragraph is similar to the past several weeks with a few modifications slanted for 2004 interpretations. We want to make certain you understand this. The mid-term election year phenomenon found the market bottom, right on cue in 2002. The presidential pre-election year phenomenon is the most bullish year on the presidential election cycle. Normal seasonality did not occur in 2003, as the presidential pre-election year exerted its influence with a bullish fervor. We have now completed our enjoyment of that in 2003.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy. Bearish expressions on a Mid-term basis in 2004 between May and October should not be surprising.

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

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

Make certain you read the entire pages on the above link. You will see there are exceptions. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know. Right now, the Mid-term Indicant continues to signal bull. There is more about that later in this report.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because we are now into bearish seasonality. If you are up by 50% or more you still may find it advantageous to set your stop loss at 10% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant signals bull. You can see from the daily reports and the recent Quick-term behavior, the market is not primed for exhilarating gains in the immediate future, but a continuation of the current technical bullish spurt would not be surprising for the next few weeks.

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending. Those types are more interested in burning your money for their pleasures, as opposed to making you money.

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

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

Energy related securities strengthened last week along with the general stock market. That includes internet stocks, large caps, and mid caps. Commodities held ground. We enjoyed the expected technical rebound last week. The pattern is converging, but most likely as a technical adjustment as opposed to a secular movement.

Economic Outlook

The U.S. Dollar weakened last week, but its configuration is a mere technical adjustment to the current cycle of strengthening. This phenomenon is not uncommon during any cyclical adjustment. The dollar is definitely into a cycle of strengthening, but it, like most things, is not going to go straight up. The configurations suggest this past week’s rebound is a mere adjustment to the current strengthening cycle.

Gold continues to rebound, but the configurations also suggest that it simply fell too much too fast. However, this rebound is not as obviously technical in nature as the rebound in the dollar. A new bullish cycle is possible, but highly unlikely with the strengthening dollar.

Other commodity indices are remaining frustratingly close to their recent cyclical peaks. Even though Greenspan is going to put the skids to inflationary threats, international capitalism’s recent economic expansions will play into the simple laws of supply and demand without regard to Greenspan’s toying with the U.S. economy. No paper pusher can solve that problem.

The three month CD was more bullish that the six month CD last week, which is contrary to recent configurations. The six-month CD has been the more bullish one. Freddie Mac’s and Fannie Mae’s declined last week, but there current cycle continues to be bullish.

Although the increased rise in capitalistic paradigms around the world, and especially in China, may induce some short-term pain, it is better for all. The economic models of the past may have to be adjusted. The more capitalists there are, the higher the standard of living for all. The markets will favor that angle, even in the face of increased shortages of natural resources. Capitalism is good and other paradigms are not when the standard of measure is the quality of life of people around the world. Inventors and the greed of capitalistic behavior will introduce unique solutions to impending shortages of natural resources. The capitalist always has and always will solve the problem, regardless of its difficulty or magnitude. No other underlying philosophy has ever demonstrated an ability to solve any problem that diminishes the quality of life.

All economic data is at the following link:

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 one weeks ago since the MTI buy signal in April 2001. Ninety-four weeks ago, it closed up 30.1%. Last week it closed up 92.7%, which is higher than the 75.9% reported forty-five weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 29.2%, which is slightly higher than 23.1% reported forty-five weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%. It is up significantly the past two weeks.

The Fidelity Gold Fund #28 is up 8.3% since the Mid-term Indicant signaled sell on April 30, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.7% profit. Even though this fund is up since the sell signal, its recent rise is technical in nature and most likely not sustainable.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF04.htm#19

The Gold Index is up 15.1% since the Mid-term Indicant signaled bear on May 8, 2004. Although this index is up since the bear signal, many quick-term attributes suggest this recent incline is a mere technical adjustment to the Mid-term Bear. Vector Pressure turned positive this past week. That would normally be bullish. The red and yellow curves are in a steep decline. The price touched the red curve on Friday. Its Force Vector is mature, suggesting the red curve will act as a lid to the price movement. Those attributes suggest the best one could hope for would be gentle lateral movement in its price.

The Force Vector movement was robust, but without a volume indicator, it is difficult to interpret this configuration. The current interpretation is that it is a mere technical rebound to a bearish undercurrent. If bullish red does not act as a lid to the pricing, then a quick reassessment of gold will be appropriate.

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

Terrorism remains an open question. As stated last week, human emotion has integrated with Greenspan’s commentary and thus the bearish perception regarding gold.

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

Quick-term and Short-term Indicant Update

The eight major indices are up 0.9% since the Quick-term Indicant signaled bull on May 25, 2004. NASDAQ100 is the most bullish. It is up 1.1% since the Quick-term Bull signal of May 25, 2004. The least bullish is the S&P600. It is up 0.2% since the May 25, 2004 Quick-term Bull signal.

As stated in last Monday’s daily report, the major indices showed little respect for the Quick-term Bear. Rather than expressing timidity around the bearish yellow curve, they blasted onward and upward. The next major hurdle will be the bullish red curve. It is unlikely the current cycle will enjoy positioning above the bullish red curve. That is due to bearish seasonality that is underway.

Additionally, the quick-term attributes do not support dynamic bullish behavior in the immediate horizon that would be sustainable.

Force Vectors are still moving north, as they have for over a week. That is a mature cycle. They need to retreat to the south. However, that is not bearish because this retreat will originate in bullish domains. Although the configuration is not bearish, the retreating cycle is also non-bullish.

Vector Pressure continues moving north for all eight major indices. As stated last week, this supports resistance to bearish dominance. Vector Pressure remains in bearish domains for all eight major indices but nearing neutrality. Vector Pressure’s configuration is biased slightly in favor of bullish expressions while Force Vectors support a slight edge to bearish expressions. This is quite different from March 2003 through late January 2004 when Force Vector and Vector Pressure configurations were in obvious support of bullish expressions. When they are synchronized with congruent emphasis, there is no doubt about the market’s direction. Right now they are asynchronous, as they are emulating residual inflection point attributes and a market faced with bearish seasonality and fundamental concerns.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. Until then, we will continue to use words to describe them.

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

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

You can tell the summer-time doldrums are upon us with the Indicant Volume Indicator. Wall Street fat cats are now heading off to vacation. They’ll be back in September, but mostly focused on getting the kids back to school during September. With all those distractions the market should not experience any dynamic bullish expressions of a sustainable nature until October. It has been that way the past two years and bullish seasonality, as expressed by the Stock Trader’s Almanac, will be in play again.

Both major indices Indicant Volume Indicator is in rapid decline. The smaller the volume the wilder the stock price swings. So, do not be surprised if you see some wild swings in prices in the coming few weeks. The Force Vectors and Vector Pressure usually detects when those wild swings are phony with Wall Street sucker plays.

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

The Dow is down 1.9% since the Short-term Indicant signaled bear on April 13, 2004. The NASDAQ is down 2.1% since the Short-term Indicant signaled bear on the same day. As you can see, the Short-term Indicant is not supportive of the Quick-term Bull.

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

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

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

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

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

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

Perspectives

There is nothing different to report here. The remainder of this paragraph remains unchanged from the last four weeks. As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions. However, there is still room for a 20% or so drop before the indices engage their respective breakdown curves. Some stocks will fall by more than 20%, many will remain flat and a few of them will skyrocket. That is why we are patient before unloading our triple digit gainers and it is best to get Mid-term Indicant confirmation that this bull is dead.

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

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

Overall, this Quick-term Bull is not receiving support from the quick-term and short-term configurations. It could very well be a short-lived bull. However, the fact that the market allowed its birth is favorable to your hold positions.

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

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

There were some changes since last week. All eight major indices are above their respective bullish red curves. The only one that hung above bullish red during the recent Quick-term Bear cycle was the S&P500. That, alone, prevented the Mid-term Indicant from signaling bear during bearish seasonality.

If you look at the Mid-term charts you will notice the current Mid-term Bull was not dynamic, but one of the steadiest on record. It has shown tremendous resistance to expiring during bearish seasonality. You will notice the Mid-term Bulls of the late 1990’s were volatile and expended tremendous energy in their meteoric increases. Their expiration was equally dynamic with explosive bearish movements. The steadiness of the current Mid-term Bull gives some reason that any impending Mid-term Bear would be mild.

However, a bear is a bear and although sometimes the depth of them can be predicted, such predictability is not always the case. If and when, our research reveals 100% accuracy in predicting the depth of bears, the Indicant will not release such predictions. Without 100% precision in such matters, why subject oneself to a deep and long lasting one? It is simply not a necessity.

However, the current Mid-term Bull lives and until it expires, enjoy it.

The eight major indices are up an average of 19.5% for an annualized gain of 20.6% since the MTI Bull signals an average of 49.1 weeks ago. The DJIA, NASDAQ, and Dow Composites have been Mid-term Bulls since March 22, 2003.

The DJIA is up 19.6% (annualized at 16.4%) since the MTI Bull signal on March 22, 2003.  That is up slightly from 14.1% reported thirty-two weeks ago. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.   

The NASDAQ Composite continues to be the strongest Mid-term Bull. It is up 39.8% (annualized at 33.4%) since the March 22, 2003 MTI Bull signal, which is down, slightly, from 34.6% reported thirty-two weeks ago. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth since the Mid-term Bull signal of March 22, 2003.

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

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

Mid-term Indicant Positions - International Markets

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

Twenty of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 83.7% since the Mid-term Indicant signaled bull an average of 77.9 weeks ago for an annualized gain of 55.9%, which is less than the 72.9% reported fifty-one weeks ago.

The two bears are up an average of 1.3% since the Mid-term Indicant bear signals two weeks ago.

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

May 23, 2004 Indicant.Net Weekly Update

Volume 5, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Opportunities and Pruning on the Horizon

All things endure aberrant behavior. Sometimes it rains, sometimes sunshine. Most of the time, you scratch golfers hit it down the middle, but every now and then you hit one out of bounds. For those of you who have trouble breaking a hundred, you enjoy the aberrant birdie every now and then.

