Nov 24, 2002 Indicant.Net Weekly Update

Volume 11, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

  The Quiet before the Storm – Part IX – It Is Quiet

It is beginning to look more and more like there will be no storm. It is not politically favorable to enter into any war at this time. There is a risk the war would drive the country into back into recession. That scenario would be catastrophic for Bush’s 2004 re-election bid. The requirements for the fall of 2004 is either a robust economy or war or both. One of those three is prerequisite for George W. Bush’s re-election.

Enough said. Let’s have some fun.

If you look at the Weekly Report Card, you will notice Mutual Funds are up 7.6% sinc the Mid-term Indicant signaled buy an average of 5.1 weeks ago. That is an annualized growth rate of 53.90%. You will also notice that growth rate pales in comparison to the Indicant Selected Stocks annualized growth rate of 209.20% since the Mid-term Indicant’s buy signal an average of 7.0 weeks ago.

It is not uncommon for mutual funds to lag stocks. Funds are much less volatile than stocks. They do down less than stocks and they go up less than stocks.

Why all the interest in mutual funds? Certain funds are enjoying much more explosive bullish behavior than others. Here are some top performers:

MF #57, Fidelity Telecommunications Up 28.9% since 10/18/02 MTI Buy Signal.

MF #56, Fidelity Technology Up 23.0% since 10/18/02 MTI Buy Signal.

MF #55, Fidelity Software and Computers Up 27.2% since 10/11/02 MTI Buy Signal.

MF #51, Fidelity Multimedia Up 22.5% since 10/11/02 MTI Buy Signal.

MF #38, Fidelity Electronics Up 20.9% since 10/25/02 MTI Buy Signal.

MF #37, Fidelity Developing Communications Up 14.5% since 10/25/02 MTI Buy Sig.

MF #33, Fidelity Computers Up 18.9% since 10/18/02 MTI Buy Signal.

MF #6, Rydex NAS100 Up 16.7% since 10/18/02 MTI Buy Signal.

The above funds have been held for an average of 36 days since their respective Mid-term Indicant buy signals. They are up an average of 21.6% for an annualized growth rate of 218.7%. You know and I know these funds will not be up 218.7% by this time next year. That is not the point here.

During last year’s seasonal Quick-term Bull move, these funds were the laggards. The leading funds were industrial and transportation related. It is different this year. It looks more like residue from the late 1990’s when tech was king. The above funds are outperforming the other funds in the Indicant listing by nearly three to one.

The profound bullish behavior by these funds indicates the market believes the economy is going to be robust in the next six to nine months. Let us enjoy that perception while it lasts. Keep in mind it is just a perception. It becomes real when you see your broker’s sell ticket.

The Dow is in a secular bear market with a beginning frame of reference of an 11,000 Dow. The NASDAQ is also in a secular bear market with a beginning frame of reference of 5,000. The markets are expected to increase on the basis of the mid-term election year phenomenon. After the 2004 elections, the market will most likely plummet again. The question is from where.

A 100% increase in the NASDAQ would not be surprising in this burgeoning bull market. That would put it at about 3500 or so. The Dow will most likely not create a new top. An 11,000 Dow would not be too surprising before the 2004 elections. Along the way, there will be dips and the Quick-term Indicant will spot them for you. The magnitude of the dips will have a huge influence on where the market tops out sometimes after 2004.

The burgeoning bull is also enjoying support from seasonal favorability. We have until February to enjoy that. February is generally a bad month for the market. There is no need to fret about that right now.

In addition to the high performing funds, some stocks have moved up exceedingly well for the first time over two years. Notice the names of these stocks are those who have not participated in the past few Quick-term Bull markets. The following stocks are from the Indicant Select Stocks:

#44, Chattem Inc, CHTT, bought at $9.06 on 3/9/01 . Up 372.9%

#48, Forest Laboratories Inc, FRX, bought at $23.48 on 6/4/99 . Up 346.1%

#19, Inktomi Corp, INKT, bought at $0.41 on 10/25/02 . Up 209.8%

#4, CNET Networks, Inc., CNET, bought at $1.16 on 10/18/02 . Up194.8%

#26, Nortel Networks Corp, NT, bought at $0.63 on 10/18/02 . Up 158.7%

#17, Broadvision, BVSN, bought at $2.21, on10/25/02. Up 135.3%

#11, Ariba Inc., ARBA, bought at $2.09,on10/25/02. Up 100.5%

#31, Qwest Communications, Q, bought at $2.43 on 10/11/02 . Up 89.7%

#43, CORNING , GLW, bought at $2.40 on 11/8/02 . Up 73.8%

#1, CGMI, Inc, CMGI, bought at $0.51 on 10/18/02 . Up 60.8%

#16, Novell Inc, NOVL, bought at $2.12 on 10/11/02 . Up 59.4%

#52, Sprint PCS , PCS, bought at $3.66 on 11/8/02 . Up 42.6%

NASDAQ100 stocks also have some impressive leadership:

