May 29, 2005 Indicant.Net Weekly Update

Volume 05, Issue 5 ISSN 1526 6516 © The Indicant Stock Market Report

Mid-term Indicant Bull Is Obstinate

Shigeo Shingo of Toyota Production System fame once said one must know the “why” when a result is different from the expectation. The bullish spurt that originated several days ago continued this past week. That flies in the face of normal bearish seasonality and the current Quick-term Bear.

This bullish spurt is occurring in one of the most bearish months of the year. A $10,000 investment in the Dow30 in 1950 lost money if only invested in the month of May. The account balance would be $9,559 before commissions as of May 31, 2004. May 2005 has been uncharacteristically bullish. The five-week period ending last weekend would have lost nearly half of its value since 1900. See last weeks report for more details about that.

The market’s bullish behavior during this May and the mini-bearish period ending last weekend are variances. Interestingly, May has been increasingly bullish since 1984, where the 1950 Dow30 $10,000 investment shriveled to as low as $6,448. Since then it has increased by nearly a third of its 1984 value.

May is typically a profit-taking month since April is either the most or second most bullish month since 1950. However, April 2005 lost money and thus there was no profit to be taken in May 2005. Since bullish behavior has been enjoyed in May of this year so far, do not be surprised at profit-taking in June. A $10,000 investment in 1950 only during June has delivered a profit of only twelve bucks. And that is before commission. June is also historically a bearish month.

The Dow30 historically enjoys a somewhat bullish July, while it is the NASDAQ’s second worse month. A 1971 investment of $10,000 in the NASDAQ only during July lost $1,629 by July 2004. However, a $10,000 investment in the Dow30 in 1950 made nearly $7,000. The implication is money rotation from high risk to greater security during the dog days of summer.

As you have seen so far this year, variance from historical norms have been pronounced. The markets conformed nicely during the heart and soul of bullish seasonality from October 2004 through early January 2005 with a nice Quick-term Indicant bull. Since early January 2005, the market has basically stalemated. It has meandered through 2005 to a nearly flat position from its beginning of the year value.

Historical norms require variance. That is because they are too simple and popular. That simplicity and popularity leads to the variances. Every time a critical majority believes normalcy will occur, the opposite occurs. That is because of the phenomena of commonality. Winners require losers.

Fundamentally, the strategists had a valid argument of bearish expectations for 2005. Rising oil prices of historical proportions have robbed significant economic activity. That should dampen profits and depress bullish enthusiasm. Bullish enthusiasm has obviously been dampened with a resultant meandering market, but no 1970’s-like bear has unfolded. There is still plenty of time for a 1970’s type of market to manifest, but there are some uncharted variables building.

Although rising oil prices and correspondingly rising interest rates nag the market, the Mid-term Bulls have expressed surprising tenacity. They continue to hold up to those threats that have historically caused the expiration of the strongest of bulls.

Dr. Shingo would ask, why. There are several potential reasons as to why these Mid-term Bulls are so tenacious. The first thing that comes to mind is the continued rise in productivity. Declining socialism is the biggest reason for rising productivity. Rising entrepreneurialism supports declining socialism. The entrepreneur works hard and basically ignore the pontification of those who promote socialistic causes. With fewer people listening, the plight of the “social” cause is predictable.

Although listed second here, it is certainly no less important than the first point. Bull markets love capitalist. All free markets require them. This planet is undergoing socio-economic changes of massive proportions. The sudden rise of a potential two billion new capitalists is unprecedented. Russia added about 300-million about fifteen years ago. That contributed to an unprecedented bull market. China is in the process of adding a billion or so new capitalists. As they increase their earnings, they will increase their spending. That is good for capital markets.

The stock market smells all these new capitalists. It is anxious for them to become honest, hard working, and productive. If the U.S. produces one Bill Gates, Michael Dell, and Henry Ford, China should produce five each. The stock market is anticipating that potential. Thus the reason for the tenacity of the current Mid-term Indicant bulls.

Of course, keep in mind, the market never looks at a single variable. Rising unemployment over the next few months should yield a bullish response. That will pressure Greenspan to slow the interest rate rise. A rapid decline in oil prices could cause a stock market spike. On the other hand a hot economy will dampen bullish enthusiasm as the market would begin it cycle of anticipating rapid rises in interest rates.

The market always anticipates fundamental reasons for its underlying trend. It does not care about historical standards. However, there are some fundamental reasons for the consistency in historical standards. One fundamental that is always first and foremost is the law of supply and demand. When demand for stocks outstrips the supply, the markets will go up regardless of what other economic fundamentals are being anticipated. Right now, the opposite is true. The supply of stocks exceeds the demand. So, make certain you read the daily reports, where a shift in this fundamental will be documented through the Indicant Volume Indicator and other Quick-term models.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and no sell signals for stocks and funds. The various Indicant models are stalemating signals.

Although there were no sell signals, the Mid-term Indicant is avoiding 112 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 25.8% since the Mid-term Indicant signaled sell an average of 56.8 weeks ago.

There were 50-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 12.8% since their respective sell signals an average of 18.4 weeks earlier. Two years ago, on May 29, 2003, the Mid-term Indicant was avoiding six stocks and funds that were down an average of 24.9% since their respective sell signals an average of 27.3-weeks earlier.

Although there were no buy signals, the Mid-term Indicant is signaling hold for 208 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 98.6%. That annualizes to 58.0%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 208 stocks and funds for an average of 88.4-weeks.

One year ago, the Mid-term Indicant was holding 229 stocks and funds out of the 296 tracked at that time for an average of 56.3 weeks. They were up 79.7% (annualized at 73.7%). The Mid-term Indicant was signaling hold for 286-stocks and funds two years ago on May 31, 2003. They were up by an average of 41.5% (annualized at 118.7%) since their respective buy signals an average of 18.2-weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term Bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways - manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth. The only positive political influence on the economy is to undo its prior damage.

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

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

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

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

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

The bullish spurt the past two weeks has been impressive. The market moved north with significant gusto. However, this movement is without substance. The lack of volume support with last week’s bullish behavior is a glaring testament this bullish movement is a mere bullish spurt.

All the Quick-term attributes remain biased with bearish tendencies even though the Mid-term Bull continues to demonstrate significant resistance to bearish ambition. That bullish resistance weakened the past twelve weeks. As stated the past few weeks, there were some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis. However, the recent bullish spurt has been strong enough to shift those attributes to neutrality. That is when the market typically turns bearish during bearish seasonality. Next week’s behavior will provide greater clarity on the sustainability of the bullish spurt now underway. Do not be surprised if this bullish spurt fades quickly.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Quick-term and Short-term Indicant continue signaling bear, as they have been doing since early January 2005. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your longer-term hold positions still appear safe. Fortunately, these safe positions were supported with a bullish spurt the past two weeks. That added continued life to the Mid-term Bulls and has deferred massive selling that will unfold at the expiration of these Mid-term Bull markets.

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

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

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more, you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

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

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

Stock and Fund Update

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

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

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

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

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

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

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

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

Divergence versus Convergence

There was convergent behavior four weeks ago, which is a bullish configuration. It was followed by divergent behavior, which is a bearish configuration, the next week. The past two weeks again demonstrated convergent behavior, which is the basis for forming a solid foundation for bull markets. The only diverging sector from last weeks bullish expression was foreign markets. A solid bull market requires three or more weeks of convergent behavior. The week just ending is the second consecutive week of convergent behavior in a bullish direction. If the market provides another week like the last two, expect the Quick-term Indicant to signal bull even without volume support. It is unlikely that will occur, but the Indicant is shrouded in demonstrated fact as opposed to theoretical projections.

As stated the past three weeks, the bull still has some fight in it. However, it continues expending too much energy in a defensive posture.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar continues to strengthen against world currencies. It continues building a base rising from its most recent cyclical minimum. As stated last week, this is not a Greenspan objective, but a fallout from his primary focus, which is to fend off inflationary threats. Rising interest rates tend to strengthen the dollar. That will damage export business and eventually hurt the U.S. economy. This is consistent with historical “political management” of the U.S. Economy. In other words, the political community understands power retention is a function of economic health on Election Day. After the election, there is no immediate concern for economic health. That is the case right now.

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

All commodities are now contained in the neutral zone, which is increasingly favorable to any potential bullish desires in the equity markets. However, the equity markets would feel more comfortable if commodities fell into bearish domains. The economy needs to be weakened considerably for that to happen.