Every spring, you see Mother Nature exert her pruning process. In early April, you see the trees blossom and enjoy peaceful spring days. Then a few days later, you see dark clouds boiling in the southwestern skies. After the storm blows through, limbs are all over the place and the trees look beaten and wilted. Mother Nature got rid of the weak limbs so the stronger ones will not have to share nutrients with the weaker limbs. It appears to be a painful process for the trees. A few days later, they are vibrant and beautiful again and much stronger because of the pruning process.

The current Mid-term Bull has been pruned. The Mid-term Bull, surprisingly, did not expire this past week. The S&P500 Index did not fall below its bullish red curve. That configuration continues to delay the expiration of the Mid-term Bull. That configuration stimulated some additional buy signals and mitigated sell signals for mutual funds this past weekend. Maybe this Mid-term Bull will only endure a pruning process this year without expiring. That is unlikely, but the possibility still exists.

The secular bear market that began in early 2000 pruned quite a few investors out of the market. Most of them have endured the pain of their losses, while earning paltry gains in their money market accounts and CD’s. Not all of them will return to the market, while others are planning on it, as they missed out on the Indicant’s buying spree in October and November 2002.

Historical standards were on the mark in the recent Quick-term Bear, even though the market turned bearish on a quick-term basis well in advance of normal bearish seasonality. There are certain weeks in the year that are historically down. We just finished one of those ranges of weeks that are historically bearish. The good news is the depth of those historically bearish standards did not prompt a Mid-term Indicant bear signal - at least, not yet. If you invested $10,000 in 1900 in only the certain weeks just completed, you would be down over 50% in the last 104 years. Specifically, the $10,000 would now amount to only $4,703. In a few months we will enter the second most bearish period where you would only have $2,227 from a $10,000 investment 104 years ago.

The good news is just after the upcoming bearish period several weeks from now, the seasonally dynamic bullish period will be upon us that delivered nearly $1,000,000 on a hypothetical $10,000 investment 104 years ago. These events refer to historical standards. They, of course, endure periods of aberrant behavior from those standards. The various Indicant models help avoid the unfavorable configurations of aberrant stock market behavior, just as it kept you in the market in 2003 while the market continued with bullish expressions during normal bearish seasonality.

The market is configuring itself to demonstrate historical standards. That is, there will be a technical bullish rally in the immediate future that will likely trigger a Quick-term Bull. Historical standards suggest a severe Quick-term Bear will quickly follow it before the next extended bullish period.

There are several opportunities building here for those of you who missed the late 2002 buying spree. You need to think in 1.5-year buckets of time, though, as the post election year in 2005 coupled with rising interest rates could stifle the resiliency of this Mid-term Indicant Bull Market.

The market always goes up. The stock market was zero the day before it was invented. It hasn’t seen zero since then. Therefore, it is always going up. However, every now and then it does some pruning. Sometimes the pruning is like a quick Spring storm. Sometimes, it is like a long-term winter storm that lingers for days and months. But, it has never gone all the way back to zero. You can see the Mid-term Indicant is still signaling hold for several stocks and funds during this Quick-term Bear. Many of you are enjoying double and triple digit performance on your hold positions even though those positions are down from last January.

The depth of those stocks with avoid signals are deep enough to provide some significant buying opportunities during the course of this year and provided the market maintains its Mid-term Indicant Bull status.

Let’s take a look at some of those opportunities that are building along with some of the successes you are now enjoying.

NAS100 #98, Intel, reacted favorably to its interaction with blue curve. It is back above the long-term trend blue curve, even though another dip to the south may result before the end of this year. Buy passively on this signal. For example, if you normally buy 200 shares, just buy 100 and save some of your cash for some post-pruning buy signals.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS17.htm#98

NAS100 #95, Paychex, is an example of this phenomenon, where stocks rebound quite often off their respective long-term blue curves.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS16.htm#95

NAS100 #93, Ciena, is an example of the reversal of this phenomenon. It is down 43.8% since the Feb 28, 2004 sell signal. It is configured to offer an excellent buying opportunity on the first robust movement in the Quick-term Indicant’s Force Vectors.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS16.htm#93

NAS100 #91, Icos, is another example but with more volatility than Ciena. Icos is down 18.1% since the Mid-term Indicant signaled sell on April 24, 2004. Icos delivered a profit of 56.4% on the last sell signal while Ciena has been a little more elusive. Ciena found great discomfort at its bullish red curve and its long-term blue curve has been consistently moving south for several years. Those stocks deliver profits much more reluctantly than those who seem enjoy elevating themselves above bullish red and long-term blue curves, such as Icos.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS16.htm#91

NAS100 #84, Vitesse, is another example of a stock finding discomfort at the bullish red curve. It is down 15.0% since the April 17, 2004 sell signal. It has not jolted its long-term blue curve since 2000, but it delivered us a 215.9% profit on the September 27, 2003 sell signal. The prior two buy/sell cycles were disappointing with small losses. It was one of the original buys in the October-November 2002 buying spree.  The Mid-term Indicant decided to take early profits in September 2003 before “tax selling” set in. Because its long-term blue curve was in a secular decline, it was appropriate to take early profits on this sort of stock. You need to trade these sort of stocks from time to time and endure the quick buy-sell cycles before catching a nice Mid-term bull leg that can deliver triple digit gains for you during Mid-term Bull markets. It is part of the pruning process for those of you who prefer trading to long-term investing. The time is getting ripe for those of you who prefer long-term investing, as many of the long-term blue curves appear to be bottoming.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS14.htm#84

NAS100 #80, Veritas, is down 19.2% since the February 28, 2004 sell signal. NAS100 #79, Novellus Systems, is down 14.0% since January 30, 2003 sell signal.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS14.htm#80

Notice how IStk #16, Novell, contrasts with Novellus. Novell is up 277.4% since the Mid-term Indicant signaled buy on April 26, 2003. Novell was a little herky-jerky in late 2002 as its movement paralleled Quick-term Indicant behavior, but has since proudly developed its own cadence to the north. It does not appear to be uncomfortable above its bullish red curve. As you can see, its behavior has elevated its long-term blue curve to the north. The trend for this stock is up, while Novellus’ trend remains south. If Novellus can find strong fundamentals, its long-term blue curve appears to be nearing a bottom even though its decline has not been as dynamic as several other tech stocks.

NAS100 #72, Interactive, has vacillated with a lack of commitment with several signals in the past few weeks on and around its long-term blue curve. It delivered a substandard profit of 24.2% from the buy/sell cycle in 2003. It is one of those stocks that tilted its long-term blue curve to the north. Rather than bouncing north off the blue trend curve, it has vacillated around it. Interactive has potential, but is now tracking closely to the Quick-term Indicant as opposed to demonstrating rugged individualism with its own cadence.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS12.htm#72

NAS100 #70, Genzyme, is up 95.5% since the Mid-term Indicant’s August 2, 2002 buy signal. It just fell below the blue trend curve. The Mid-term Indicant is still signaling hold even though it is no longer a triple digit gainer. It was one of the early buys in the late 2002 buying spree. Its early movement was robust and independent from stock market influences. It has strong fundamentals. The Mid-term Indicant will not signal sell until its trend curve shifts to the south, while the Mid-term markets are still receiving a bull signal. If the Mid-term Indicant signals bear, then the buy/sell algorithms will change to more aggressive selling and avoiding.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS12.htm#70

NAS100 #57, BEA Systems, is down 32.3% since April 17, 2004 sell signal. This stock had great difficulty moving above the blue trend curve and did not find comfort interacting with its bullish red curve. Before cycling north, it has decided to take a deeper dip to the south. This could be a buying opportunity on the next Quick-term Bull signal.

Some of the buy/sell cycles for this non-robust stock have been amazing. The Mid-term Indicant signaled sell on June 8, 2001 at $38.88 and avoided until March 8, 2002. This sell/buy cycle avoided a 58.8% capital loss. The March 8, 2002 buy was quickly followed with a March 29, 2002 sell signal for a 12.2% capital gain. The stock was avoided until the August 23, 2002 buy signal, where a 52.2% capital loss was avoided. The next sell occurred a few weeks later on September 6, 2002 for a 14.5% capital gain. The Mid-term Indicant signaled buy again on October 11, 2002 during the early stages of the 2002 buying spree, where a 9.3% capital gain was missed, but a 94.2% capital gain was enjoyed on the September 27, 2003 sell signal. Since then minor misses and losses occurred on the last two trades. As you can see, the under-performers can provide for some exciting trades.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS10.htm#57

NAS100 #33, Applied Micro, is down 17.7% since May 22, 2004 sell signal. As you can see from its chart, it never generated enough bullish energy to shift its blue trend curve back to the north. This stock participated directly with the Quick-term Indicant market’s move. It is configured for a nice move to the north when the Quick-term Indicant signals bull and sustains for a few months as opposed to quick up and down gyrations.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS06.htm#33

NAS100 #28, RF Micro Devices, is down 24.7% since the January 30, 2004 sell signal. It is another stock that could provide you a buying opportunity in the near future. All the Mid-term Indicant indicators are converging at the same place.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS05.htm#28

NAS100 #20, QLogic, is down 40.7% since the January 30, 2004 sell signal. This is after it delivered a capital gain of 26.1% in the most recent buy/sell cycle from February 23, 2003 through January 30, 2004. As you can see, this stock did not perform to the market and the Mid-term Indicant was quick to signal sell at the first sign of trouble earlier this year. The market is quick to prune the weaker stocks during Quick-term Bears. Some hold in hopes of getting the long-term capital gain. The market knows this and is quite often sinister in allowing you that pleasure. Tax selling is seldom profitable. It is better to pay taxes on gains than endure losses.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS04.htm#20

NAS100 #15, Juniper, is up 269.1%. It is a triple digit gainer riding a long-term bull wave. The Indicant is more patient in signaling sell during Mid-term Bull signals for any triple digit gainer, even though most of the geometric configurations favor dumping this stock. Stocks that hit triple digit performance can and do crash, but such performance is a substantive indication the stock will eventually rise to quadruple level performance from the record shattering NASDAQ Bear market early this century. It is relatively safe to hold triple digit gainers as the market has demonstrated great confidence in that company’s ability to deliver the anticipated profits. However, voodoo bookkeeping and dilettante management is something to keep your eye on any stock.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS03.htm#15