#41, Amazon.Com, AMZN. Bought at $7.12 on 11/9/01 . Up 236.9%

#94, Apollo Corp, APOL. Bought at $14.84 on 2/11/01 . Up 195.1%

#74, Gilead Sci, GILD. Bought at $16.09 on 4/6/01 . Up 145.3%

#83, Nextel Comms A. NXTL Bought at $6.70 on 8/16/02 . Up 106.4%

#45, Imclone Systems. IMCL Bought at $8.16 on 10/25/02 . Up 84.3%

#57, BEA Systems. BEAS Bought at $6.13 on 10/11/02 . Up 82.1%

#73, Broadcom Corp. BRCM Bought at $12.04 on 11/8/02 . Up 71.4%

#75, Nvidia Corp, NVDA. Bought at $9.40 on 10/18/02 . Up 67.2%

#15, Juniper Networks, Inc., JNPR. Bought at $5.54 on 10/25/02 . Up 57.6%

#38, Citrix Systems, CTXS. Bought at $7.24 on 10/25/02 . Up 56.8%

#7, I2 Technologies, Inc., ITWO. Bought at $0.94 on 11/2/02 . Up 56.4%

#68, TMP Worldwide, TMPW. Bought at $9.69 on 10/25/02 . Up 51.7%

#93, Ciena Corp, CIEN. Bought at $3.69 on 10/25/02 . Up 51.2%

#49, Atmel Corp, ATML. Bought at $1.87 on 11/2/02 . Up 50.3%

#92, Xilinx, Inc, XLNX, Bought, at $16.25 on 10/11/02 . Up 48.8%

#71, Network Applicance, NTAP. Bought at $9.69 on 10/25/02 . Up 48.1%

#16, Qualcomm Inc., QCOM. Bought at $27.71 on 8/30/02 . Up 46.8%

#9, Adobe Systems, Inc., ADBE. Bought at $20.47 on 8/23/02 . Up 45.6%

#6, Comverse Technologies, Inc., CMVT. Bought at $8.18 on 11/8/02 . Up 45.3%

#66, Flextronics, FLEX, Bought at $7.80 on 10/18/02 . Up 42.7%

#28, RF Micro Devices, Inc., RFMD. Bought at $7.71 on 10/25/02 . Up 41.8%

#84, Vitesse Semicon, VTSS. Bought at $1.98 on 11/2/02. Up 41.8%

#70, Genzyme Gen, GENZ. Bought at $21.29 on 8/2/02 . Up 41.8%

#63, Maxim Integrated, MXIM. Bought at $29.63 on 10/18/02 . Up 41.4%

#30, Cisco Systems, Inc., CSCO. Bought at $10.53 on 10/18/02 . Up 41.4%

#91, Icos Corp, ICOS, Bought at $21.84 on 10/11/02 . Up 40.4%

The leadership is different from last year’s seasonal bullish surge. This adds credibility for a solid bull market at least through this coming January.

The ProFunds Ultra Short, (MF#22) is down 30.2% since the Mid-term Sell signal on October 18, 2002 . Remember that fund moves inversely and disproportionately to the stock market. Just as many of you made from 25% to 70% in the bear decline this year, it will be around for us when the next bear market hits. This chart on this fund is expressed logarithmically, so you can more easily see its behavior along the bottom. The problem for that fund is that it is nowhere near its bottom if the current bull market continues.

http://www.indicant.net/Members/Updates/Mutual%20Funds/MF04.htm#22

The Mid-term Volatility Index finally received a bear signal. As you can see from the chart, it appears to have committed its move to the south. Do not be surprised if it puts up a battle in the next few weeks. Each battle will induce the general stock markets to move south, but those movements should be mild.

http://www.indicant.net/Members/Updates/MT%20Indexes/I03.htm#16

Divergence versus Convergence

As stated last week, the stock prices are in a convergence pattern. There is no discrimination on any sector at this time.

Economic Outlook

As money leaves the bond markets, stock prices will move to the north. The bond market will move south and corresponding interest rates will move north.

Many of the inflation-oriented commodities continue taking on the appearance of cyclical peaks. As stated last week, that bodes well for cyclical downturns and relieving Greenspan from inflationary pressures. The CRB Bridge Futures is indicative of that behavior. It has turned south. If it forms a new cycle that is symmetrical to that of the past two cycles, then we should enjoy about six months of Greenspan relaxing.