This paragraph remains unchanged from the past 25-weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. Until recently, the stock market was not being bothered by this unfavorable direction on a mid-term basis. However, it is now being bothered by these unfavorable relationships. The bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and fifty-three weeks ago since the MTI buy signal in April 2001. One-hundred and forty-six weeks ago, it closed up 30.1%. Last week it closed up 130.3%, which is higher than the 75.9% reported 97-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 31.2%, which is higher than 23.1% reported 97-weeks ago. After falling significantly three weeks ago, this fund moved north the past two weeks.

Fidelity Gold, Fund #28, is up 0.7% since the Mid-term Indicant signaled sell six weeks ago on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 168.8% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 59.9%. Vanguard Energy #18, VGENX, is up 93.0% (annualized at 42.7%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 56.9% (annualized at 38.1%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 67.7% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 37.5%.

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

The Gold/Silver Index is up 0.1% since the Mid-term Indicant signaled bear six weeks ago on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for 20.4-weeks. As stated the past several weeks, that is a long period of survival spanning nearly four months of the six months of bullish seasonality. The market is now mired inside bearish seasonality. The indices are now determining any potential comfort zones around bullish red. Such comfort around their respective bullish red curves should not be expected.

The eight major indices are up by an average of 0.6% since the Quick-term Indicant signaled bear on January 4, 2005.

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

All eight major indices remain above their respective bullish red curves for the second consecutive week. It will be interesting to see if comfort is found at those lofty altitudes. Normally, bearish expressions follow that configuration during bearish seasonality.

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

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

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

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

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

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

The Dow is up 0.7% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 0.5% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears.

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

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

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

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

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

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

Perspectives

Nothing has changed in the past several weeks. The major indices continue to threaten contact with their respective breakdown lines. Contact with them will support continuing bearish behavior. All bullish spurts off the breakdown lines are short-lived and typically do not exceed the peak of the last bullish spurt. Even without that contact, the current bullish spurt is not configured for sustainability.

Read your daily emails.

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

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

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

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

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

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

The eight major indices are up an average of 27.3% since the Mid-term Indicant signaled bull an average of 83.8-weeks ago. That annualizes to 16.9%. The Dow Transports is the strongest bull. It is up 60.1% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 23.7% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 41.3% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 53.7% since the Mid-term Indicant bull signal on August 16, 2003. The Utilities and Transports stood still last week with most of the bullish spurt in the NASDAQ and Dow30.

Four of the eight major indices remain as red bulls, which is down from six, 11-weeks ago, but up from one two weeks ago. Just when the survivability of these bulls was in question several weeks ago, they responded with a bullish fervor, in the form of minor bullish spurts, in the face of the Quick-term Bear. That was a testament to the strength of this Mid-term Bull market. However, as stated the last several weeks, they are being threatened with the potential of rising inflation and interest rates.

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

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

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

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 111.0% since the Mid-term Indicant signaled bull an average of 114.7-weeks ago for an annualized gain of 50.3%, which is less than the 72.9% reported 110-weeks ago. International indices moved up slightly the past two weeks, after moving south in four of the previous five weeks.

The lone bear is down 15.5% since the Mid-term Indicant signaled bear 20.0-weeks ago. It is the Chinese market that endures this bear signal. As you can see, the Chinese economy is pressured to continue cooling their economy. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious. The Chinese economy will most likely not start heating up again until after the mid-term elections next year.

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

May 22, 2005 Indicant.Net Weekly Update

Volume 05, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Trip Line Assignments – A Variance to Historical Standards

A 1900 investor would have lost money through 2004 if invested only during the five week period just completed. That period is the BRS-1 cycle. It is the first of two historically bearish periods in each year on a weekly basis. Look at the chart on the below link. It is the white segmented line.

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

This particular cycle is identified as an N-BRS-1 cycle. The letter, N, indicates this is a neutral cycle, which is defined as one between the Bullish Red curve and the Bearish Yellow curve.

The BRS-1 and BRS-2 cycles are not the same as the Stock Trader’s Almanac’s bullish and bearish periods, which occur in six-month increments. The STA states bullish seasonality from November through April and bearish seasonality occurs from May through October. The Indicant refers to the STA bullish and bearish periods quite often due to their historical consistency. However, the Indicant continued signaling bull in 2003 STA’s bearish seasonality. The Indicant is independent of all known and published models.

Although somewhat complicated and esoteric, the MTI-RYS model was developed to detect bullish and bearish cycles regardless of seasonal or economic influences. It was developed for the sole purpose of beating buy-and-hold and help Indicant members guide their money in and out of the market based on market conditions. The model is extremely complicated. Its design parameters at inception was “find what works” to beat buy-and-hold by tremendous amounts regardless of a lack of symmetrical beauty. Pretty and simple were not part of the design constraints. Effectiveness was all that was required. This model continues under-going research to improve it. The model beats buy and hold only during bearish expressions. No model can beat bullish expressions, regardless of magnitude.

The construction of Trip Lines is an important part of the model. It elevates and depresses the next bull or bear signal based upon recent market levity. It biases bear signals around the two BRS (bearish) cycles every year. The Trip Lines are assigned at the conclusion of both BRS cycles. New Trip Lines were assigned this week. Click the following link to gain some insight on Trip Line assignments, but do not feel you need to fully understand them. The Bull and Bear signals are generated to you via email and displayed on the web site each week. Those bull and bear signals bias buy and sell signals.

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-0003-TripLineInstr.htm#Assigning%20Trip%20Lines

Sometimes the Trip Lines are extended from the existing Trip Line off the prior BRS-2 cycle. Nine of the ten major indices had their Trip Line extended from the prior BRS-2 cycle this weekend. This is common during the throes of meandering markets. The levity position simply did not change enough to warrant new Trip Lines for nine of the ten major indices tracked by the MTI-RYS model.

The BRS-1 cycle, just completed, is the minor one of the two. A $10,000 investment in 1900 would now yield a balance of less than $5,000 if invested only in the weeks of the BRS-1 cycle. The BRS-2 cycle is more dynamic and much more consistent in displaying bearish behavior than the BRS-1 cycle. The BRS-2 cycle will occur later this year. It will begin on the week-ending September 2, 2005 and end on week-ending October 21, 2005. It is a much more consistent in demonstrating bearish behavior.

Interestingly, the recently completed BRS-1 cycle demonstrated bullish behavior, contrary to its historical norm. Let’s take a look at some recent N-BRS-1 cycles that displayed bullish behavior during presidential post election years.

There have been only two N-BRS-1 cycles in a presidential post election year that demonstrated bullish behavior since 1950. They occurred in 1953 and 1977. A link to the first one is below:

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-01-DJI-1952-1956.htm

The presidential post election year is the one with a brown color. You will notice the BRS-1 cycle in 1953 was bullish. It was followed by meandering bearish expressions that preceded a recession in late 1953 and early 1954. You will notice the election year of 1952 was a meanderer much like the post election year of 2004.

The Indicant does not forecast the market, but the similarities are worthy of mention. A Republican president followed a Democratic one and the similarities in the market’s response are worth the mention.

R-BRS-1 cycles are above the bullish red curve. Trip Lines are not assigned to such cycles because bulls show no respect for historical bias. In such cases, the MTI-RYS simply enjoys the bulls and disallows the BRS-1 cycle to cause any fretting. There have been quite a few R-BRS cycles since 1953. Some have expressed bearish behavior and some bullish. The Indicant simply ignores them when they are above Bullish Red.

However, there have been quite a few Hybrid BRS-1 cycles since 1953. Look at the one in 1957. Click the below link to see that one. A BRS-1 cycle is hybrid when it crosses one of the two curves. In 1957, the BRS-1 cycle crossed above the Bullish Red curve. This is referred to as a HR-BRS-1 cycle. You will notice bullish behavior followed that phenomenon. Unfortunately, that bullish spurt was followed by significant bearish behavior a few weeks later.

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-01-DJI-1956-1960.htm

Again, that expression was one that anticipated the recession that hit later that year.

The next hybrid BRS-1 cycle that occurred was in 1969. You will notice it was immediately followed by dynamic bearish expressions even during Neil Armstrong’s moon walk.