NAS100 #10, Sepracor, has not participated in the recent Quick-term bearish movements, although it has recently weakened. It is up 404.2% since the October 25, 2002 buy signal. The same is true of Adobe Systems, NAS100 #9. It is up 117.0% since August 23, 2002 buy signal, which occurred during the throes of the deep Mid-term and Quick-term Bear cycles of 2002. Although these stocks are not up as much as they once were, the pruning of the weaker stocks will help elevate these stronger stocks to higher levels by virtue of simple supply and demand. The dumping of the weaker stocks provides more cash to buy these stronger stocks just as the Spring storms prune the weaker limbs from the trees so the stronger limbs can get more nourishment.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS02.htm#10

NAS100 #7, ITWO Technologies, is down 38.5% since Feb 07, 2004 sell signal. This stock could provide some nice gains on the next Quick-term Bull signal, although it has delivered some wild technical and fundamental disappointments in the recent past. This company has legal troubles evolving around ethics. This stock was once the fastest growing NASDAQ stock and now seems destitute. However, penny stocks such as this one can provide for some exciting trades. Fundamental problems should be strongly considered for those of you who are investors while traders may find it more enjoyable. Revenues are falling and legal costs are rising. The company also appears to be hung up on academic credentialism, as opposed to practical experience.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS02.htm#7

NAS100 #4 PMC Sierra, is up 124.9% since March 1, 2003 buy signal. The Mid-term Indicant was a little slower in buying that stock because it was down over 90%. Such beaten stocks can take longer to recover. However, this stock has done well even though it has weakened considerably in the past few months. It is still a triple digit gainer.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS01.htm#4

NAS100 #1, Apple, was slow in receiving the Mid-term buy signal in the 2002 buying spree. However, it has not participated in the recent bearish expressions. It is up 87.6% since the May 3, 2003 buy signal.

http://www.indicant.net/Members/Updates/MTI-Stks-NAS100/NS01.htm#1

Indicant Stock #54, King Pharma, was one of the best performers during the 2000-2001 bear. It was a triple digit performer during most of that bear market, but as you can see, it has been having difficulty since its mergers and acquisitions. It is down 9.8% since the May 8, 2004 sell signal. As you can see from the charts, the last two Mid-term cycles on the bearish swing occurred in a higher plane. Some folks call this base building and an opportunity for a long-term buy. This could also be an excellent buying opportunity on the next Quick-term Bull signal.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S09.htm#54

IStk #47 Enzo Biochem, is down 20.5% since April 17, 2004 sell signal. This stock participates in a promising industry, but as you can see from its charts, it was not a good performer in the past two years and its blue trend curve’s gentle drift to the south is unfavorable. However, keep your eye on it in the next Quick-term bull signal.

IStk #46, D&K Healthcare, was also one of our better performers in the 2000-2001 bear market, but it has tumbled sharply. It is down 7.7% since April 24, 2004 buy signal. It is two cents above its Mid-term Green curve. The Mid-term Indicant continues to signal hold.

IStk #45, Cellstar, is down 16.1% since April 30, 2004 sell signal. IStk #44, Chattem, another one of our excellent performers during the 2001-2002 bear market. As you can see, it has had difficulty staying below the long-term blue curve. It is up 81.5% since the buy signal of August 23, 2003. The Mid-term Indicant will signal hold until it passes below the blue curve or depending on market conditions. Chattem once marched to its own drum beat, as opposed to synchronizing with the stock market. Now it has succumbed to market influences. IStk# 43, Corning, is up 395.8% since the November 8, 2002 buy signal. It is configured to enjoy continuing increases, but it will be interesting to see if it shifts its blue trend curve to the north. This stock is typical of many large corporations where their profits are totally “GNP-dependent” as opposed to smart management.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S08.htm#47

IStk #39, Elan, has slowed, but has not been a participant in the Quick-term Bear. It is up 791.2% since the November 8, 2002 buy signal. It was one of those participants in the October and November 2002 Mid-term Indicant buying spree. Even though the Indicant will not re-signal buy before a sell signal, you may want to consider buying on the next Quick-term Bull signal.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S07.htm#39

IStk #36, Biovail, is down 53.7% since the September 27, 2003 sell signal. It has tried to make some northerly movements since then, but those movements were obvious Wall Street sucker plays and the Mid-term Indicant appropriately continued to signal avoid.  IStk #34, Ballard, is down 28.3% since the November 15, 2003 sell signal. It participates in the promising fuel cell industry, but it is the weaker performer in that group. IStk #32, Hydrogenic, is down 10.2% since the May 8, 2004 sell signal and after making us a nice profit. It has historically been the strongest performer in the fuel cell industry, but recently has seemed to lose favor. It could be due, in part, to the strengthening Canadian dollar.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S06.htm#36

IStk #26, Nortel, was up over 1,000% at one time since the Mid-term buy signal. It is now up 438.1% since the buy signal of October 18, 2002. It is still being held because of its triple digit status. As you can see, it did not find comfort above its blue trend curve. It could be an excellent buy when the Quick-term Indicant next signals bull. If the current buy signals hold, there will not be another buy signal. The Indicant signals buy the first week and then signals hold until the next sell signal. Many of you recall how the Mid-term Indicant strongly suggested this stock in late 2002 and early 2003 with solid configurations. They have since broken down, but this stock has tremendous potential by virtue of its tremendous strength in the 2002-03 Mid-term Bull markets.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S05.htm#26

IStk #22, Retek, is another one that found discomfort above its blue trend curve. It is down 30.5% since the Feb 28, 2004 sell signal after making us a nice profit of 147.1% on the September 27, 2003 sell signal and a smaller profit of 8.9% on the most recent sell signal. Keep in mind the profit numbers reported herein exclude commission costs.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S04.htm##22

IStk #12, EMC, is yet another stock finding discomfort above its long-term blue curve. It is up 87.1% since the November 2, 2002 buy signal. It is a former triple digit gainer, but has strong fundamentals. The Mid-term Indicant may signal sell after the next Quick-term Bear starts. IStk #11, Ariba, provided some early spark in the late 2002 buying spree, but never participated in the late 2002-2003 Mid-term Bull market. It is down 35.4% since the March 13, 2004 sell signal. IStk #10, McLeod, is down 41.4% since the April 24, 2004 sell signal. It also has trouble holding above the long-term blue curve.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S02.htm##12

IStk #6, Level 3 Communications, is down 31.0% since the Feb 14, 2004 sell signal. It was a recent buy and sell by Warren Buffet. Too many people watch Mr. Buffet and his leads are not working as well as they once did. Following Mr. Buffet has fallen prey to the phenomenon of commonality. Too many folks follow now and it no longer works. He made very little on Level 3, if anything at all.

http://www.indicant.net/Members/Updates/MTI-Stks-Indicant%20Sel/S01.htm##6

DJU#8, TXU, has also not participated in this Quick-term Bear. It is up 150.1% since the buy signal of Nov 8, 2002. It would not be fitting to not mention a utility stock since the Dow Utilities was the best performing index during the earlier stages of this Mid-term Bull market.

http://www.indicant.net/Members/Updates/MTI-Stks-DJU/DJU-02.htm#8

Whereas, DJU #5, AES Corp., is up 353.9% since the Mid-term Indicant buy signal on November 23, 2002. You can see it has participated, slightly, in the current Quick-term Bear. It has yet to fall to its blue trend curve.

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

Mutual Fund #19, Vanguard Gold and Precious Metals rebounded back to the number one spot of mutual funds. It is now up 85.6% since the Mid-term Indicant’s buy signal on April 13, 2001. Notice how it bounced north after engaging its long-term blue curve. Many stocks, funds, and indexes do this, but not every time.

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF04.htm#19

As you can see, opportunities are again building for successful stock buys. The next opportunity for successful mutual fund buying will be in later this year. The Indicant will keep you posted on that.

Weekly Buy/Sell Summary

The Mid-term Indicant generated eleven buy signals and one sell signal. Do not be aggressive with these buy signals. Some of the stocks will produce a small profit before the next Quick-term Bull/Bear cycle. Some will immediately incur a sell signal. One or two may zoom to new heights, so be very conservative in any buying at this time. Also, place your stop loss order immediately on buying.

In addition to the sell signal, the Mid-term Indicant is avoiding sixty-five stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 10.9% since the Mid-term Indicant signaled sell an average of 12.3 weeks ago.

There were only nine stocks and funds avoided at this time last year even though there were no sell signals. The avoided stocks and funds one year ago were down an average of 25.1% since their respective sell signals an average of 26.5 weeks earlier.

In addition to the buy signals this weekend, the Mid-term Indicant is currently signaling hold for 219 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 74.7%. That annualizes to 67.5%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 219 stocks and funds for an average of 57.6 weeks.

There was one buy signal on this weekend one year ago. At that time, the Mid-term Indicant was holding 286 stocks and funds for an average of 17.3 weeks. They were up 35.9% (annualized at 108.1%).

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

This paragraph is similar to the past several weeks with a few modifications slanted for 2004 interpretations. We want to make certain you understand this. The mid-term election year phenomenon found the market bottom, right on cue in 2002. The presidential pre-election year phenomenon is the most bullish year on the presidential election cycle. Normal seasonality did not occur in 2003, as the presidential pre-election year exerted its influence with a bullish fervor. We have now completed our enjoyment of that in 2003.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy. Bearish expressions on a Mid-term basis in 2004 between May and October should not be surprising.

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

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

Make certain you read the entire pages on the above link. You will see there are exceptions. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know. Right now, the Mid-term Indicant continues to signal bull. There is more about that later in this report.

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 5% because we are now into bearish seasonality. If you are up by 50% or more you still may find it advantageous to set your stop loss at 10% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant signals bull. You can see from the daily reports and the recent Quick-term behavior, the market is not primed for exhilarating gains in the immediate future, but a technical bullish spurt in the immediate future would not be surprising.

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending. Those types are more interested in burning your money for their pleasures, as opposed to making you money.

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

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

Commodities continued their rebound last week along with Internet and other technical sectors. The pattern continues to favor a bearish convergence, but a technical bullish rebound should not be surprising for general equities in the next few weeks.

As stated last week, general equities are converging with bearish expressions on a Mid-term and Quick-term basis. This supports continued bearish expressions. Any rebound at this point should be considered strictly technical and not sustainable.