Oil prices continue to express cyclical downward behavior. Political pressure is being exerted on the Saudis. George W. Bush even has his pal, Premier Putin, doing this. Putin recently pointed out that most of the 911 hijackers were Saudis. This type of pressure should act as a depressant on oil prices.

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

Fear Metrics: Economic and Terrorism

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Twenty-four weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Seventeen weeks ago, it closed up 12.0% since the buy signal. Eight weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 33.0%. The Mid-term Indicant continues to signal hold for this fund, but it is softening. If the current Quick-term Bull becomes more explosive, expect this fund to drop in value.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-two weeks ago since the MTI buy signal in April 2001. Sixteen weeks ago, it closed up 27.8%. Last week it closed up 40.3%. The Mid-term Indicant continues to signal hold for this fund, but appears to be nearing a sell signal.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds will need to have avoid signals for the market to embark upon a meaningful and lasting bull leg. Right now, they are still signaling, “hold,” but appear to be nearing a sell signal.

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. They are up 8.7% (annualized at 83.7%) since the October 15, 2002 Quick-term Bull signals. The Short-term Indicant showed points early last week, but lost them at the end of the week. It has been over six months since the Short-term Indicant showed any points. The fact that some points showed is bullish.

The Dow is down 16.8% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 65.2% since the Short-term Indicant signaled bear over two and a half year ago on March 30, 2000 .

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

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

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

All eight major indexes are up an average of 7.3% since their respective Mid-term Bull signals an average of 4.9 weeks ago. This annualizes to 77.9%. The weakest Mid-term Bull is the Dow Utilities. It is the youngest bull and is up only 2.9%. The strongest bull is the NASDAQ100. It is up 16.7%.

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

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

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

Mid-term Indicant Positions - International Markets

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

In addition to the new bulls, nineteen are up an average of 18.0% since the Mid-term Indicant signaled bull an average of 19.3 weeks ago for an annualized gain 48.6%.

One international markets is still a bear. It is down an average of 14.5% since their respect bear signals an average of 11.1 weeks ago. Click the following hyperlink to view the status and charts.

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

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were four buy signals and no sell signals. You received a report earlier this weekend about that.

In addition to the buy signals, the Indicant is now signaling hold for 71 of the seventy-six mutual funds it tracks. The 71 funds with hold signals are up an average of 7.6% for an annualized gain of 53.9%. The average holding period is 5.1 weeks, compared to 22.7 weeks reported on October 18, 2002 when only ten funds were being held.

The Mid-term Indicant is avoiding five funds. They are down an average of 30.2% since the Indicant sell signals. The Indicant has been avoiding these bearish funds for an average of 5.1 weeks.

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

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

Mid-term Indicant Positions - Indicant Selected Stocks

11-24-02

  Nov 17, 2002 Indicant.Net Weekly Update

Volume 11, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

The Quiet before the Storm – Part VIII

The storm front was quiet until Iraq fired on U.S. planes late last week. You must have noticed the stock market did not react bearishly to that. However, more surprises from Saddam Hussein are likely to come.

This bull market will not go up on a straight line. It will go up on bad news and fall on good news over the next few weeks. It is headed to the northeast quadrant on the charts due to seasonal bullishness and the mid-term election year phenomenon.

U.S. Politicians are plotting on how to play the economy and Saddam Hussein. The bottom line to their strategic behavior is getting reelected in 2004. That is why political logic sometimes does not make sense to us. Vietnam was a classic example of this. That war was the beginning of the downfall of the Democratic party’s influence in this country.

There should not be too much conflict here on how to play the economy and Saddam Hussein. It just depends on the competency of our military leadership. If there is a ground attack on Iraq and the resistance is competent, the stock market will not like that. If the ground attack is successful with a quick and noticeable U.S. victory, the market will really like that. If oil prices remain stable and Greenspan keeps quiet, this baby bull will grow into a prize winning bull.

The mid-term election year phenomenon should take this current bull to very near the former highs of the Dow Jones Industrial Average and S&P500. Although the NASDAQ is behaving with solid bullishness, it will be the most volatile in its quest toward the northeast.

Also, there is an increasing decline in employee contributions to their companies 401K plans. That decline has been steady but has been decreasing disproportional the past few months. Although historical data is not sufficient enough to research correlations, this is another sign that the current bull market will move aggressively to the north. This is how it works.

The bull early birds get in first. You have done that. Big money institutions always spark the initial phase of the bull market cycles. Then the second wave of investors come into the market driving it higher. By the time your pals and next door neighbor gets in the market, the big money guys start selling. The timing of all this is founded in economic fundamentals, economic expectations, corporate performance, and last but not least, human emotion. If there was a way to digitize market euphoria, we would have the perfect predictor of market behavior.