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-01-DJI-1968-1972.htm

As you can see, man’s adventurism had no bullish impact on the market. In other words, the free markets ask, “how can one make money walking on the moon?” There will someday be some money made for offering moon walks. All it takes is a lunching pad, a space ship, a space suit, and quite an extensive budget.

This aberrant BRS-1 cycle in 1969 again preceded a recession and the bearish behavior was dynamic. The markets were fed up with the increased movement in socialism at that time and all the talk about a government-led great society.

The next neutral N-BRS-1 cycle that expressed bullish behavior in a presidential post election year occurred in 1977. Its display was consistent with high oil prices and rapid inflation. Today’s market is enduring high oil prices, but rapid inflation has yet to arrive. The market meanders in anticipation of rapid inflation, but the uncertainty of rising productivity and capitalistic societies mitigate rapid bearish expressions; thus the meandering behavior.

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-01-DJI-1976-1980.htm

As you can see, there was no recession that coupled that particular aberrant BRS-1 cycle. However, the stock market plummeted with rising oil prices, rampant inflation, and unbelievably high interest rates. Socialism and OPEC were finally taking their toll on the free markets around the world. The world has recognized the failures of socialistic causes and that has helped propel stock markets around the world to dizzying heights.

The last presidential post election year of 2001 also demonstrated an aberrant BRS-1 cycle. It was a Red Hybrid and was immediately followed with bearish expressions. The horrors of 911 contributed to those bearish expressions.

So, the message is this. When the BRS-1 cycle is below or hybrid to the bullish Red curve and expresses aberrant bullish behavior, do not be surprised with following bearish expressions. Keep in mind, the Indicant does not forecast and is not saying this is going to occur. However, a high likelihood supports this when coupled with the current Quick-term Bear signal.

The market moved northward during the recent mini-seasonal bearish cycle. Trip line assignments are completed. The NASDAQ Index was the only one requiring a new Trip Line. This elevated the position of the next Bear signal.

The MTI-RYS model merely extended existing Trip Lines on the other nine indices, primarily due to the markets meandering behavior. This is neither favorable or unfavorable. It just gives you an idea where the MTI-RYS model will signal bull or bear. That signal significantly influences buy and sell signals for stocks and funds.

Weekly Buy/Sell Summary

The Mid-term Indicant generated seven buy signals and no sell signals for stocks and funds.

Although there were no sell signals, the Mid-term Indicant is avoiding 112 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 26.6% since the Mid-term Indicant signaled sell an average of 55.8 weeks ago.

There were 65-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 10.9% since their respective sell signals an average of 12.3 weeks earlier. Two years ago, on May 24, 2003, the Mid-term Indicant was avoiding 9-stocks and funds that 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 signaling hold for 201 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 99.4%. That annualizes to 57.0%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 201 stocks and funds for an average of 90.6-weeks.

One year ago, the Mid-term Indicant was holding 219 stocks and funds out of the 296 tracked at that time for an average of 57.6 weeks. They were up 74.7% (annualized at 67.5%). The Mid-term Indicant was signaling hold for 286-stocks and funds two years ago on May 24, 2003. They were up by an average of 35.9% (annualized at 108.1%) since their respective buy signals an average of 17.3-weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term Bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways - manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth. The only positive political influence on the economy is to undo its prior damage.

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

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

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. The early part of December was not consistent with the normal Santa Clause rally. However, bullish expressions resumed in late December 2004. Some quick-term attributes suggested there would be a Santa Clause rally and that is exactly what happened. The market is still elevated as a function of the typical fourth quarter rally in 2004.

Unfortunately, the Quick-term Bear that plagues normal bullish seasonality for the second consecutive year is challenging this elevated position. Bullish seasonality ended on April 30, 2005. The market is now situating into bearish seasonality, based on historical norms. So far, the market appears to be configuring to support historical standards by expressing bearish behavior.

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

The bullish spurt this past week was impressive. The market moved north with significant gusto. However, this movement is without substance. The lack of volume support with last week’s bullish behavior is a glaring testament this bullish movement is a mere bullish spurt.

All the Quick-term attributes remain biased with bearish tendencies even though the Mid-term Bull continues to demonstrate significant resistance to bearish ambition. That bullish resistance weakened the past eleven weeks. As stated the past few weeks, there are some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Quick-term and Short-term Indicant continue signaling bear, as they have been doing since early January 2005. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your longer-term hold positions still appear safe. Fortunately, these safe positions were supported with last week’s bullish spurt. That added continued life to the Mid-term Bulls and has deferred massive selling that will unfold at the expiration of these Mid-term Bull markets.

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

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

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more, you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

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

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

Stock and Fund Update

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

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

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

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

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

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

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

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

Divergence versus Convergence

There was convergent behavior three weeks ago, which is a bullish configuration. It was followed by divergent behavior, which is a bearish configuration. This past week again demonstrated convergent behavior, which is the basis for forming a solid foundation for bull markets. The only diverging sector from last weeks bullish expression was foreign markets. A solid bull market requires three or more consecutive weeks of converging bullish expressions. It is unlikely that will occur during bearish seasonality and during this presidential post election year.

As stated the past two weeks, the bull still has some fight in it. However, it continues expending too much energy in a defensive posture.

Economic Conditions – Inflation, Currency, Interest Rates

For the first time in quite some time, commodities and the U.S. Dollar’s is now contained in neutral position. Greenspan’s policy is along conventional political designs to tame inflation, even at the expense of economic growth, during the presidential post election year. That is typical. And it is working.

The U.S. Dollar continues to strengthen against world currencies. It appears to be building a solid base rising from its most recent cyclical minimum. This, of course, is not a Greenspan objective, but a fallout from his primary focus, which is to fend off inflationary threats. Rising interest rates tend to strengthen the dollar. That will damage export business and eventually hurt the U.S. economy. The political cycle mandates a healthy economy only in the presidential pre-election and election years.

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

All commodities are now contained in the neutral zone, which is favorable to any potential bullish desires in the equity markets.

This paragraph remains unchanged from the past 24-weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. Until recently, the stock market was not being bothered by this unfavorable direction on a mid-term basis. However, it is now being bothered by these unfavorable relationships. The bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and fifty-two weeks ago since the MTI buy signal in April 2001. One-hundred and forty-five weeks ago, it closed up 30.1%. Last week it closed up 120.8%, which is higher than the 75.9% reported 96-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 29.0%, which is higher than 23.1% reported 96-weeks ago. After falling significantly two weeks, this fund moved north last week.

Fidelity Gold, Fund #28, is down 6.0% since the Mid-term Indicant signaled sell five weeks ago on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 154.6% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 55.2%. Vanguard Energy #18, VGENX, is up 83.8% (annualized at 38.9%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 48.3% (annualized at 32.7%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 59.4% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 33.3%.

All of these energy related funds were up a little last week after falling significantly in the prior week.

The Gold/Silver Index is down 6.6% since the Mid-term Indicant signaled bear five weeks ago on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for over twenty weeks. As stated the past several weeks, that is a long period of survival in the midst of the heart and soul of bullish seasonality. The market is now mired inside bearish seasonality. The market is more comfortable flirting with the bearish yellow curve. Last weeks bullish spurt consumed quite a bit of energy escaping the gravity of the bearish yellow curve.

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

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

All eight major indices are now above their respective bullish red curves. It will be interesting to see if comfort is found at those lofty altitudes. Normally, bearish expressions follow that configuration during bearish seasonality.

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

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

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

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

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

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

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

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

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

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

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

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

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

Perspectives

Nothing has changed in the past few weeks. The major indices continue to threaten contact with their respective breakdown lines. Contact with them will support continuing bearish behavior. All bullish spurts off the breakdown lines are short-lived and typically do not exceed the peak of the last bullish spurt. Even without that contact, the current bullish spurt is not configured for sustainability.

Read your daily emails.

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

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

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

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

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

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

The eight major indices are up an average of 26.5% since the Mid-term Indicant signaled bull an average of 82.8 weeks ago. That annualizes to 16.7%. The Dow Transports is the strongest bull. It is up 60.0% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 22.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 40.8% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 53.7% since the Mid-term Indicant bull signal on August 16, 2003.

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

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

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

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

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 109.0% since the Mid-term Indicant signaled bull an average of 113.7 weeks ago for an annualized gain of 49.8%, which is less than the 72.9% reported 100-weeks ago. International indices moved up slightly last week, after moving south in four of the previous five weeks. That contrasts with the strong bullish spurt by U.S. indices last week.