Economic Outlook

The US Dollar continues to show signs it has passed its cyclical low against world currencies. Greenspan’s rhetoric continues to unfold. This is unfavorable to U.S. exporters, but favorable to those countries who find U.S. markets attractive.

Gold rebounded last week, but that is most likely a technical bounce. However, oil continues to skyrocket. If it worms its way into the consumer price index, rest assured that gold prices will rebound as well. Other commodities are holding strongly at their respective bullish peaks, but are configured in a way that suggests their recent peaks will not be matched in the immediate future. Greenspan is now directing the course of these charts.

The six-month CD continues to rise, but the rate of increase softened last week to 4.1%. The nearer term CD’s also enjoyed higher rates of increases last week. After rising the past several weeks, Freddie Mac and Fannie Mae’s finally endured a decline last week. However, they still appear to be solidifying their red bull status.

All economic data is at the following link:

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 weeks ago since the MTI buy signal in April 2001. Ninety-three weeks ago, it closed up 30.1%. Last week it closed up 85.6%, which is higher than the 75.9% reported forty-four weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 27.2%, which is slightly higher than 23.1% reported forty-four weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%. It was up significantly last week.

The Fidelity Gold Fund #28 is up 3.5% since the Mid-term Indicant signaled sell on April 30, 2004. The last buy/sell cycle was from December 7, 2001 to April 30, 2004 resulted in a 52.7% profit. Even though this fund is up since the sell signal, its recent rise is technical in nature and most likely not sustainable.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF04.htm#19

The Gold Index is up 10.0% since the Mid-term Indicant signaled bear on May 8, 2004. Although this index is up since the bear signal, Quick-term Gold is still enduring negative bearish pressure. As stated the past two weeks, gold did execute the predicted rebound, but the probability for sustained bullish expressions is now less than 38%. Although Force Vectors are now into bullish domains, Vector Pressure remains deep inside bearish domains.

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

Terrorism remains an open question. As stated last week, human emotion has integrated with Greenspan’s commentary and thus the bearish perception regarding gold.

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

Quick-term and Short-term Indicant Update

The eight major indices are down 1.5% since the Quick-term Indicant signaled bear on April 30, 2004. The S&P400 Index is the most bearish. It is down 2.6% since the Quick-term Bear signal of April 30, 2004. The least bearish is the NASDAQ100. It is up 0.5% since the April 30, 2004 Quick-term Bear signal.

The eight major indices are below their respective bearish yellow curves by an average of 0.1%. The market rebounded slightly last week, while the bearish yellow curve continued moving to the south. Behavioral interactions with bearish yellow in the immediate future will help identify the longer-term market commitment to bearish or bullish direction.

All eight Force Vectors continue moving north, which means the current Quick-term Bear is not being allowed to mature and take complete control of the market’s direction. However, that can change quickly. The Force Vectors remain in bearish domains. However, their recent elevation is helping prevent rapid bearish influences.

Vector Pressure is now moving north for all eight major indices. This also supports resistance to bearish dominance. Vector Pressure remains in bearish domains for all eight major indices but nearing neutrality.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. Until then, we will continue to use words to describe them.

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

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

As stated the past few weeks, the NYSE Indicant Volume Indicator continues moving north. Its ascent is softening. Hopefully, it will turn south and discontinue supporting the recent Quick-term bearish expressions.

The NASDAQ’s Indicant Volume Indicator is now in a rapid cycle of lethargy. That means the miniscule rise in the market last week was not inspired by big volume buyers. The decline in volume started a few weeks ago, which means there is little big volume support for bearish aspirations. That is non-bearish in the sense that big money is not dumping.

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

The Dow is down 4.0% since the Short-term Indicant signaled bear on April 13, 2004. The NASDAQ is down 5.8% since the Short-term Indicant signaled bear on the same day. The Mid-term Bull is still alive and thus some hope for a Quick-term rebound.

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

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

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

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

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

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

Perspectives

There is nothing different to report here. The remainder of this paragraph remains unchanged from the last three weeks. As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions. However, there is still room for a 20% or so drop before the indices engage their respective breakout curves. Some stocks will fall by more than 20%, many will remain flat and a few of them will skyrocket. That is why we are patient before unloading our triple digit gainers and it is best to get Mid-term Indicant confirmation that this bull is dead.

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

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

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

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

Nothing changed since last week. The eight major indices are all above their respective long-term blue curves. Normally, during bearish seasonality, the Mid-term Indicant would signal bear when the indices fall below their respective bull red curves.  Only one index remains above its bullish red curve. That provides support for the continuing bull signal.

The eight major indices are up an average of 15.9% for an annualized gain of 17.2% since the MTI Bull signals an average of 48.1 weeks ago. The DJIA, NASDAQ, and Dow Composites have been Mid-term Bulls since March 22, 2003.

The DJIA is up 17.0% (annualized at 14.5%) since the MTI Bull signal on March 22, 2003.  That is up slightly from 14.1% reported thirty-one weeks ago, but down from recent weeks. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.   

The NASDAQ Composite continues to be the strongest Mid-term Bull. It is up 34.5% (annualized at 29.4%) since the March 22, 2003 MTI Bull signal, which is down from 34.6% reported thirty-one weeks ago. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth since the Mid-term Bull signal of March 22, 2003.

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

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

Mid-term Indicant Positions - International Markets

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

Twenty of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 82.6% since the Mid-term Indicant signaled bull an average of 76.9 weeks ago for an annualized gain of 55.9%, which is less than the 72.9% reported fifty weeks ago.

The two bears are up 0.4% since the Mid-term Indicant bear signals last week.

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

May 16, 2004 Indicant.Net Weekly Update

Volume 5, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Fundamentals and Stability

Corporate earnings continue to rise. The economy continues to expand. Interest rates remain at historically low levels. Inflation is low. Unemployment continues to improve. Consumers are spending.

The market addressed all the above last year. It is now where it needs to be relative to today’s fundamentals. The question is what are those fundamentals about six to nine months from now? That is what the market is grappling with now. The Quick-term Indicant has been revealing those concerns about late 2004 for the past few months. Most of the Quick-term attributes suggest a continuing bearish bias on the immediate horizon.

The Quick-term indicators started revealing lost steam in the Mid-term Bull early last February. Greenspan sparked an acceleration in the bull’s lost energy in late March. In late April, he indicated his concerns about inflation should not be taken lightly.

The Mid-term Indicant did not signal bear this past weekend. Only one of the eight major indices is still a Mid-term Indicant Red Bull. That is enough to continue signaling bull on a mid-term basis. The Mid-term Indicant Bull is now not strong and is very vulnerable right now. A slight rebound would not be surprising in the next few days to prevent a Mid-term Bear signal. The continuing delays in signaling a Mid-term Bear has minimized the number of sell signals for stocks and funds.

The current Mid-term Bull, which began in March 2003, has been steady. It has not expressed the dynamic movements of many Mid-term Bulls of the past. Where it lacked in dynamic configurations, it made up for in stability. A Mid-term Bull that has been as stable as this one has will not expire easily. Even if the Mid-term Indicant signals bear this year, the odds are in favor a new Mid-term Bull signal before the end of the year. As stated last week, the political cycle and inflationary fears are threatening the current Mid-term Bull’s longevity.

It is interesting that gold prices are falling with inflationary fears. Inflation and gold typically parallel one another. Inflation is not here yet and it is unlikely it will surface. Greenspan is not going to let it. The political cycle is perfectly timed for him to prevent inflation. He will stifle inflation regardless of the impact to the economy.

There may be another reason for the decline in the value of gold for those of you who enjoy conspiracies. Saudi’s own a lot of gold. Big money has been dumping gold. It would not be surprising if Saudi’s have been doing the same. Why would they do that with rising oil prices? Gold and oil have a history of paralleling each other on the charts.

During World War II, Saudi royalty worked out an agreement with FDR their security in retaining power would be dependent on their supply of oil to the U.S. Other than the oil embargo in the early 1970’s, the Saudi’s have held up to that agreement. The kingdom knows their survival is dependent upon U.S. prosperity and protection.

So, here is a fundamental scenario of the balance of this year. The Saudi’s will accelerate their production of oil before the election. They want stability in the U.S. and do not want to disrupt that with a new administration in power while there are American troops in the Middle East. That is an unknown they would prefer to avoid. A change in leadership would feel threatening to them. They may have been buying gold with their increased revenues from oil. Now, they are most likely dumping gold knowing that a rapid reduction oil prices would dampen the price of gold anyway. And they are more influential on oil prices than anyone else. So, expect declining oil prices before the election.

The Saudi’s know that continuing increases in oil prices will cause Greenspan to increase interest rates. They know that will threaten the economic well being of the U.S. and rest of the world. Even though they could enjoy increased revenues from the thirst of oil from the Chinese, they know that political stability in the U.S. is favorable to their retention of power.

If the Saudis have any influence on terrorist activities, they will squelch that also. That adds to instability and thus threatens their enjoyment of their rich lifestyles. The reduced level of fear congruently depresses the price of gold. This is an especially discerning to them with U.S. troops next door in Iraq and a change in U.S. political leadership is not something they would want to encounter.

Declining oil prices, coupled with a decline in other commodity prices, along with mild interest rate increases will spark a huge stock market rally sometimes this year. The market is down in this presidential election year. It is the second most bullish year on the presidential election year cycle. So, a bullish spurt of significance would not be surprising before the end of this year. It would support the political cycle. People in power, regardless of country of origin, know the importance of stability. That is what they attempt to manage for that is the only reason for their retention of power. A bull spurt along with continuing increases in employment will add to that stability.

Weekly Buy/Sell Summary

The Mid-term Indicant generated two buy signals and three sell signals. Do not be aggressive with these two buy signals.

In addition to the sell signals, the Mid-term Indicant is avoiding seventy-three stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 10.0% since the Mid-term Indicant signaled sell an average of 16.8 weeks ago.

There were only eight stocks and funds avoided at this time last year in addition to two sell signals. The avoided stocks and funds one year ago were down an average of 26.0% since their respective sell signals an average of 36.3 weeks earlier.

In addition to the buy signals this weekend, the Mid-term Indicant is currently signaling hold for 218 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 75.4%. That annualizes to 68.5%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 218 stocks and funds for an average of 57.2 weeks.