As stated many times in the past, we are into a secular bear market, but a gain of 50% to 100% from current levels in the NASDAQ would not be asking too much. Proponents portraying a secular bear theme can continue to be happy, while several enjoy the fruits of a Mid-term Indicant bull market. If this Mid-term Bull market follows normal mid-term election year phenomena, we should enjoy a nice ride to the north for the next two years. Along the way, there will be several Quick-term Bears. The nature of those Quick-term Bears will help identify how long and by what magnitude the Mid-term Bull will enjoy.

Although George W. Bush does not need a strong bull market for re-election, he does need a strong economy. Alan Greenspan will have more influence on the stock market. If George and pals pass legislation friendly to the economy over the next two years, then both the stock market and economy will move north. However, if Greenspan sniffs irrational exuberance again, he will put the brakes on. The stock market will not like that. You can expect George and pals to wine and dine Greenspan until at least November 2004. So far, he appears to be on their side. He cut interest rates the day after the Republican sweep of both legislative houses. It is very unusual for the incumbent to gain seats, like George W. Bush just did. The Americans said, Bush and pals, you’ve got two years to turn this thing around. Let’s see what they do.

The bull market is in tact. The Mid-term Volatility Index is crashing down. It is still a bull and one of the strongest bulls we have since 1999. It was mentioned in yesterday’s preliminary update, but is worthy of redundancy. The link to the chart is below:

http://www.indicant.net/Members/Updates/MT%20Indexes/I03.htm#16

As you can see, the Volatility Index produced a double peak in the current cycle. You will also notice the current bullish cycle possessed significant magnitude and breadth. The double peak through us off a little last August, when it began its first slide to the south. We believed the mid-term election year phenomenon had kicked in at that time. (The volatility index runs counter cyclical to the overall stock market). At one point the Mid-term Volatility Index Bull was up nearly 200% from the Mid-term Bull signal. It is now up 61.2% since the bull signal on April 10, 2002 . In early September, the Volatility Index moved strongly to the north again. This triggered another, but not unexpected, Quick-term Bear signal for the stock market.

As you can see this Mid-term Volatility Index Bull is unusually strong and will not die that quickly. But it will eventually die. It will most likely provide a few battles between now and Christmas. There will definitely be a Christmas rally. Between now and then, we do not expect a Quick-term Bear. However, we do expect increasing volatility during the next few weeks.

Do not be alarmed when the Volatility Index Bull puts up a few battles. That will drag the market down. Expect this Quick-term Bull to stay in positive territory during these battles, but there may be some noticeable bearish market behavior when it does. As long as the Quick-term Bull remains in tact, there should be no concern. Expect a minimum 20% rise in the current Quick-term Bull at least through January. Don’t hold me to that, as the Indicant does not officially forecast. All we are concerned about is the direction of the market, not where it is going to go. However, the mid-term election year phenomenon and favorable seasonality provides significant confidence during such proclamations.

The market’s behavior around Christmas and into January 2003 will provide some additional insight of the magnitude and breadth of the mid-term election year, bull market phenomenon. If the market proceeds through January with strong bullish behavior then you can expect this Mid-term Bull will have significant longevity. It will not look like the bull market of 1999, but more likely resemble that of the 1950’s. During those years you would have enjoyed long slow slopes to the northeast without much volatility. We’ll take that. Of course, another irrational bull leg like that of 1999 would also be nice. Although unlikely, we will take that too!

Fundamentally, if politicians push through a flat tax, then the magnitude of this bull would have a better chance of resembling the bull of 1999. Even though that bull market was a phony, good money was made by a few on the wild speculations. A flat tax would not offer any need for wild speculations. As previously stated, politicians have not wanted to give up their “intellectual” powers provided by a complex tax code and other legislative powers. They love complexity and are generally not in favor of the simplicity of common sense. They generally love knowing more about the nonsensical impositions on the populace. That gives them power over them uninformed and thus their votes. Some of us know better.

The only thing standing in the way of a 100,000 Dow is politicians around the world, including our own. Saddam Hussein is a politician with no check and balances. Adolph Hitler was a politician with limited checks and balances. Bin Laden is a politician. They all have one common thread, including U.S. politicians. They tell you what you want to hear for self-gain concluding in your ultimate demise. Did the American people really agree to turn over as much as one-half their earnings to the U.S. government? No way. Politicians lied all the way to the top of what is perceived to be their personal glory. They want to be listed in history books and almanacs. That is what is important to them. They do not want to do it the harder way, such as Henry Ford. Along that path those single individuals destroyed many lives. They want to dictate how the world should behave from the pulpit.