The lone bear is down 11.7% since the Mid-term Indicant signaled bear 19.0-weeks ago. It is the Chinese market that endures this bear signal. As you can see, the Chinese economy is pressured to continue cooling their economy. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious. The Chinese economy will most likely not start heating up again until after the mid-term elections next year.

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

May 15, 2005 Indicant.Net Weekly Update

Volume 05, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

The Post Election Year

Between 1833 and 2001, post election years have garnished a stock market gain of a meager 2.0%. That is the lowest performing on the four-year presidential election cycle. Interestingly, the stock market was down in post election years until 1980. It is amazing that equity investments applied only in post election years would have lost money for over a hundred and fifty years.

The majority of stock market gains occur in the presidential pre-election year. That is when the incumbent is preparing his party’s re-election. Early campaign promises actually have to be executed. Since the populace is primarily interested in their own financial well-being, politicians must deliver on business-friendly promises. Economic well-being is delivered only from businesses; not social causes.

There have been recent exceptions to historical standards in presidential post election years. Those exceptions are explained later.

The 27.7% gain in 1985’s post election year, was followed by similar gains of 27.0% in 1989, 13.7% in 1993, and 22.6% in 1997. The great bull markets of the 1980’s and 1990’s fostered those unprecedented gains in presidential post election years. Even after those tremendous gains, the average increase in the stock market is a mere 2.0% since 1833 in presidential post election years. That includes a whopping 66.7% gain in 1933, which accompanied the Dirty Thirties. That 66.7% gain in 1933 followed the great stock market crash of 1929.

George W. Bush’s 2001 endured the first stock market loss in a presidential post election year since Reagan’s 1981. The 2001 drop was 7.0% with most of that occurring in the later part of that year. It was preceded and followed by bearish years in 2000 and 2002. Greenspan “irrational exuberance” commentary, a recession, and an overbought market caused those bearish years from 2000 to 2002.

The presidential post election year is the only year on the four year cycle, where the market has gone down more than it has gone up. Since 1833, it has fallen 23 times and increased 19 times. That contrasts sharply with the presidential pre-election year where the market increased 32 times and fell in only 11 of those years.

The stock market is driven by perception just as much as economic reality. The perception holds that voters will vote for the incumbent if the economy is okay. Politicians understand this. They develop policies friendly to economic health on Election Day. At least that is the perception. That is why the market has a propensity for bearish expressions during presidential post election years.

However, since 1980, rising entrepreneurialism increased its influence on stock market dynamics. A common man, Ronald Reagan, was elected president. That more or less led to a denouncement of academic credentialism as being a sole measure of success. This economic phenomenon led to the popularity in small cap stocks. Great new companies formed in the 1980’s and 1990’s. Common people, as opposed to the typical political Ivy League credentials of political institutions, formed many great companies. Hard work replaced rising intellectualism of the 1960’s and 1970’s. That propelled the stock market to dizzying heights.

Too many people owned stocks by the end of the 1990’s, which was eerily similar to that of the 1920’s. Since too many people owned stocks there was no longer a long line of buyers. The laws of supply and demand kicked in, causing the stock market to plummet in the early 2000’s, just as it had done in 1929-1932.

It is common for the average stock market investor to completely avoid the stock market after being burned. Many people vacated the stock market after the crash of 1987 and you can rest assured that many people will not return after being burned in 2000-2002. That will depress the demand for stocks. Thus, the price of stocks will not enjoy the price elasticity of supply and demand that occurred in the 1990’s.

The presidential post election year, coupled with a reduced demand for stocks should act as a depressant to stock prices. Increasing interest rates and rising fuel costs should also deter any bullish enthusiasm.

Societal intelligence about the importance of political influences on the economy has increased. More people are understand that the only political influence on the economy is to undo prior political damage to the economy. FDR’s New Deal kept the market down during his sixteen years in office. Although he enjoyed a great bull market in 1933, the buyer and holder from the 1920’s was still down by over 50% during the entire Roosevelt presidency.

The laws of supply and demand are not made-man. It is a natural law. Natural laws have been around for millions of years. Man-made laws are new. Natural laws will always exists, whereas man-made laws will exists only as long as men exist. FDR’s New Deal created many laws. Those laws were not in harmony with natural laws. The stock market aligns itself with reality. Politicians make laws that are not aligned with natural laws more often than not. When those man-made laws are imposed on capitalistic motives, the added burden of those laws acts as a weight on the capitalistic spirit. When that happens, the stock market does not go up.

The perception may continue to hold that political policies will be biased in favor of social causes and to the detriment of capitalistic causes. If that perception holds, regardless of reality, you can expect seasonal normalcy during this period of bearish seasonality.

It should not be surprising that interest rates were decreasing in the presidential pre-election year. That design was consistent with the political cycle. It should not be equally surprising that interest rates and oil prices are on the incline in the post election year. You should equally not be surprised at a non-bullish behavior in this year’s stock market.

Regardless of the accuracy in these assertions about perceptions, the Indicant will keep you informed of the stock markets’ intentions on a quick-term, short-term, mid-term, and long-term basis.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and two sell signals for stocks and funds.

In addition to the sell signals, the Mid-term Indicant is avoiding 117 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 28.0% since the Mid-term Indicant signaled sell an average of 54.7 weeks ago.

There were 73-stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 10.0% since their respective sell signals an average of 11.3 weeks earlier. Two years ago, on May 17, 2003, the Mid-term Indicant was avoiding 8 stocks and funds that were down an average of 28.0% since their respective sell signals an average of 26.4 weeks earlier. There were two sell signals and eleven buy signals two years ago.

Although there were no buy signals this weekend, the Mid-term Indicant is signaling hold for 201 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 93.9%. That annualizes to 54.5%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 201 stocks and funds for an average of 89.6-weeks.

One year ago, the Mid-term Indicant was holding 218 stocks and funds out of the 296 tracked at that time for an average of 57.2 weeks. They were up 75.4% (annualized at 68.5%). The Mid-term Indicant was signaling hold for 275-stocks and funds two years ago on May 17, 2003. They were up by an average of 36.3% (annualized at 111.9%) since their respective buy signals an average of 16.8-weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term Bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways - manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth. The only positive political influence on the economy is to undo its prior damage.

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

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

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. The early part of December was not consistent with the normal Santa Clause rally. However, bullish expressions resumed in late December 2004. Some quick-term attributes suggested there would be a Santa Clause rally and that is exactly what happened. The market is still elevated as a function of the typical fourth quarter rally in 2004. Unfortunately, the Quick-term Bear that plagues normal bullish seasonality for the second consecutive year is challenging this elevated position. Bullish seasonality ended on April 30, 2005. The market is now situating into bearish seasonality, based on historical norms. So far, the market appears to be configuring to support historical standards by expressing bearish behavior.

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

All the Quick-term attributes remain biased with bearish tendencies even though the bull demonstrated significant resistance to bearish ambition. That bullish resistance weakened the past ten weeks. As stated the past few weeks, there are some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Quick-term and Short-term Indicant continue signaling bear, as they have been doing since early January 2005. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your longer-term hold positions still appear safe. Unfortunately, those safe positions are being seriously challenged.

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

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

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

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

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

Stock and Fund Update

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

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

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

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

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

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

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

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

Divergence versus Convergence

Last week’s stock market demonstrated divergent behavior. The energy sector was bearish, acting incongruent to a 1970’s market. Must of this bearish behavior is due to profit-taking by traders. Mid-caps and small caps also expressed bearish behavior. Last weeks convergent behavior, unfortunately, did not sustain. Consequently, there is no possible foundation to form a foundation for a sustainable bull market.

As stated last week, the bull still has some fight in it. However, it continues expending too much energy in a defensive posture.

Economic Conditions – Inflation, Currency, Interest Rates

Many of the economic indicators shifted from bearish to neutral in terms of potentially influencing the stock market. The U.S. Dollar continues to stiffen against its previous slide. Some more commodity prices fell from supporting equity market bearishness to neutral. Unfortunately, interest rates continue rising.

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

As stated last week, the dollar continues to move stronger off recent cyclical minimums, but still remains solidly weak against world currencies. Although, this is somewhat bullish for the stock market, its contribution to that bullish behavior continues to shrink with the world shrinking.