There were eleven buy signals on this weekend one year ago. At that time, the Mid-term Indicant was holding 275 stocks and funds for an average of 16.8 weeks. They were up 36.3% (annualized at 111.9%).

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

This paragraph is similar to the past several weeks with a few modifications slanted for 2004 interpretations. We want to make certain you understand this. The mid-term election year phenomenon found the market bottom, right on cue in 2002. The presidential pre-election year phenomenon is the most bullish year on the presidential election cycle. Normal seasonality did not occur in 2003, as the presidential pre-election year exerted its influence with a bullish fervor. We have now completed our enjoyment of that in 2003.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy. Bearish expressions on a Mid-term basis in 2004 between May and October should not be surprising.

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

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

Make certain you read the entire pages on the above link. You will see there are exceptions. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know. Right now, the Mid-term Indicant continues to signal bull. There is more about that later in this report.

Stop Loss Management

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

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending. Those types are more interested in burning your money for their pleasures, as opposed to making you money.

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

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

Commodities rebounded last week; primarily due to a technical bounce in gold prices. Gold appears poised for a continued Quick-term rebound, but the Mid-term cycle is configured toward continuing bearish expressions. Foreign securities continue to express Mid-term Indicant bearishness. The Internet Sector weakened further last week with more bearishness. Medical and technology also continued their southerly movement. The Mid-term pattern of convergence supports a bearish theme for nearly all equities.

The Bank Sector is enduring negative Vector Pressure with rising Force Vectors in bearish domains. The same is true for the Biotech Sector. Consumer and Cyclical Sectors are configured with rising Force Vectors, but deep inside bearish domains along with negative Vector Pressure. The Pharmaceutical Sector is neutral in, but tainted with a slight bearish bias. The Internet Sector is near neutrality, but with also with a slight bearish bias. Mid-caps and Technology are enduring negative Vector Pressure, while also enjoying rising Force Vectors. Unfortunately, they are also rising in bearish domains. Even the Oil Field Services Sector is suffering from similar Quick-term configurations, along with the Russell 2000 Index. The same is true for the Institutional and Major Market Indices.

Overall, general equities are converging with bearish expressions on a Mid-term and Quick-term basis. This supports continued bearish expressions. Any rebound at this point should be considered strictly technical and not sustainable.

Economic Outlook

As stated last week, Greenspan’s anti-inflation rhetoric continues to strengthen the dollar. The charts are configured for continuing solid bullish movement by the U.S. Dollar. For those of you interested in trading currencies, the greenback appears to be engaging a solid Mid-term Bull cycle.

Commodities are mixed in direction. Gold continues to plummet, while oil continues to skyrocket. The Dow Futures and Dow AIG Spot prices appear to be at a cyclical maximum, but have not reversed direction from their current bullish cycle on a Mid-term Indicant basis. Other commodities have committed to cyclical reversals, but they still reside in bullish domains. Greenspan’s anti-inflationary rhetoric appears to have modified their natural direction. Their bearish direction, if it takes hold, will be bullish for the stock market, provided future interest rate increases are mild.

The six-month CD continues to rise. It was up 10.5% last week to 1.47%. Freddie Mac and Fannie Mae’s continue to rise. They are solidifying their red bull status. The last time they were red bulls was in early 2003.

All economic data is at the following link:

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% ninety-nine weeks ago since the MTI buy signal in April 2001. Ninety-two weeks ago, it closed up 30.1%. Last week it closed up 77.1%, which is slightly higher than the 75.9% reported forty-three weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 24.6%, which is slightly higher than 23.1% reported forty-three weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%.

The Fidelity Gold Fund #28 is down 3.3% since the Mid-term Indicant signaled sell last week.  

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF04.htm#19

The Gold Index is up 4.1% since the Mid-term Indicant signaled bear last week.

As repeatedly stated in this weekly report, gold prices will tumble if terrorism and inflationary threats subside. There is a “perception” that inflationary threats will subside, as demonstrated by the plummeting gold prices. Gold is configured for a possible rebound but the probability of a sustained rebound is less than 30% since its Vector Pressure is deep into bearish domains. Its Force Vectors are moving solidly to the north but from bearish domains.

Terrorism remains an open question. As stated last week, human emotion has integrated with Greenspan’s commentary and thus the bearish perception regarding gold.

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

Quick-term and Short-term Indicant Update

The eight major indices are down 1.6% since the Quick-term Indicant signaled bear on April 30, 2004. The S&P600 Index is the most bearish. It is down 2.8% since the Quick-term Bear signal of April 30, 2004. The least bearish is the NASDAQ100. It is down 0.1% since the April 30, 2004 Quick-term Bear signal.

The eight major indices are below their respective bearish yellow curves by an average of 1.0%. This is a significant bearish attribute. As stated last week, there is no near-term physical floor to stop a falling market. This provides fuel to bearish aspirations.

The Quick-term curves are all declining. The bearish yellow curve flattened out a few days ago and is now declining. This is also a significant bearish attribute.

All eight Force Vectors are now moving north, which means the current Quick-term Bear is not being allowed to mature and take complete control of the market’s direction. However, that can change quickly. Unfortunately, this northerly movement is not robust and thus little chance for a resumption of bullish configurations.

All eight Force Vectors remain in bearish domains even though their direction is north. This position continues to provide an edge to bearish aspirations.

Vector Pressure is also moving south for seven of the eight major indices. This supports resistance to bearish dominance, but the recent upturn for the NASDAQ100’s Vector Pressure appears weak. Vector Pressure remains in bearish domains for all eight major indices.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. Until then, we will continue to use words to describe them.

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

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

As stated the past few weeks, the NYSE Indicant Volume Indicator continues moving north. Its ascent is softening. Hopefully, it will turn south and discontinue supporting the recent Quick-term bearish expressions.

The NASDAQ’s Indicant Volume Indicator continues to express apathy. That is non-bearish in the sense that big money is not dumping.

As stated last week, the Indicant Volume Indicator is edging bias in favor of Quick-term bearish expressions.

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

The Dow is down 3.5% since the Short-term Indicant signaled bear on April 13, 2004. The NASDAQ is down 6.2% since the Short-term Indicant signaled bear on the same day. The Mid-term Bull is still alive and thus some hope for a Quick-term rebound.

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

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

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

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

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

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

Perspectives

There is nothing different to report here. The remainder of this paragraph remains unchanged from the last two weeks. As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions. However, there is still room for a 20% or so drop before the indices engage their respective breakout curves. Some stocks will fall by more than 20%, many will remain flat and a few of them will skyrocket. That is why we are patient before unloading our triple digit gainers and it is best to get Mid-term Indicant confirmation that this bull is dead.

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

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

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

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

The Mid-term Indicant did not signal any bears this past week. The eight major indices are all above their respective long-term blue curves. Normally, during bearish seasonality, the Mid-term Indicant would signal bear when the indices fall below their respective bull red curves.  Only one index remains above its bullish red curve. That provides support for the continuing bull signal.

The eight major indices are up an average of 15.8% for an annualized gain of 17.5% since the MTI Bull signals an average of 47.0 weeks ago. The annualized growth rate is down from 47.9% reported forty-nine weeks ago.  The DJIA, NASDAQ, and Dow Composites have been Mid-term Bulls since March 22, 2003.

The DJIA is up 17.5% (annualized at 15.2%) since the MTI Bull signal on March 22, 2003.  That is up from 14.1% reported thirty weeks ago, but down from recent weeks. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.   

The NASDAQ Composite continues to be the strongest Mid-term Bull. It is up 34.0% (annualized at 29.5%) since the March 22, 2003 MTI Bull signal, which is down from 34.6% reported thirty weeks ago. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth since the Mid-term Bull signal of March 22, 2003.

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

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

Mid-term Indicant Positions - International Markets

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

Twenty of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 81.2% since the Mid-term Indicant signaled bull an average of 75.9 weeks ago for an annualized gain of 55.7%, which is less than the 72.9% reported forty-nine weeks ago.

The two new bears are the first new international bears in five months. All of the foreign markets are weakening and appear to be paralleling the U.S. Indices with similar bearish influences.

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

May 9, 2004 Indicant.Net Weekly Update

Volume 5, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

The Manipulation

Sure, the trade deficit is high and going higher. That supports Greenspan’s anti-inflation rhetoric. However, Greenspan contributed to the inflationary threats. His reason for doing so is all about politics. He lowered rates to record low levels, weakening the dollar, which adds to the trade deficit. Greenspan’s weak dollar ignited inflationary pressures. He did all that within the confines of the political election cycle. There is more to the story.

Just prior to the post election year, 2000, Greenspan touted “irrational exuberance” as the NASDAQ rose to unbelievable heights. The NASDAQ was already at an unbelievable height in the mid-term election year of 1998, but he said nothing at that time because it was a mid-term election year. Expressions, such as “irrational exuberance,” are not the politically correct things to say during a mid-term election year, which was the case in 1998. The successor to the incumbent president will consider the Fed Chief’s prior actions when extending the Fed Chief’s employment.

Greenspan timed his “irrational exuberance” comment brilliantly to the political timetable. He understands the political cycle and he understands economic lead times. He also understands that Americans vote their pocket books on Election Day. He puts all that together and times his comments (and economic policies) accordingly. He also takes into account his own legacy. It is clear that he does not want a 1970’s type of economy during his watch.

His comments and policies contributed to the birth of the bear market that began in 2000, which carried over to bringing down the economy as well. The stock market was a bear in 2001, which is common in presidential post election years. His interest rate reductions in 2002 helped the economy start its turnaround. It also helped the market find bottom in the mid-term election year that is common. His policies and the consequences of those policies were on par with historical standards.

Greenspan is starting to chatter about government deficit spending. he cannot do anything about that, except jawbone it. Politicians spend the money. It is not their money. Therefore, most of the spending will be irrational. Politicians are great manipulators. Let’s face it, not all voters are sharp. Many actually believe politicians when they say “sound good” things. They clap their hands, smile, and wave to politicians’ speeches much like the radicals in the Middle East responding to the mystical demands of the cleric in the spotlight.