Divergence versus Convergence

The market is again favoring price convergence. Just about every sector, except automotive is moving to the northeast. Analysts perceive the automotive sector to experience reduced sales volume over the next few years due to the recent incentive packages. That theoretically robs sales from future periods. Apparently, the future is here upon us. Therefore, the outlook for automotive companies is somewhat dim. Other than that, most other sectors are moving north.

The oil service stocks are in a holding pattern right now. They have been making a timid move to the north in anticipation of war and instability in the Middle East over the past few months. There timidity has been accompanied by volatility and limited conviction. Halliburton is developing an interesting pattern of strong fundamentals, but not sure why. These stocks are poised to make a huge move to the north in the event of war and rising oil prices. Regardless of war, rising oil prices will propel these stocks north. Always keep in mind these companies are very technically astute. At one time, these companies were considered technology leaders. Schlumberger offers many products and services outside the oilfield industry. Their people are especially competent, but their management is approaching fifth generation. That puts a significant lid on their potential.

Economic Outlook

Market driven interest rates are nose-diving in light of Greenspan’s recent cut in interest rates. Treasury notes, call money, CD’s, Freddie Mac, Fannie Mae, etc. are all heading south at a noticeable clip. These declining interest rates are fuel for the current Quick-term and Mid-term Bull market. The average investor dropping out of the stock market is added fuel for a solid bull market.

Many of the inflation-oriented commodities are taking on the appearance of cyclical peaks. That bodes well for cyclical downturns and relieving Greenspan from inflationary pressures. The CRB Bridge Futures is indicative of that behavior. It has turned south. If it forms a new cycle that is symmetrical to that of the past two cycles, then we should enjoy about six months of Greenspan relaxing.

Oil prices continue to express cyclical downward behavior. As you know, it can sky rocket with the first exploding bomb in the Middle East . Prices have been softening since Saudi’s royal family announced they would do their part stabilizing oil prices in the event of military conflicts in the Middle East .

Gold continues to hold up strongly, but takes on the physical appearance of peaking. Its rise was driven initially by inflation fears and then later by terrorists fear.

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

Fear Metrics: Economic and Terrorism

Much of the recent movement in the market is due to seasonal bullishness. However, there are good reasons for the mid-term election phenomenon. Politicians will legislate friendliness to the economy. They know Americans vote their pocket books. That is why the mid-term election phenomenon is an accurate predictor of market behavior in mid-term election years. Regardless of what politicians do, big money perceives their friendliness to the economy.

It has been well over a century since a foreign enemy in this country could kill Americans. The only exception to that is Pearl Harbor and 911. However, Americans have been killing each other in this country since it was founded. In that regard, it is not much different. The sniper in Washington D.C. and Maryland a few months ago just happened to be named Mohammed or some such thing. In the 1960’s a sniper killed several students in a matter of minutes in Austin , Texas . In the early 1990’s, a young man drove his truck into a Waco restaurant and killed over twenty people in a matter of minutes. A few months later, the U.S. Government attacked a building in Waco , Texas and killed nearly a hundred people. The world has its beauty and its beast. Always has and always will. We simply have another beast to deal with. What is different?

Fear needs its proper perspective. Fear does not always make the stock market go down. Strong fear allows for other profitable investment opportunities. That is why we offer this particular section in our weekly report. Right now, fear seems to be waning.

This paragraph remains unchanged since last week. Gold and Precious metals could have increased somewhat by virtue of Greenspan’s cut in interest rates. This is perceived as a precursor to inflation. This will impose downward pressure on the dollar.

The dollar continues to demonstrate across the board weakness against other major currencies. As long as interest rates remain low, that will not change. The weaker dollar can be inflationary alone, if the American consumer continues with an appetite for imported goods. A continuing weakening dollar may reduce demand for young burgeoning economies around the world. Such economic behavior could lead to more world tension.

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Twenty-three weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Sixteen weeks ago, it closed up 12.0% since the buy signal. Seven weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 42.3%. The Mid-term Indicant continues to signal hold for this fund.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty-one weeks ago since the MTI buy signal in April 2001. Fifteen weeks ago, it closed up 27.8%. Last week it closed up 45.3%. The Mid-term Indicant continues to signal hold for this fund.

As you can see, these two funds moved aggressively to the north as the market crashed and international tensions added fuel to their rise. Right now, those two funds are in a holding pattern. If international peace and international capitalism again asserted as the major paradigm for world order, then these two funds would collapse in price.