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

As stated the past nine weeks and originating last August, current cyclical behavior appears adjusting to trends similar to that of the 1970’s. The cyclical rise in commodities is not passive. This cyclical movement has now converted to a trend. This trend provides bearish confidence in the stock market. This increasing bearish confidence can yield swift and significant punishment to the passive, long-term investor. As stated the past nine weeks, the bull can contribute to the least-worse case of a meandering market. However, the strongest of bulls cannot standup to excessive inflation or deflation or extremely high interest rates. A bull traditionally does not survive a combination of inflation/interest rates in excess of 8/0%. Right now, the threat is inflation and its serious nature continues to grow.

http://www.indicant.net/Members/Updates/Economic/E01.htm

This paragraph remains unchanged from the past 23-weeks with a few modifications. Interest rates continue their rise, but still from historically low levels. Until recently, the stock market was not being bothered by this unfavorable direction on a mid-term basis. However, it is now being bothered by these unfavorable relationships. The bearish bias by the Quick-term Indicant may be an early indication of the market’s intolerance to these unfavorable trends. There is some point where equities will not like the “position” of interest rates if Greenspan continues his northward trek. It is not uncommon to over-cool the economy in post election years, which is now underway.

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and fifty-one weeks ago since the MTI buy signal in April 2001. One-hundred and forty-four weeks ago, it closed up 30.1%. Last week it closed up 117.3%, which is higher than the 75.9% reported 95-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 28.3%, which is higher than 23.1% reported 95-weeks ago. After falling significantly this past week, this fund is exactly where it was on December 5, 2003 when it was up 117.3%. That was its prior cyclical peak.

Fidelity Gold, Fund #28, is down 7.5% since the Mid-term Indicant signaled sell four weeks ago on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 149.0% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 53.6%. Vanguard Energy #18, VGENX, is up 80.1% (annualized at 37.5%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 45.0% (annualized at 30.9%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 55.9% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 31.6%.

All of these energy related funds were down, significantly, last week.

The Gold/Silver Index is down 8.6% since the Mid-term Indicant signaled bear four weeks ago on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for over twenty weeks. As stated the past several weeks, that is a long period of survival in the midst of the heart and soul of bullish seasonality. The market is more comfortable flirting with the bearish yellow curve.

The eight major indices are down an average of 3.9% since the Quick-term Indicant signaled bear on January 4, 2005.

The current Quick-term Bear was being pestered by a bullish spurt last week. However, as stated last week, the Quick-term Bear was not being threatened. Recent bullish spurts consumed a tremendous amount of energy that depletes possibilities of the birth of a new Quick-term Bull from being born. The current Quick-term Bear is now consistent with normal bearish seasonality, even though it was born in the heart and soul of bullish seasonality.

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

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

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

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

The NYSE Indicant Volume Indicator is biased in support of continuing bearish expressions on a quick-term basis. Both the NASDAQ and NYSE Indicant Volume Indicators have resumed a lethargic pattern, which minimizes the probability of any sustainable bullish move in bearish seasonality.

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

The Dow is down 3.2% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 4.9% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears.

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

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

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

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

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

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

Perspectives

Nothing has changed in the past few weeks. The major indices continue to threaten contact with their respective breakdown lines. Contact with them will support continuing bearish behavior. All bullish spurts off the breakdown lines are short-lived and typically do not exceed the peak of the last bullish spurt. Even without that contact, the current bullish spurt is not configured for sustainability.

Read your daily emails.

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

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

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

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

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

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

The eight major indices are up an average of 21.9% since the Mid-term Indicant signaled bull an average of 80.8 weeks ago. That annualizes to 13.9%. The Dow Transports is the strongest bull. It is up 50.3% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 19.0% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 35..3% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 48.7% since the Mid-term Indicant bull signal on August 16, 2003.

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

Now, these Mid-term Bulls are being threatened again. As stated the past few weeks, it is unlikely they will survive this bearish onslaught with the bearish seasonal cycle, now underway. Rising interest rates, increased oil prices, and the presidential post election year is a powerful set of parameters that support bearish behavior and the death of these long-standing Mid-term Bulls.

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

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

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

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 107.4% since the Mid-term Indicant signaled bull an average of 112.7 weeks ago for an annualized gain of 49.6%, which is less than the 72.9% reported 99-weeks ago. International indices moved south last week, after moving south in three of the previous four weeks.

The lone bear is down 11.0% since the Mid-term Indicant signaled bear 18.0-weeks ago. It is the Chinese market that endures this bear signal. As you can see, the Chinese economy is pressured to continue cooling their economy. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious. The Chinese economy will most likely not start heating up again until after the mid-term elections next year.

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

May 08, 2005 Indicant.Net Weekly Update

Volume 05, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Bearish Seasonality

The current Mid-term Bull that was born in March 2003 continues to live. This bull was seriously threatened eight weeks ago, but the market rebounded with a bullish spurt. However, this rebound has not detracted from the current Quick-term Bear. The underlying Quick-term configurations continue to support bearish behavior.

The current Mid-term Bull zoomed northward during 2003 after March of that year. Historical standards were violated as the bull continued to strengthen during bearish seasonality in 2003. The most bullish rolling half of the year just concluded on April 30. The DJIA increased 1.6% during that time. The S&P500 increased even more by 2.4%. However, the NASDAQ decreased, uncharacteristically, by 2.7%. The November 2004-April 2005 rolling half was the NASDAQ’s first bearish expression in a rolling half since that of April 2004-September 2004.

A 1971 $10,000 NASDAQ investment only in the most bearish period of May–October would now be worth only $12,255. This contrasts significantly with the $119,401 balance that accumulated during bullish seasonality, which lasts from November through April. You can see why May through October is referred to as bearish seasonality. Although some money was made in the NASDAQ during bearish seasonality, it did not earn as much as a simple savings account.

A 1950 $10,000 investment in the Dow during the May-October-rolling-half amounts to only $9,048. As you can see, the May-October-rolling-half lost money in the last half century. The market is now mired into this period of bearish seasonality.

The NASDAQ rolling third just ending (Jan-April) was the worse performing rolling third since 2002, when the NASDAQ plummeted 13.4%. The most recent plunge was 11.7%. The Quick-term Indicant signaled bear throughout this drop in the NASDAQ. The 1971 $10,000 NASDAQ investment only in the January-April-rolling-third is now $42,637. That is down significantly from the 1999 January-April-rolling-third when the balance amounted to $65,270.

As you can see the buyer and holder from 1999 lost considerable value if they limited their investments only in this period. What has been disappointing the past two years is that the NASDAQ’s January-April-rolling-third is the fourth most bullish, yet 2004 and 2005 brought the NASDAQ downward.

The May-August rolling third is, historically, the NASDAQ’s fourth most bearish. The 1971 May-August $10,000 investment accumulated to $16,879 by August 2004. At least some money was made, but less than what would have been earned in Treasury Notes and other interesting bearing accounts. The June-September-rolling-third is historically the most bearish. The $10,000 NASDAQ investment in 1971 dropped to $7,866. The July-October rolling third plummeted even more to $5,867. These periods of seasonal bearishness are just ahead of us.

Keep in mind the May-Oct is the most bearish rolling half for all of the major indices. This seasonal phenomenon should not be ignored. The October–January-rolling-third is the most bullish. The 1971 investment of $10,000 in the NASDAQ only in October-January accumulated a balance of $104,053 as of January 2005. This seasonal phenomenon holds true for all the major market indices.

Historical norms are violated from time to time, but there are fundamental reasons to expect seasonal normalcy this year. Rising interest rates and rising oil prices are powerful fundamental forces that suggest this year will be normal. The fact that this is a presidential post election year adds fuel to this bearish expectation. The presidential post election year is the most bearish on the four-year presidential election cycle.

The various Indicant models will keep you informed of this over the next several months. Just as was the case in 2003, the Mid-term Indicant signaled major buying just ahead of the solid bull market, which violated seasonally bearish norms in 2003. If the market chooses to ignore bearish seasonality this year, you will know it.

Weekly Buy/Sell Summary

The Mid-term Indicant generated two buy signals and no sell signals for stocks and funds.

Although there were no sell signals, the Mid-term Indicant is avoiding 117 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 27.8% since the Mid-term Indicant signaled sell an average of 53.7 weeks ago.