I am not sure if the authors of the U.S. Constitution had it in mind that Congressman would be a full-time six-figure job 250 years later. The founders of the constitution fully understood that power corrupts and thus the creation of checks and balances in government. Most of the founding fathers did their civic duties from their hearts and on a part-time basis. Somewhere along the way, politicians learned to manipulate the populace, take more money from them, and expand the role of government and thus their importance. All this devolutionary behavior led to full-time employment in Washington D.C. with low effort, high profile lifestyles.

The electoral and political system is corrupt and will eventually collapse. The stock market and investors periodically suffer from the political influences preventing the creation of wealth. It may be two hundred years from now before the current system collapses. It does not take a brain surgeon to predict its eventual demise. Greenspan cannot do anything about that but jawbone, as he has done, and all his predecessors have done on a politically timely basis.

Recessions are a natural by-product of capitalism. As the economy heats up, prices tend to increase as understaffed factories incur increased overtime and new hire learning curve costs to get production out the door. Hotels and restaurants overflow as the demand increases with fat wallets. Eventually capacity catches up to these “boom-time demands.

Dilettante managers administer most major capacity expansions (and contractions). They are usually behind the supply and demand curve. Most Fortune 500 types do not possess the anticipatory skills to get “in front” of these curves. They are generally focused on next quarter’s results and that huge bank loan for their fat salaries. Recently, many employed voodoo bookkeeping when the financials did not support their next bonus or employment contract. Fiction and mysticism cascaded throughout corporate America following the examples of Bill Clinton’s fiction.

Once the dilettante’s market share numbers reveal their prior inadequacies, they decide to expand capacity in hopes of getting their next five-year employment contract for huge bucks. By the time they get around to doing it, they over do it, as the entrepreneurial driven companies smelled their ineptness and already provided the capacity short-fall. Layoffs ensue and the economy cools. That is the nature of capitalism when Fortune 500’s dilettante management conducts a fair share of expanding capacity.

During economic expansions, entrepreneurs get their capacity online before the large cap folks do. The entrepreneurs generally out-perform the large cap managers; especially on the upswing. Anyone can cut costs and downsize, but the Fortune 500 dilettante can do it better, as they are not as emotionally aligned with their business processes, as their small cap counter-parts. The entrepreneur is more nimble and closer to his or her own money and usually senses greater loyalty to their employees. The dilettante is only in it for the money and has little compassion for their employees. The large cap manager is usually salaried through a five-year contract and these days for too much money. If all shareholders cut all Fortune 500 officers’ salaries in half, none of them would quit because they would still be making more than they are worth.

Some of the entrepreneurial driven companies move on into the Fortune 500 ranks. That adds to economic growth provided its growth more than compensates for the downsizing of the current Fortune 500 companies. You can see this phenomenon by comparing the S&P600 small caps to the S&P500 large caps. The reality is this; the further you are from using your own money, the worse your ability to employ that money. So, entrepreneurs out perform large caps and large caps out perform politicians. The government can use force to collect their taxes and thus has not yet gone out of business. Fortune 500 companies cannot use force. They have to perform and generate returns on capital employed. But, the overpaid dilettantes eventually drive their employer out of business.

The stock market knows all of this. What it is trying to do is figure out bad it is going to be next year. The market smells the bad odor of the political influences of the presidential post election year. It knows it is going to be bad. It does not yet know how bad it is going to be. Greenspan’s anti-inflation chatter is driving at the very soul of the current Mid-term Bull market.

Politicians and the Fed accentuate the natural flow of capitalism’s natural economic expansion/contraction cycles. Without Clinton’s record tax increase there would have been more entrepreneurs providing increased capacity in the supply chain. That would have robbed some capacity requirements from the large caps. That combination would dampen inflations enthusiasm. Prices would be lower, but Clinton’s tax increase sucked need capital from the capitalists and placed it in the hands of politicians.

Yes, Greenspan can do little about government deficit spending, but he directly contributed to the trade deficit with his weakening dollar tactic. He configured his strategy so most Americans wallets are thick on Election Day. His duty is to not interfere with the election of the incumbent. So far, he gets an A in that category with respect to Clinton and possibly George W. He was still enduring a learning curve when George Sr. was ousted and did not quite have his timing down. Of course, George Sr. contributed to his own demise with his “no new taxes pledge” that he violated.

The market will enjoy its seasonal rebound later this year. The skids Greenspan is placing right now will not affect the economy until the post election year, 2005; after the votes are counted. By late 2005, unemployment will be rising again and according to historical standards, the stock market will smell an improving economy in 2006 and find its cyclical bottom, similar to 2002. The only thing that is increasingly different is the increasing capitalism around the world. That is definitely supporting the cause of long-term bullishness. It would be of higher magnitude if the political influences on this new capitalistic paradigm could be eliminated.

That is what is going on right now.

Weekly Buy/Sell Summary

The Mid-term Indicant generated two buy signals and eighteen sell signals. Do not be aggressive with these two buy signals.

In addition to the sell signals, the Mid-term Indicant is avoiding fifty-seven stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 12.8% since the Mid-term Indicant signaled sell an average of 15.8 weeks ago.

There were seventeen stocks and funds avoided at this time last year in addition to two sell signals. The avoided stocks and funds one year ago were down an average of 31.9% since their respective sell signals an average of 30.7 weeks earlier.

In addition to the buy signals this weekend, the Mid-term Indicant is currently signaling hold for 219 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 76.9%. That annualizes to 70.8%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 219 stocks and funds for an average of 56.5 weeks.

There were eleven buy signals on this weekend one year ago. At that time, the Mid-term Indicant was holding 266 stocks and funds for an average of 16.4 weeks. They were up 32.0% (annualized at 101.5%).

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

This paragraph is similar to the past several weeks with a few modifications slanted for 2004 interpretations. We want to make certain you understand this. The mid-term election year phenomenon found the market bottom, right on cue in 2002. The presidential pre-election year phenomenon is the most bullish year on the presidential election cycle. Normal seasonality did not occur in 2003, as the presidential pre-election year exerted its influence with a bullish fervor. We have now completed our enjoyment of that in 2003.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy.

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

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

Make certain you read the entire pages on the above link. You will see there are exceptions. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know. Right now, the Mid-term Indicant continues to signal bull. There is more about that later in this report.

Stop Loss Management

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

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending. Those types are more interested in burning your money for their pleasures, as opposed to making you money.

Recent stock buys may behave like popcorn with wild up and down swings. This is common behavior during market inflection points.

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

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

As stated last week, the recent convergence movement adds fuel to bearish expectations. There was a typo in last weeks report. It stated, “the convergence movement last year adds fuel to bearish expectations. It should have stated “the convergence movement last week adds fuel to bearish expectations. The difference is in the words, year and week. At any rate, we hope that was not too confusing. The same is true this week. Other than a slight rebound in pharmaceuticals and the internet indices, most equity sectors continued their path to the south in addition to commodities. Convergence patterns support the general direction of bull or bear. Right now, that direction is bearish on a Quick-term and Short-term basis.

Economic Outlook

Greenspan’s anti-inflation rhetoric continues to strengthen the dollar. His record setting interest rates weakened the dollar over the past year. He has decided to favor anti-inflation now that the economy and employment is heating up. The dollar has found its bottom and now enjoying the early stages of an mid-term bull cycle. 

Greenspan’s anti-inflation chatter has had little impact to commodity prices with the exception of gold, which continues to nosedive. The demand for gold is more psychological than real commodities that are used in supply chains for value adding process and production purposes. Although real commodities off of recent record high peaks, they are not yet nose-diving. Rest assured that Greenspan will make them nose-dive eventually, unless productivity increases offset the rising raw material costs.

The six-month CD continues to rise. It was up 3.1% last week to 1.33%. Freddie Mac and Fannie Mae’s continue to rise and are now Mid-term red bulls. The last time they were red bulls was in early 2003. They peaked on that particular bullish cycle just as the stock market began its second move up on the current Mid-term bull leg. It is not likely that scenario is about to unfold in the immediate future.

All economic data is at the following link:

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% ninety-eight weeks ago since the MTI buy signal in April 2001. Ninety-one weeks ago, it closed up 30.1%. Last week it closed up 76.7%, which is slightly higher than the 75.9% reported forty-two weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 24.6%, which is higher than 23.1% reported forty-two weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%. This fund may be sold in the near future if gold does not rebound from its recent downturn.

The Mid-term Indicant signaled sell for the Fidelity Gold Fund #28. It garnished us a 52.7% profit before commissions between December 7, 2001 and last week. That increase pre-empted the rise in commodity prices, but was more closely related to the fear element in the value of gold. This was a nice investment to own during 2002 when most stocks and equity funds moved south.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF04.htm#19

As stated last week, the Mid-term Indicant signaled bear for the Gold and Silver Index. This index made a nice Mid-term cyclical move to the north. Since Greenspan initiated strong anti-inflation chatter, gold prices are plummeting. As stated a couple of years ago in this weekly report, Greenspan will protect his legacy and not allow a 1970’s type of economic climate to evolve during his tenure. He gets to keep his job regardless of how bad the economy gets. Also, his timing on shifting his theme is consistent with the presidential political cycle. Fed Chief’s try stimulate the worse economic conditions during the presidential post election year, which is the most bearish of the four year cycle.

As repeatedly stated in this weekly report, gold prices will tumble if terrorism and inflationary threats subside. There is a “perception” that inflationary threats will subside, but terrorism is still an open question. Human emotion has integrated with Greenspan’s commentary and thus the bearish perception regarding gold.

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

Quick-term and Short-term Indicant Update

The eight major indices are down 0.9% since the Quick-term Indicant signaled bear on April 30, 2004. The S&P600 Index is the most bearish. It is down 2.0% since the Quick-term Bear signal on April 30, 2004. As you can see from its Perspectives Charts, its cycles are more pronounced that the large cap indices. It goes up more than large caps and it goes down faster, but not necessarily more.

The eight major indices are below their respective bearish yellow curves by an average of 1.3%. This is a significant bearish attribute. There is no near-term physical floor to stop a falling market. This provides fuel to bearish aspirations.

The Quick-term curves are all declining. The bearish yellow curve flattened out a few days ago and is now declining. This is also a significant bearish attribute.

Four Force Vectors are moving south and four are moving north. The most recent robust cycle was south, favoring Quick-term bearish action. The four moving north are timid, offering no support for bullish expressions.