We will continue with the following observation until it becomes a non-issue. There is a growing underline consensus the war with Iraq will not happen and the fear of terrorism is waning. You can intuitively see that equities are beginning to win the tug of war with fear.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds will need to have avoid signals for the market to embark upon a meaningful and lasting bull leg. Right now, they are still signaling, “hold,” but appear to be nearing a sell signal.

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are Quick-term Bulls. They are up 5.5% (annualized at 65.0%) since the October 15, 2002 Quick-term Bull signals. However, the Short-term Indicant is not yet signaling any robust support. The Mid-term Indicant supports the Quick-term Indicant and that is enough for bullish confidence. If the Short-term Indicant were to signal bull, then we would be exuberant about the current bull. However, it is okay to be “confident.”

The Dow is down 19.0% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 66.6% since the Short-term Indicant signaled bear over two and a half year ago on March 30, 2000 .

Remember that the Short-term Indicant outperforms buy and hold alone. It is used primarily for confirming the legitimacy of Quick-term and Mid-term Indicant positions. Its behavior also indicates the relative position of the current secular bear market.

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

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

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

All eight major indexes are up an average of 4.6% since their respective Mid-term Bull signals an average of 3.8 weeks ago. This annualizes to 62.0%. The weakest Mid-term Bull is the Dow Utilities. It is the youngest bull and is up only 0.3%. The strongest bull is the NASDAQ100. It is up 11.0%.

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

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

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

Mid-term Indicant Positions - International Markets

There was one new bull signal and no new bear signals. The new bull was the Israel TA100. You will notice it is receiving a Mid-term Indicant Bull signal in the face of a constant barrage of terrorists’ attacks in Israel . It will be interesting to see how this new bull behaves and how long it will live.

The bulls are up an average of 16.3% since the Mid-term Indicant signaled bull an average of 19.3 weeks ago for an annualized gain 43.8%.

Three international markets are still bears. They are down an average of 11.7% since their respect bear signals an average of 18.8 weeks ago. Click the following hyperlink to view the status and charts.

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

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were no buy signals and no sell signals. You received a report earlier this weekend about that.

In addition to the buy signals, the Indicant is now signaling hold for 71 of the seventy-six mutual funds it tracks. The 71 funds with hold signals are up an average of 5.0% for an annualized gain of 41.5%. The average holding period is 6.3 weeks, compared to 22.7 weeks that was reported on October 18, 2002 when only ten funds were being held.

The Mid-term Indicant is avoiding five funds. They are down an average of 2.2% since the Indicant sell signals. The Indicant has been avoiding these bearish funds for an average of 2.5 weeks.

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

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

Mid-term Indicant Positions - Indicant Selected Stocks

11-18-02

Nov 10, 2002 Indicant Weekly Update

Volume 11, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

The Quiet before the Storm – Part VII

The storm turned out to be an unprecedented gain in Congressional seats by the Republican Party, Greenspan cutting interest rates by a significant amount, and the resignation of SEC Chairman Pitts. The departure of Pitts adds a tint of bullish flavor to the stock market.

In their defeat, Democratic leadership is whining. They claim the economic boom of the 1990’s was Bill Clinton’s economy. They complain the current recession is George W. Bush’s economy. They are wrong on both counts. As most of you know, expressing honest perspectives by politicians is not their character.

The 1990’s booming economy was stimulated by a do-nothing government and hard-working people. The Y2K effort generated abnormal employment of high skilled labor. It also fostered additional high tech creativity. After Y2K initiatives were no longer necessary, many high skilled workers were unemployed. The economy started softening in the spring of 2000, while Bill Clinton was president. Economic cyclical movement and trends do not turn on a dime.

The current recession was stimulated in part due to dilettante management in Fortune 500 companies. These managers were cut from the same character mold of Bill Clinton. Many corporate chiefs think they are leaders. Many sociologists claim the president of the United States establishes examples of leadership. That way children will better behave. Hopefully, moms and dads kept their children censored on the escapades of Bill Clinton. The dilettante managers of the 1990’s “followed” the Bill Clinton example. They believed it was okay to lie, cheat, and steal. That is what they did by virtue of Bill Clinton’s example. There is a solid argument for what sociologists claim.

Many corporate leaders of the 1990’s were finally exposed in late 2000. Enron was the first. Tyco was second. Aldelphia, MCI, and a host of others followed suit. Those corporate leaders gave up on honesty. Being dishonest is a clear indication of weak character.

George H. Bush won the election of 1988 with a pledge, “no new taxes.” A few years later there were new taxes endorsed by papa Bush. Regardless of the sincerity he may have possessed at the time of his pledge, he did not keep his word. That is dishonest and a clear indication of the nature of one’s character. In that case, the lie occurred before the event. In Bill Clinton’s case, the lies occurred after the event. Is one lie worse than the other? I suppose there are several opinions on that.