There were 57 stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 12.8% since their respective sell signals an average of 15.8 weeks earlier. Two years ago, on May 10, 2003, the Mid-term Indicant was avoiding 17 stocks and funds that were down an average of 31.9% since their respective sell signals an average of 30.7 weeks earlier. There were two sell signals and eleven buy signals two years ago. Last year at this time, there were 18 sell signals as the meandering market accelerated the demise of weaker stocks.

In addition to the buy signals this weekend, the Mid-term Indicant is signaling hold for 201 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 98.0%. That annualizes to 57.5%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 201 stocks and funds for an average of 87.7 weeks.

One year ago, the Mid-term Indicant was holding 219 stocks and funds out of the 296 tracked at that time for an average of 56.5 weeks. They were up 76.9% (annualized at 70.8%). The Mid-term Indicant was signaling hold for 266 stocks and funds two years ago on May 10, 2003. They were up by an average of 32.0% (annualized at 101.5%) since their respective buy signals an average of 16.4 weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term Bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways - manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth. The only positive political influence on the economy is to undo its prior damage.

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

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

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. The early part of December was not consistent with the normal Santa Clause rally. However, bullish expressions resumed in late December 2004. Some quick-term attributes suggested there would be a Santa Clause rally and that is exactly what happened. The market is still elevated as a function of the typical fourth quarter rally in 2004. Unfortunately, the Quick-term Bear that plagues normal bullish seasonality for the second consecutive year is challenging this elevated position. Bullish seasonality ended on April 30, 2005. We’re now into bearish seasonality.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality standards. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but thirteen weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with a bullish response. That bullish response was weak but possessed enough bullish steam to thwart increasing aggressive bearish behavior. However, residual components of the prior Quick-term Bull and the constitution of the current Mid-term Bull are exhausted from having to thwart bearish ambition.

Another bullish spurt is in process. It is not accompanied with increasing volume. This bullish spurt does not possess Quick-term configurations to support bullish sustainability. Do not be surprised if the current bullish spurt is followed again by a bearish response.

All the Quick-term attributes remain biased with bearish tendencies even though the bull demonstrated significant resistance to bearish ambition. That bullish resistance weakened the past nine weeks. As stated the past few weeks, there are some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Short-term Indicant continues signaling bear. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your longer-term hold positions still appear safe. Unfortunately, those safe positions are being seriously challenged.

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

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

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

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

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

Stock and Fund Update

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

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

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

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

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

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

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

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

Divergence versus Convergence

Last week’s stock market demonstrated convergent behavior. That is usually bullish. It would not be surprising for the current quick-term bullish spurt to climb to the Quick-term bullish red curve before succumbing to the bear’s influence. However, it is refreshing a movement of convergent behavior occurred for the first time in quite some time. This behavior is weak, but should be considered a pleasant result for those of you desiring bullish behavior.

As stated last week, the bull still has some fight in it. However, it continues expending too much energy in a defensive posture.

Economic Conditions – Inflation, Currency, Interest Rates

Greenspan’s rate hikes continue to have little influence on commodity prices. However, the DJIA Futures did dip slightly into neutrality this past week. Unfortunately, this movement was miniscule and most of the other commodities remain solidly bullish, which is bearish for the stock market.

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

The dollar continues to move stronger off of recent cyclical minimums, but still remains solidly weak against world currencies. Although, this is somewhat bullish for the stock market, its contribution to that bullish continues to shrink with the world shrinking. The U.S. Economy is becoming more dependent on the world economy and vice versus. The small U.S. manufacturer, though, have greater growth opportunities with the weaker dollar. The same is true for the agriculture industry.

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

As stated the past eight weeks and originating last August, current cyclical behavior appears adjusting to trends similar to that of the 1970’s. The cyclical rise in commodities is not passive. This cyclical movement has now converted to a trend. This trend provides bearish confidence in the stock market. This increasing bearish confidence can yield swift and significant punishment to the passive, long-term investor. As stated the past eight weeks, the bull can contribute to the least-worse case of a meandering market. However, the strongest of bulls cannot standup to excessive inflation or deflation or extremely high interest rates. A bull traditionally does not survive a combination of inflation/interest rates in excess of 8/0%. Right now, the threat is inflation and its serious nature is growing.

http://www.indicant.net/Members/Updates/Economic/E01.htm

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

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and fifty weeks ago since the MTI buy signal in April 2001. One-hundred and forty-three weeks ago, it closed up 30.1%. Last week it closed up 130.8%, which is higher than the 75.9% reported 94-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 31.7%, which is higher than 23.1% reported 94-weeks ago. This fund is up from its most recent peak on December 5, 2003 when it was up 117.3%. The fund was up significantly last week.

Fidelity Gold, Fund #28, is down 0.6% since the Mid-term Indicant signaled sell three weeks ago on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market. This fund has simply lacked the strength and consistency as its Vanguard cousin.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 169.4% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 61.4%. Vanguard Energy #18, VGENX, is up 89.8% (annualized at 42.4%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 55.1% (annualized at 38.3%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 65.8% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 37.5%.

All of these energy related funds were up last week. The prior weeks political rhetoric has worn out and economic reality has re-exerted itself into market fundamentals.

The Gold/Silver Index is down 0.8% since the Mid-term Indicant signaled bear three weeks ago on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market. The configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for over nineteen weeks. As stated the past several weeks, that is a long period of survival in the midst of the heart and soul of bullish seasonality. The market is more comfortable flirting with the bearish yellow curve.

The eight major indices are down an average of 2.6% since the Quick-term Indicant signaled bear on January 4, 2005. The current bullish spurt has pulled all eight major indices back above their respective yellow bearish curves.

The current Quick-term Bear is being pestered by the current bullish spurt. However, it is not being threatened. These bullish spurts consume a tremendous amount of energy that depletes possibilities of the birth of a new Quick-term Bull from being born. The current Quick-term Bear is now consistent with normal bearish seasonality, even though it was born in the heart and soul of bullish seasonality.

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

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

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

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

The NYSE Indicant Volume Indicator is biased in support of continuing bearish expressions on a quick-term basis. The NASDAQ Indicant Volume Indicator has resumed a lethargic pattern, which minimizes the probability of any sustainable bullish move in bearish seasonality.

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

The Dow is down 1.2% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 5.4% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears.

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

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

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

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

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

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

Perspectives

The major indices continue to threaten contact with their respective breakdown lines. Contact with them will support continuing bearish behavior. All bullish spurts off the breakdown lines are short-lived and typically do not exceed the peak of the last bullish spurt. Even without that contact, the current bullish spurt is not configured for sustainability.

Read your daily emails.

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

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

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

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

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

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

The eight major indices are up an average of 24.1% since the Mid-term Indicant signaled bull an average of 80.8 weeks ago. That annualizes to 15.5%. The Dow Transports is the strongest bull. It is up 56.1% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 21.4% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 38.9% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 53.7% since the Mid-term Indicant bull signal on August 16, 2003.

Only one of the eight major indices continue as a red bull, which is down from six, eight weeks ago. It is the Dow Utilities. Just when the survivability of these bulls was in question several weeks ago, they responded with a bullish fervor in the face of the Quick-term Bear. That was a testament to the strength of this Mid-term Bull market. However, as stated the last few weeks, they are being threatened with the potential of rising inflation and interest rates.

Now, these Mid-term Bulls are being threatened again. As stated the past few weeks, it is unlikely they will survive this bearish onslaught with the impending bearish seasonal cycle. Rising interest rates, increased oil prices, and the presidential post election year is a powerful set of parameters that support bearish behavior and the death of these long-standing Mid-term Bulls.

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

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

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

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 109.4% since the Mid-term Indicant signaled bull an average of 111.7 weeks ago for an annualized gain of 50.9%, which is less than the 72.9% reported 98-weeks ago. International indices moved north last week, after moving south in the previous three weeks.

The lone bear is down 6.9% since the Mid-term Indicant signaled bear 17-weeks ago. It is the Chinese market that endures this bear signal. As you can see, the Chinese economy is pressured to continue cooling their economy. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious.

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

May 01, 2005 Indicant.Net Weekly Update

Volume 05, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

Are We in the Early Stage of a 1970’s Market – Part XI

The Dow Utilities moved north last week. They did not express bearish behavior last week like most of the other major indices. Although the market rose slightly last week, several of the Dow Utility stocks skyrocketed. Many believe utility stocks are safe because of their relative ease in passing fuel cost increases onto the consumer.