All eight Force Vectors are in bearish domains. This position provides an edge to bearish aspirations.

Vector Pressure is also moving south. This attribute is the soul of a bull or bear. Right now it is providing spiritual support for the Quick-term Bear. Additionally, all eight Vector Pressures are negative (bearish). They are still near a state of equilibrium, meaning there is a chance for a meaningful rebound.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. Until then, we will continue to use words to describe them.

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

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

As stated in the Indicant Daily Report last week, the NYSE Indicant Volume Indicator continues moving north. It nearly expresses robust behavior. Its incline is closer to thirty degrees than sixty degrees, which is a solid robust configuration. Solid robust configurations obviate the market’s intended direction. Sometimes the market is not anxious to obviate its commitment to bullish or bearish expressions, which is the case right now.

However, the northerly direction of the big board’s (NYSE) Indicant Volume Indicator during the market’s recent decline supports continuing Quick-term bearish expressions. The NASDAQ’s Indicant Volume Indicator is not as committed, as it has turned meekly to the south in a non-robust fashion.

Overall, though, the Indicant Volume Indicator is edging bias in favor of Quick-term bearish expressions.

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

The Dow is down 2.5% since the Short-term Indicant signaled bear on April 13, 2004. The NASDAQ is down 5.5% since the Short-term Indicant signaled bear on the same day. The Mid-term Bull is still alive and thus some hope for a Quick-term rebound.

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

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

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

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

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

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

Perspectives

There is nothing different to report here. The remainder of this paragraph remains unchanged from last week. As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions. However, there is still room for a 20% or so drop before the indices engage their respective breakout curves. Some stocks will fall by more than 20%, many will remain flat and a few of them will skyrocket. That is why we are patient before unloading our triple digit gainers and it is best to get Mid-term Indicant confirmation that this bull is dead.

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

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

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

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

The Mid-term Indicant did not signal any bears this past week even though bearish seasonality just began. The eight major indices are all above their respective long-term blue curves. Since the indices and other Indicant attributes are very close to these long-term attributes, the Mid-term Indicant is electing to continue signaling bull. Normally, during bearish seasonality, the Mid-term Indicant would signal bear when the indices fall below their respective bull red curves.

This Mid-term Indicant Bull will wait until the indices fall below their long-term blue curves, unless the Quick-term attributes leave no doubt about the mid-term perspectives turning into an outright bear.

The eight major indices are up an average of 16.5% for an annualized gain of 18.6% since the MTI Bull signals an average of 46.0 weeks ago. The annualized growth rate is down from 47.9% reported forty-eight weeks ago.  

The DJIA is up 18.7% (annualized at 16.5%) since the MTI Bull signal on March 22, 2003.  That is up from 14.1% reported twenty-nine weeks ago, but down from recent weeks. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.   

The NASDAQ Composite continues to be the strongest Mid-term Bull. It is up 35.0% (annualized at 30.8%) since the March 22, 2003 MTI Bull signal, which is down from 34.6% reported twenty-nine weeks ago. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth since the Mid-term Bull signal of March 22, 2003.

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

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

Mid-term Indicant Positions - International Markets

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

Twenty-two of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 79.8% since the Mid-term Indicant signaled bull an average of 70.7 weeks ago for an annualized gain of 58.8%, which is less than the 72.9% reported forty-eight weeks ago.

None of the foreign indices is a Mid-term Indicant Bear, but if there is no resistance to recent bearish expressions, this will change. So far, they are configured similar to U.S. Indices with their respective long-term trends moving north.

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

May 2, 2004 Indicant.Net Weekly Update

Volume 5, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Inflection Point – Appears to be Ending

It appears big money is leaning toward the belief corporate earnings will be unacceptably depressed with the anticipated increasing interest rates. The bias is increasingly bearish.

The Quick-term Indicant signaled bear yesterday. Six of the eight major indices fell below bearish yellow. Force Vector direction is south. All eight major indices Force Vector positions are now located in bearish domains. Vector Pressure direction shifted south. Four of the eight Vector Pressure positions are now located in bearish domains; the NASDAQ, S&P100, S&P500, and S&P400. The four remaining Vector Pressures, residing in bullish domains, provide some buffering potential against an outright collapse in the market, but there is little doubt about the market’s intended bearish behavior.

An increasingly ominous concern is the rising Indicant Volume Indicator in a declining market. It appears “big-money” is leaning on the belief that profit margins will be diluted with the anticipated interest rate hikes. Increased interest rates also threaten economic expansion. This will reduce corporate sales volume and the absorption of overhead and capital expenses. That scenario appears consistent with recent big money selling behavior. If the Indicant Volume Indicator continues to rise, while the market is moving south, you can expect robust bearish expressions.

Although economic fundamentals have not yet formulated, the market is anticipating a bleak future in terms of corporate earnings. There is increasing evidence the impending interest rate hikes may sooner than later – before the end of the year. Big money is holding the belief that Greenspan has already made up his mind. They apparently believe he is not just jawboning about rate hikes.

This is apparent by the rapidly declining gold prices. The Mid-term Indicant even signaled sell on Fidelity’s American Gold Fund. Its price collapsed below the long-term blue curve. The link to the chart follows:

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF05.htm#28

Vanguard’s Gold and Precious Metals Fund is similarly collapsing in price, but has not yet fallen below the trend line. This fund is closed right now. That is one reason why it continues to signal hold. It will open back up to investors if the price continues collapsing. The Fidelity Gold Fund is open and should be available to you if the Mid-term Indicant signals buy when it enjoys a cyclical rebound.

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF04.htm#19

There is an old saying that you have heard several times – “don’t buck the trend.” Both funds long-term blue curve is increasing. The trend is up for both funds. Since the Fidelity Gold Fund is open and the Mid-term Indicant’s sell signal produced a pre-commission profit of 52.7% since the Mid-term buy signal on December 7, 2001, it should be easy for you to sell. However, those of you holding Vanguard’s Gold Fund should continue holding since it is closed. However, do not hesitate selling it in the event the Mid-term Indicant signals sell. It is not uncommon for securities to bounce north after contacting northerly moving long-term blue curves. Since the Vanguard Fund is closed, the Mid-term Indicant will wait at least one more week before signaling sell. Never hold a fund on the basis of it being unavailable. There are always plenty of opportunities to make money in the stock market.

On a Quick-term basis, gold appears very weak. Although its Quick-term Force Vector moved north last Thursday, it just completed a robust cycle to the south. That robust expression suggests continuing bearish behavior. A rebound will be muted at this point. Any shift in trend will be obviating itself within the next few weeks.

In summary, technical indicators suggest souring economic fundamentals. Much of the media is conveying dismay at the market’s recent fall. They suggest that corporate earnings recent rise to double-digit levels should propel the market forward. The market’s rise late last year addressed the current environment. The market does not care about today, tomorrow, next week, or next month, even though it will jerk up and down on today’s news. The undercurrent is what is important to know. Right now, the undercurrent is turning bearish.

The market’s current focus is on the fourth quarter of this year and the first quarter of next year. Remember, buy on the rumor and sell on the news paradigm. The strategic thinkers are betting the rise in interest rates will depress corporate earnings in the next six to nine months. They also believe the cooling of the economy will reduce the absorption of overhead and capital that will further erode profit margins. Additionally, the strategic outlook is for reduced economic activity will mitigate inflation’s threat. That is why gold prices are dropping.

Keep in mind the presidential post election year is the most bearish on the four-year cycle. That begins in January 2005 right in the heart and soul of bullish seasonality. This year is expected to be bullish, but so far it has been a bearish year. Normal seasonality should be expected this year with a tremendous bounce to the north at some future point this year.

This leads us into a review of historical standards. The Presidential Election Year is the second most bullish year on the four-year election cycle. So far this year, the Dow, S&P500, and NASDAQ are down. These indices were also down in the last presidential election year in 2000. The last time there were back-to-back down presidential election years was in 1889 and 1893. As stated in prior weekly reports, bearish expressions in 2004 should be wiped out with a bullish surge following any such bearish expressions. However, the Indicant will not operate on that projection. It will signal bear/sell and then bull/buy when the time comes. It never signals hold during downturns regardless of magnitude or breadth. The Mid-term Indicant is patient in signaling sell for stocks and funds when they are up by high double-digit and triple-digit amounts.

The Dow’s Jan-Apr rolling third was down 2.2%. The S&P500’s was down less severely by 0.4%, while the NASDAQ’s decline was down a more precipitously 4.2%. The January-April rolling third is historically the third most bullish for the NASDAQ and S&P500. Unfortunately, it demonstrated bearish expressions in 2004. The variance to historical standards suggests a recovery bounce before the end of the year. Negative variances are generally offset with corresponding positive variances, eventually.

The upcoming May-Aug rolling third is the third most bearish for the Dow and S&P500. That is the first four months of the six-month period of bearish seasonality, which begins in May and ends in October. Last year we enjoyed a tremendous bullish surge in the bearish rolling half. The Mid-term and Quick-term Indicants maintained their bull signals during that time with very few sell signals. The Dow enjoyed a 15.6% surge, while the S&P500 and NASDAQ enjoyed rises of 14.2% and a whopping 32.0% rise between May and October 2003. The NASDAQ’s last contrarian move in bearish seasonality occurred in 1999 with a 16.6% gain. Many of you recall the NASDAQ’s collapse in 2000, 2001, and 2002 in the bearish half, which is when bearish expressions are more dynamic.

We are now entering bearish seasonality. The rolling half from May through October is the most bearish. The May-Jun rolling bi-monthly period is the second most bearish for the S&P500 and Dow. It is in the middle of the pack for the NASDAQ. This is not the time for aggressive buying. Unless the Quick-term attributes shift configurations, you can expect a significant increase in sell signals over the next few weeks. Even though any bearish expressions are expected to be mild, there is no need to participate in what is expected. Bears are bears and the Indicant avoids them.

Weekly Buy/Sell Summary

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

In addition to the sell signals, the Mid-term Indicant is avoiding twenty-eight stocks and funds of the 296 tracked by the Indicant. The avoided stocks and funds are down an average of 27.5% since the Mid-term Indicant signaled sell an average of 39.5 weeks ago.