George W. Bush won the election of 2000 due, in part, to his pledge of a tax cut. So far, so good. He has an opportunity to do something great for this country. For the first time in several decades, Republicans control the executive and both legislative houses.

Number One. Cut the capital gains taxes by a significant amount. Actually abolishing it outright would be the better step. Why should a risk taker be penalized for success? It is the risk takers who create aggressive economic growth. The economy would no longer have the noose around its neck.

Number Two. Implement a flat tax. Reduce everyone’s income tax forms down to a single 5.5” x 8.5” form. Imagine how many hours of productive thought could be gained with a single page form.

The most honest person can be elected to public office. Upon arrival to Washington D.C. that person is immediately corrupted. Pappa Bush had character, as a World War II hero, but he got into politics and wound up in Washington DC where character is lost. The system is corrupt. Legislatures are no longer competing when they get there. They no longer have to live within a budget that is intended to produce profit. To get there, they have to tell their locals they would provide government funded programs to the local economy. That means they have to participate in taking money from other locales to fund their local interests. That is why the system is corrupt. To keep their jobs, they must continue taking from others. In that “scratch my back and I will scratch your back” world of Washington D.C. politics, corrupt behavior is impossible to deny.

For years, Republican leadership has promoted reduced capital gains taxes and a flat income tax. Now they have the chance to promote their prior agenda’s. Remember, politicians cannot help the economy, but they can sure hurt it. The economy has been dampened by politicians for centuries. The economy does not need them.

Will the politicians give up their falsely acquired powers with a flat income tax. Their importance would be diminished if income tax were simplified. Politicians get huge annuities from the government. They do not need to take risks. Capital gain is something very few of them will have to deal with after leaving office. So, why push that through. There is no “personal” benefit for them. However, there is nothing wrong with you writing your politicians and telling them you are tired of being penalized for your success and not receiving any benefits for your failures.

Most of the above commentary is meaningless. Why? Because very little will happen. And who cares?

The point under consideration is all about perception. If investors believe the Republicans will legislate friendliness to the economy, then the stock market will go up. Regardless of what really happens, it is the perception that is important. With the Republican sweep in the recent election, you can expect that perception to be played out by the powers in government. And with that, you can expect a rising stock market until the next election.

The resignation of SEC Chairman Pitts and Greenspan’s interest rate cuts should help the stock market enjoy its mid-term election year bull. It has begun. If history repeats, this bull should last at least until 2004.

One strategic view of the future: (A repeat with commentary)

1. Defer the war with Iraq until 2004 elections.

This is still possible, but may not be necessary. The UN supports the president and did so too close to the election to allow Bush an earlier war. However, Bush may pursue an early war so he and pals can focus on the economy prior to 2004. There will be other opportunities for vote getting military conflicts in 2004. Saddam Hussein is not the only culprit out there.

2. Ensure democratic control of house and senate until 2004 elections.

            Bush and friends were surprised by their success in the 2002 mid-term elections. A plane crash in Minnesota helped that outcome. The Republicans can accomplish the same thing. By winning the majority in both Houses, the Republicans have two short years to show their stuff. We’ll see!

3. Veto all the stupid ideas by the Democrats since FDR, fostering a “do-nothing” government.

            This is an on-going process anyway. The electronic age and technology is slowly and surely eroding the power of non-producers.

4. With the “do-nothing” government, the economy will improve.

            This should happen anyway. The only added punch to the economy is to undo the past fifty years of legislative stupidity by eliminating the capital gains tax and pushing through a flat tax.

5. Prosperity will increase.

            This is entirely dependent on the economy. Greenspan apparently sees some threats to this and we all know he has Republican inclinations. After all, Ronald Regan appointed him.

6. Through covert operations, let or help Saddam Hussein do something stupid so the entire world will hate him, including many Arabs.

            Saddam Hussein’s first priority is to stay alive and stay in power. The weapons inspectors are on their way. And the world, for the most part, hates him already. Unfortunately, nearly as many in world hate Americans.

7. Through covert operations, help the North Koreans do something stupid so the entire world will hate them.

            This is still very likely and could be George Bush’s opening for additional “vote getting” military conflicts by the 2004 elections.

8. Wage war in October-November 2004 with Saddam Hussein and possibly North Korea .

            Very likely depending on future North Korea aggression.

9. Bush wins the election in 2004.

            This is entirely dependent on the economy or if the country is at war.

10. Regain control of the House and Senate.

            This was accomplished slightly ahead of schedule. Can the Republicans keep it.

10.1 -> Added 11/03/02 . Secular bear market returns with full force in April 2005 and lasts until 2008.