Although there is some truth to that, there is more. Stock prices fall and rise on the principles of supply and demand just as much, if not more, than fundamental reasons. Supply and demand, quite often, is driven by perception more than fundamental realities. When a perception is popular demand is excited. When that excitement exceeds the available supply, prices rise.

Many buyers during the late October 2002 buying spree are holding onto their utility stocks because they locked into solid dividends when they purchased at very low prices. They are more reluctant to unload them and their bear market yields. This is stifling the supply of utility stocks. The underlying perception of future profitability is exciting demand. Thus their prices continue to increase.

Many investors want to buy utilities on the perceived ability of passing higher fuel charges onto the consumer. The perception holds that profit margins and cash inflows will be maintained even in the face of higher fuel costs. Furthermore, those that are holding are not so eager to rid themselves of the nice dividends that accompany utilities.

Although the utility stocks have not been as dynamic as 1990 tech stocks, they have been the most solid performing group of stocks this century. The simple laws of supply and demand will protect your holdings even in the face of a bear market. If potential buyers are high and potential sellers of utilities are low in numbers, then utility stock prices should continue to rise. At the very worse, their directional behavior should be held to a bearish minimum in the event a powerful bear unfolds.

However, keep in mind that everything has a price. If enough holders of equities cannot resist the capital gains being offered to them, selling in high volume could unfold. That would then cause those stocks to drop along with the rest of the market. The odds are against that scenario at this time. Continued holding is appropriate at this time. Watch the buy and sell signals in this group as well as the Indicant’s MTI-RYS model for the Dow Utility Index.

Interestingly, the market rebounded with some bullish vigor last Friday on the news of falling oil prices. George W. Bush and Saudi Royalty sweet-talked the commodity markets. The contributed to oil price declines last Friday. It is amazing how human emotion can kick into the market with commentary from the insubstantial. George W. and Saudi Royalty do not handle 48” pipe wrenches or power tongs. They do not produce oil. Sure, they have influence over production and a little influence on demand. But most of the demand is driven by rising capitalism. There is little chance of a continuation of falling oil prices. Political rhetoric is without substance. The emotional trader loses.

Each bullish spurt has been followed by a bearish expression. Friday’s drop in oil prices, if continued into next week, may indeed provide the current Mid-term Bulls additional life. That will further protect your longer-term hold positions. However, keep your eyes on commodities and especially oil prices. The CPI has been increasing, but surprisingly tame with record high oil prices. The market will not express too much bullish enthusiasm if the underlying economic trends continue. That is inflation, interest rates, and rising commodity prices. Those three must reverse the current unfavorable trend for dynamic bullish expressions in the stock market.

Weekly Buy/Sell Summary

The Mid-term Indicant generated no buy signals and four sell signals for stocks and funds.

In addition to the sell signals, the Mid-term Indicant is avoiding 115 stocks and funds of the 320 tracked by the Indicant. The avoided stocks and funds are down an average of 29.3% since the Mid-term Indicant signaled sell an average of 52.9 weeks ago.

There were only 28 stocks and funds avoided at this time last year. The avoided stocks and funds one year ago were down an average of 27.5% since their respective sell signals an average of 39.5 weeks earlier. Two years ago, on May 3, 2003, the Mid-term Indicant was avoiding 27 stocks and funds that were down an average of 26.4% since their respective sell signals an average of 29.6 weeks earlier. There was one sell signal and 13 buy signals two years ago. Last year at this time, there were 31 sell signals as the meandering market accelerated the demise of weaker stocks.

Although there were no buy signals this weekend, the Mid-term Indicant is signaling hold for 201 of the 320 stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 95.7%. That annualizes to 56.7%, which is down from 124.1% reported on June 7, 2003, but up from 50.2% reported over two years ago on February 15, 2003. The Mid-term Indicant has been signaling hold for these 201 stocks and funds for an average of 87.7 weeks.

One year ago, the Mid-term Indicant was holding 237 stocks and funds out of the 296 tracked at that time for an average of 39.5 weeks. They were up 72.1% (annualized at 70.9%). The Mid-term Indicant was signaling hold for 255 stocks and funds two years ago on May 3, 2003. They were up by an average of 31.4% (annualized at 102.2%) since their respective buy signals an average of 16.0 weeks earlier.

Secular Market Blend

This section is a repeat from the last several months with a few modifications, reflecting recent secular influences. The current Mid-term Bull market and buying barrage in late 2002 followed the predicted market bottom in 2002. The mid-term presidential election year phenomenon was consistent with history. Even more impressive was how the market synchronized with near perfection to normal seasonality in 2002.

The Dow30 found bottom on October 9, 2002 at 7286.27. The NASDAQ found bottom on the same day at 1114.11. As earlier stated, the Indicant began its buying barrage in October – November 2002 just after the market bottomed from the severe 2000-2002 Bear Market.

Some of you recall the Short-term Indicant Bear for the NASDAQ was the longest in history. It even exceeded the Dow’s 1929-1932 Short-term Indicant Bear in breadth and approached it in magnitude. The good news is that the NASDAQ’s decline did not lead to a depression, which is a clear indication of how little influence the tech stocks have on the economy. Remember, real economic wealth is delivered in only three ways - manufacturing, agriculture, and extraction. All other industries are merely transfer agents of wealth. The only positive political influence on the economy is to undo its prior damage.

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

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

The year, 2004, was consistent with normal bearish seasonality. Unfortunately, bearish expressions started ahead of schedule in 2004. However, the bullish expressions, which solidified in October 2004, synchronized beautifully with historical standards with a bullish outburst. The Quick-term Indicant accurately revealed an early start to bullish seasonality in late 2004. The early part of December was not consistent with the normal Santa Clause rally. However, bullish expressions resumed in late December 2004. Some quick-term attributes suggested there would be a Santa Clause rally and that is exactly what happened. The market is still elevated as a function of the typical fourth quarter rally in 2004. Unfortunately, the Quick-term Bear that plagues normal bullish seasonality for the second consecutive year is challenging this elevated position. Bullish seasonality ends on April 30, 2005.

Although not surprising, 2005 began with unfavorable performance to bullish seasonality standards. The Quick-term Indicant signaled bear in early January 2005. Bearish expressions followed. At first, these bearish expressions were mild, but twelve weeks ago, bearish behavior revealed greater aggression. However, that aggression was muted with a bullish response. That bullish response was weak but possessed enough bullish steam to thwart increasing aggressive bearish behavior. However, residual components of the prior Quick-term Bull and the constitution of the current Mid-term Bull are exhausted from having to thwart bearish ambition.

All the Quick-term attributes remain biased with bearish tendencies even though the bull demonstrated significant resistance to bearish ambition. That bullish resistance weakened the past eight weeks. As stated the past few weeks, there are some quick-term attributes shifting in support of even more bearish expressions on a quick-term basis.

The presidential post election year is, historically, the most bearish year on the four-year presidential election cycle. Like all things, there are exceptions to historical normalcy. As this year progresses, the various Indicant models will advise if 2005 is an exception or normal. So far, this year appears normal; that is bearish. The Short-term Indicant continues signaling bear. The Mid-term and Long-term Indicant models continue to signal bull. The short cycles are dominating now, but your longer-term hold positions still appear safe. Unfortunately, those safe positions are being seriously challenged right now.

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

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

Stop Loss Management

The Mid-term Indicant continues recommending a stop loss of 8% because of the Quick-term Bear. The Quick-term Indicant’s configuration is enough to outweigh bullish seasonality.

If you are up by 50% or more you may find it advantageous to set your stop-loss at 15% from your current hold position. If you sold a stock on the stop loss and the Indicant continues to signal hold, do not buy the stock unless the Quick-term Indicant is signaling bull.

Use a 10% trailing stop loss or the yellow or green values you will find on the tables. If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 10% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 10% trailing stop loss. If you are up by triple digit amounts and enjoy your ownership of the stock or fund, then use a 20% trailing stop loss or the slow moving blue curve price. If you really enjoy holding the stock, keep a close eye on the management. Dilettante managers have a way of worming into the business. Watch closely for cronyism and lazy-hazy management dialog. Keep your eye on lavish spending and excessive concerns about social issues. Those types are more interested in burning your money for their pleasures, as opposed to making you money. High performing companies remain focused on honoring the investments made by their shareholders.