There were twenty-seven stocks and funds avoided at this time last year in addition to one sell signal. The avoided stocks and funds one year ago were down an average of 26.4% since their respective sell signals an average of 29.6 weeks earlier.

Although there were no buy signals this weekend, the Mid-term Indicant is currently signaling hold for 265 of the 296 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 72.1%. That annualizes to 70.9%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over a year ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 237 stocks and funds for an average of 52.9 weeks.

There were thirteen buy signals on this weekend one year ago. At that time, the Mid-term Indicant was holding 255 stocks and funds for an average of 16.0 weeks. They were up 31.4% (annualized at 102.2%).

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

This paragraph is similar to the past several weeks with a few modifications slanted for 2004 interpretations. We want to make certain you understand this. The mid-term election year phenomenon found the market bottom, right on cue in 2002. The presidential pre-election year phenomenon is the most bullish year on the presidential election cycle. Normal seasonality did not occur in 2003, as the presidential pre-election year exerted its influence with a bullish fervor. We have now completed our enjoyment of that in 2003.

You will notice many of the mutual fund buy signals occurred in March 2003. Many of you recall how the market did not synchronize very well with the heart and soul of bullish seasonality from November 2002 through February 2003. After that asynchronous performance in November 2002 rolling third of the year, the market turned bullish in March 2003 and again did not synchronize with normal seasonality. The Mid-term Indicant continued signaling bull during bearish seasonality. It is unlikely we will enjoy back-to-back asynchronous market behavior with seasonal normalcy.

The second most bullish year along the presidential election cycle is the election year, which is underway in 2004. We are anticipating enjoyment of that as well. The following link will take you to charts that explain this phenomenon, which is currently underway and for you to enjoy. It is in a “members only” section. This paragraph will repeat throughout this year.

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

Make certain you read the entire pages on the above link. You will see there are exceptions. So far, we do not expect 2004 to be an exception. If it becomes an exception, the Quick-term Indicant and the other Indicant models will let you know.

Stop Loss Management

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

Use either a 5% (or 10%) trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 8% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 15% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending. Those types are more interested in burning your money for their pleasures, as opposed to making you money.

Recent stock buys may behave like popcorn with wild up and down swings. This is common behavior during market inflection points.

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

Stock and Fund Update

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

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

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

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

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

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

All update information is on a single page in the web site. Click the below link to that page. You will need your login ID and password.

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

Divergence versus Convergence

There was solid convergence this past week with the exception of oil field services, which held is bullish position. Gold and equities have moved congruently the past year and a half, although gold moved in a bullish direction in 2002’s equity bear market. Their congruent behavior should not sustain for too long. Gold’s rise the past two and a half years paralleled commodities in general. Also, gold has historically been considered as a safe investment during periods of uncertainty as well as a hedge against inflation. Its rise since 2001 appears consistent with these historical underlying themes.

The convergence movement last week adds fuel to bearish expectations.

Economic Outlook

The strengthening U.S. Dollar supports the recent anti-inflationary pressures. This phenomenon invites a continuing reduction in gold prices. The cyclical bearishness of the U.S. Dollar, coupled with rising commodity prices, helped contribute to the magnitude of gold’s impressive gains in 2002 and 2003. The expiration in the commodity’s bullish cycle and the expiration in the U.S. Dollar’s bearish cycle is a double whammy depression to gold prices.

Commodity prices were mixed with a slight edge to moving up. Oil prices continue to rise. Inflationary threats are not completely eliminated. Continuing increases in oil prices can threaten the economic recovery. Greenspan will bias the Fed’s behavior in defeating inflation, even at the expense of the economy. 

The six-month CD rose again last week, while the closer in yields are remaining flat. Freddie Mac and Fannie Mae’s rose last week as well. All of these instruments are now above their respective red bullish curves, albeit in a depressed state.

All economic data is at the following link:

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

Fear Metrics: Economics and Terrorism

The Indicant signaled buy for Fidelity American Gold (FSAGX) - #28 on December 7, 2001. Ninety-nine weeks ago, it was up 66.1% since that buy signal. Ninety-two weeks ago, it closed up 12.0% since that buy signal. Eighty-three weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001. Last week it closed up 52.7%, which is higher than 47.1% reported forty-one weeks ago, but considerably lower than the 137.8% growth reported on December 5, 2003. The Mid-term Indicant signaled sell this past weekend. This turned out to be a rather nice investment to enjoy during the bear market of 2002. It’s rapid rise during 2003 was somewhat surprising as it moved congruently with the bull market, which is not typical behavior.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% ninety-seven weeks ago since the MTI buy signal in April 2001. Ninety weeks ago, it closed up 30.1%. Last week it closed up 80.8%, which is slightly higher than the 75.9% reported forty-one weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 26.1%, which is higher than 23.1% reported forty-one weeks ago. This fund is also down considerably since its most recent peak on December 5, 2003 when it was up 117.3%. This fund may be sold in the near future if gold does not rebound from its recent downturn.

As always stated you can monitor the above two funds and the options index to help you gauge fear related investments.

Links to both of the above funds are as follows:

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF05.htm#28

http://www.indicant.net/Members/Updates/MTI-Mutual%20Funds/MF04.htm#19

Fifty-three weeks ago, the Gold and Silver Index fell below the long-term blue curve. As is typical, it bounced back above that curve the following week, forcing the Mid-term Indicant to signal bull. Since the Mid-term Indicant’s bull signal of May 3, 2003, this index is up 21.3%, which is down considerably from its most recent peak of 64.8% growth on December 5, 2003. The annualized growth rate is 21.1%, which is considerably lower than 142.5% reported forty-five weeks ago.

The Mid-term Indicant will wait one more week before signaling bear. Quite often securities and indexes rebound after falling below their long-term blue curves. The characteristics of the rebound can reveal the nature of the commitment to whatever new direction is unfolding. If it rebounds strongly, then the golden bull has not yet evaporated.

As repeatedly stated in this weekly report, gold prices will tumble if terrorism and inflationary threats subside. There is a “perception” that inflationary threats will subside, but terrorism is still an open question. Human emotion has integrated with Greenspan’s commentary and thus the bearish perception regarding gold.

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

Quick-term and Short-term Indicant Update

The Quick-term Indicant signaled bear. The majority of the Quick-term attributes are favoring bearish expressions. Force Vector direction is moving south. All eight Force Vectors are now in bearish domains. This movement has not been robust, yet. There is the potential of becoming robust, as the movement has been smooth, which means the recent decline contains bearish configurations with commitment.

Vector Pressure is now negative for four of the eight major indices. The NASDAQ, S&P100, S&P500, and S&P400 are the current victims. The other four are barely hanging on in bullish domains, but they are offering an opportunity for a market rebound. The nature and configuration of the first rebound will identify the staying power of the unfolding Quick-term bear market.

All eight Vector Pressures are configured with a southerly direction, providing pressure against the bull and fuel for the bear.

The eight major market indices are below the bearish yellow curve by 0.6%. Only one index is above it – the Dow Composite of Sixty-Five Stocks. The Dow 30 is exactly equal to it. The others are below it. If the bearish yellow curve acts as a lid to northerly movements, the inflection point has expired. Read your email next week.

Keep in mind Force Vectors and Vector Pressure are eight dimensional and cannot be plotted. We continue to research methods to convert to two-dimensional arrays so you can see them. Until then, we will continue to use words to describe them.

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’s embryonic movement to the north last week has not deviated. It appears to be gaining momentum. If that configuration continues with a tumbling stock market, stocks and funds will become cheaper.

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

The Dow is down 1.5% since the Short-term Indicant signaled bear on April 13, 2004. The NASDAQ is down 5.4% since the Short-term Indicant signaled bear on the same day. The Short-term Indicant Bear, coupled with the Quick-term Indicant Bear and the rising Indicant Volume Indicator means there is a high likelihood of increased selling activity. The Mid-term Bull is still alive and thus some hope for a Quick-term rebound.

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

As you can see, the major indices have hit cyclical peaks on a Quick-term basis. Look at the charts. It is encouraging the breakdown curves are increasing. That means any potential bearish expressions will begin at a higher magnitude, which solidifies your hold positions. However, there is still room for a 20% or so drop before the indices engage their respective breakout curves. Some stocks will fall by more than 20%, many will remain flat and a few of them will skyrocket. That is why we are patient before unloading our triple digit gainers and it is best to get Mid-term Indicant confirmation that this bull is dead.

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

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

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

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

Six of the eight major indices were red bulls eight weeks ago. Four weeks ago, the only Mid-term Red Bull was the Dow Utilities. Last week, there were seven red bulls. Now, there are none. The Mid-term Indicant is nearing a bear signal and the variables are quicker to do so during bearish seasonality, which begins this coming Monday.

The eight major indices are up an average of 17.6% for an annualized gain of 20.3% since the MTI Bull signals an average of 45.0 weeks ago. The annualized growth rate is down from 47.9% reported forty-seven weeks ago.  

The DJIA is up 20.0% (annualized at 18.0%) since the MTI Bull signal on March 22, 2003.  That is up from 14.1% reported twenty-eight weeks ago, but down from recent weeks. The Dow pinnacled at 24.7% on February 14, 2004 from the MTI Bull signal on March 22, 2003.   

The NASDAQ Composite continues to be the strongest Mid-term Bull. It is up 35.1% (annualized at 31.6%) since the March 22, 2003 MTI Bull signal, which is down from 34.6% reported twenty-eight weeks ago. It has been meandering along for several weeks and the previously reported slightly bearish bias has now turned forcefully bearish. Its most recent cyclical peak was on January 17, 2004 at 50.6% growth from the Mid-term Bull signal of March 22, 2003.

The Mid-term Indicant is much slower to signal bear during bullish seasonality. It is much quicker to signal bear during bearish seasonality. If the indices are below the bullish red curve next week and depending upon the Quick-term configurations, there is a high probability of bear signals, which will accelerate the sell signals for stocks and funds.

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

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

Mid-term Indicant Positions - International Markets

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

Twenty-two of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 82.5% since the Mid-term Indicant signaled bull an average of 69.4 weeks ago for an annualized gain of 61.8%, which is less than the 72.9% reported forty-seven weeks ago.

None of the foreign indices is a Mid-term Indicant Bear, but if there is no resistance to recent bearish expressions, this will change.

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

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