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

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

Stock and Fund Update

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

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

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

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

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

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

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

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

Divergence versus Convergence

Last week’s stock market demonstrated divergent behavior. The strong bullish rally last Friday was again fake. Sustainable bulls do not originate with divergent configurations. Much of the divergent behavior was tied to falling energy sector prices due to U.S. President and Saudi Royalty having a chit-chat. Neither group actually produces anything. Therefore, their chit-chat is with little meaning. The market allowed the emotional reaction to that, but the divergent pattern reveals the market knows better.

As stated last week, the bull still has some fight in it. However, it continues expending too much energy in a defensive posture.

Economic Conditions – Inflation, Currency, Interest Rates

The U.S. Dollar remained in the neutral zone for the third consecutive week. The remainder of this paragraph is the same as last week. Strengthening configurations remain. That is a presidential post-election-year design in that it is generally unfavorable to the U.S. economy. These unfavorable and unpleasant tactics and strategies are, quite often, implemented in the presidential post-election-year. There is no political reason not do the unpleasant with no political careers at stake.

As stated the past two weeks, the U.S. Dollar’s relative position remains bullish for the U.S. Economy. It appears to be past a cyclical bottom. As long as Greenspan continues his “measured” increases in interest rates, recognize the dollar’s cyclical bottom has past us. If Greenspan discontinues his rate hikes, expect the dollar to resume its bearish direction.

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

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

As stated the past seven weeks and originating last August, current cyclical behavior appears adjusting to trends similar to that of the 1970’s. The cyclical rise in commodities is not passive. This cyclical movement has now converted to a trend. This trend provides bearish confidence in the stock market. This increasing bearish confidence can yield swift and significant punishment to the passive, long-term investor. As stated the past seven weeks, the bull can contribute to the least-worse case of a meandering market. However, the strongest of bulls cannot standup to excessive inflation or deflation or extremely high interest rates. A bull traditionally does not survive a combination of inflation/interest rates in excess of 8/0%. Right now, the threat is inflation and its serious nature is growing.

http://www.indicant.net/Members/Updates/Economic/E01.htm

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

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

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% one-hundred and forty-nine weeks ago since the MTI buy signal in April 2001. One-hundred and forty-two weeks ago, it closed up 30.1%. Last week it closed up 123.8%, which is higher than the 75.9% reported 93-weeks ago. The current annualized growth rate since the April 13, 2001 buy signal is 30.2%, which is higher than 23.1% reported 93-weeks ago. This fund is up from its most recent peak on December 5, 2003 when it was up 117.3%. The fund was down significantly last week.

Fidelity Gold, Fund #28, is down 1.8% since the Mid-term Indicant signaled sell two weeks ago on April 15, 2005. The last buy/sell cycle was short-lived and resulted in a small loss. This fund should do well in the event this market turns into a 1970’s type of market. This fund has simply lacked the strength and consistency as its Vanguard cousin.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 159.4% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 58.2%. Vanguard Energy #18, VGENX, is up 85.4% (annualized at 40.7%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 49.6% (annualized at 35.0%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 60.9% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 35.2%.

All of these energy related funds fell sharply last week due to political rhetoric and investor emotion. There is no fundamental reason for this drop.

The Gold/Silver Index is down 3.3% since the Mid-term Indicant signaled bear two weeks ago on April 15, 2005. This index also should express bullish behavior with a 1970’s influence on the market. However, the Mid-term Indicant does not forecast the market and right now the configurations support a bearish influence on precious metals. That should change before the year is out, but until then, wait for the bull signal.

As repeatedly asked, is this the 1970’s all over again? This report has repeatedly stated the market does not look like the 1970’s again, but there are shifts in market configurations that appear biasing in favor of a 1970’s type of market. Increasing bullish expressions in the energy sector will lead to increased bearish expressions in general equities. This may continue in this presidential post election year. The political system is not sensitive to democratic desires during lame-duck presidencies and especially in the presidential post election year. Again, forecasting the market is okay for hallway conversations, but never provide your broker instructions based on a forecast. The Indicant will keep you posted on the market’s cyclical and trend inclinations.

Quick-term and Short-term Indicant Update

The Quick-term Indicant Bear that was born on January 4, 2005 has now survived for over eighteen weeks. As stated the past several weeks, that is a long period of survival in the midst of the heart and soul of bullish seasonality. The market is more comfortable flirting with the bearish yellow curve.

As earlier stated the eight major indices are down an average of 4.4% since the Quick-term Indicant signaled bear on January 4, 2005. Four of the eight indices are below their respective bearish yellow curves. Even with just one index below bearish yellow intensifies bearish influence.

Most quick-term bears do not survive this long during bullish seasonality. This quick-term bear was on the verge of expiration twelve weeks ago, but the potential burgeoning bull expended too much energy preventing complete bearish dominance. As stated for the past several weeks, there is simply not enough bullish energy for the birth of a new Quick-term Bull.

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

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

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

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

The NYSE Indicant Volume Indicator is biased in support of continuing bearish expressions on a quick-term basis. The NASDAQ Indicant Volume Indicator discontinued its lethargic pattern and has now shifted in full bearish support with its dynamic move to the north.

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

The Dow is down 2.7% since the Short-term Indicant signaled bear on January 20, 2005. The NASDAQ is down 7.6% since the Short-term Indicant signaled bear on January 11, 2005. Both indices are Short-term Bears.

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

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

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

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

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

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

Perspectives

There has been quite a shift in this configuration. The major indices are now approaching their respective breakdown lines. Contact with them will support continuing bearish behavior. All bullish spurts off the breakdown lines are short-lived and typically do not exceed the peak of the last bullish spurt. That is the nature of bear markets.

Read your daily emails.

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

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

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

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

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

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

The eight major indices are up an average of 22.5% since the Mid-term Indicant signaled bull an average of 79.8 weeks ago. That annualizes to 14.7%. The Dow Transports is the strongest bull. It is up 51.4% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Jones Industrial Average is up 19.6% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Composite is up 37.2% since the Mid-term Indicant signaled bull on March 22, 2003. The Dow Utilities is up 56.4% since the Mid-term Indicant bull signal on August 16, 2003. The utilities are holding up the strongest with these recent bearish onslaughts. Individual utility stocks shot up strongly last week, intensifying your hold positions.

Only one of the eight major indices continue as a red bull, which is down from six, seven weeks ago. It is the Dow Utilities. Just when the survivability of these bulls was in question several weeks ago, they responded with a bullish fervor in the face of the Quick-term Bear. That was a testament to the strength of this Mid-term Bull market. However, as stated the last few weeks, they are being threatened with the potential of rising inflation and interest rates.

Now, these Mid-term Bulls are being threatened again. As stated the past few weeks, it is unlikely they will survive this bearish onslaught with the impending bearish seasonal cycle. Rising interest rates, increased oil prices, and the presidential post election year is a powerful set of parameters that support bearish behavior and the death of these long-standing Mid-term Bulls.

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

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

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

Mid-term Indicant Positions - International Markets

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

Although there were no new bull signals, twenty-one of the twenty-two foreign indexes tracked by the Indicant are Mid-term Bulls. They are up an average of 105.5% since the Mid-term Indicant signaled bull an average of 110.7 weeks ago for an annualized gain of 49.5%, which is less than the 72.9% reported 97-weeks ago. International indices moved south last week for the third week in a row.

The lone bear is down 6.9% since the Mid-term Indicant signaled bear 16-weeks ago. It is the Chinese market that endures this bear signal. As you can see, the Chinese economy is pressured to continue cooling their economy. That may dampen the demand for natural resources on a cyclical basis, but the long-term trend is obvious.

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

©All material contained in this Web site is copyright protected. Any redistribution of any information in this Web site is expressly prohibited unless written authorization is granted by the publisher  of Indicant.Net.

Additional Hyperlinks - Just click on any of the below to get where you want to go.

Become a Member | DJIA History Since 1900 | Back Issues | Mutual Fund Listing | Contact Us | Historical Performance Metric | Performance Summary for Stocks and Funds | Current Performance Report Card | Sector Funds That Did Well in Bear Market of 2000-2001 | ETF Tour| Option Stalking |Stocks | Ezine | Stocks in Spotlight | Indicant Volume Indicator | Perspectives | Seasonality

- **** -    -*****-