11. Push through whatever legacy the president wants.

12. Leave office in 2008 with a big grin.

Divergence versus Convergence

Divergence is detected in the biotechnology stocks. They moved south in the past few weeks, but are now rebounding. Too many advisories suggested “buy” on these stocks in early October. Consequently, stocks and associated funds nose-dived during the past weeks. However, many biotech stocks received buy signals this week. You will notice the Indicant is tracking several new biotech stocks. The baby boomers are getting older and many of them simply do not want to die. That bodes well for capital investments into the biotech sector.

Economic Outlook

Greenspan has decided to favor the economy right now with his interest rate cut. This will further weaken the dollar and add fuel to inflation. The only commodity that favors an anti-inflation posture is oil. It has been declining in price since the Saudis guaranteed stable supply even if bombs away over Iraq . With that, Greenspan may be able to hold interest rates low enough for the baby bull market to grow and potentially build a legacy of its own. George W. Bush will certainly be helping that out.

The CRB Bridge Futures appears to have pinnacled. Greenspan looks at that. If it declines, then the reduction in rates last Wednesday can hold. We will keep our eye on it as it will influence Greenspan next spring. That will also influence the stock market. However, it is currently believed the influences of the secular bear will return after 2004. Until then, expect a general bullish trend.

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

Fear Metrics: Economic and Terrorism

After a few weeks of being bouncy, the fear element reasserted this past week with the UN backing Bush’s edict to disarm or face the consequences. The fear element is a little bouncy at what appears to be a pinnacle. The Gold and Precious Metals Options Index received a bear signal two weeks ago. It is up 14.1% since then, but still below the long-term blue curve. This bounce to the north is temporary provided inflation is held in check and fear of terrorism and war subside. As soon as Saddam Hussein disarms and allows weapons inspectors to return to Iraq , the fear element should subside.

Gold and Precious metals could have increased somewhat by virtue of Greenspan’s cut in interest rates. This is perceived as a precursor to inflation. This will impose downward pressure on the dollar.

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Twenty-two weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Fifteen weeks ago, it closed up 12.0% since the buy signal. Six weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 42.8%. The Mid-term Indicant continues to signal hold for this fund.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty weeks ago since the MTI buy signal in April 2001. Fourteen weeks ago, it closed up 27.8%. Last week it closed up 47.1%. The Mid-term Indicant continues to signal hold for this fund.

As you can see, these two funds are now increasing in light of the two primary fear elements; war and inflation.

We will continue with the following observation until it becomes a non-issue. There is a growing underline consensus the war with Iraq will not happen and the fear of terrorism is waning. You can intuitively see that equities are beginning to win the tug of war with fear.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds will need to have avoid signals for the market to embark upon a meaningful and lasting bull leg. Right now, they are still signaling, “hold,” but appear to be nearing a sell signal.

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are now Quick-term Bulls. However, the Short-term Indicant is not yet signaling support.

The Dow is down 19.4% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 67.8% since the Short-term Indicant signaled bear over two and a half year ago on March 30, 2000 .

Keep in mind, the Short-term Indicant outperforms buy and hold alone. It is used primarily for confirming the legitimacy of Quick-term and Mid-term Indicant positions. Its behavior also indicates the relative position of the current secular bear market.

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

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

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

The Mid-term Indicant signaled new bulls for seven of the eight major market indexes on October 18, 2002 . Those seven bulls are now up an average of 3.4% (annualized at 107.2%). The Mid-term Indicant signaled bull for the Dow Jones Utilities this past weekend.

All eight major indexes are up an average of 3.4% since the Mid-term Bull signal. This annualizes 80.7%. Seven of eight received bull signals on October 18,2002 .

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

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

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

Mid-term Indicant Positions - International Markets

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

The bulls are up an average of 15.0% since the Mid-term Indicant signaled bull an average of 18.2 weeks ago for an annualized gain 43.0%.

Four international markets are still bears. They are down an average of 9.2% since their respect bear signals an average of 15.0 weeks ago. Click the following hyperlink to view the status and charts.

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

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were no buy signals and two sell signals. You received a report earlier this weekend about that.

In addition to the buy signals, the Indicant is now signaling hold for 71 of the seventy-six mutual funds it tracks. The 71 funds with hold signals are up an average of 3.5%, which is down from 11.6% three week’s ago. This reduction is due to a combination of the newness of the funds with hold signals and the pausing bull. The 3.5% gain annualizes to 35.5%. The average holding period is 5.1 weeks, compared to 22.7 weeks that was reported three weeks ago when very few funds were being held.

In addition to the sell signals, the three avoided funds are down 2.8% since the Indicant sell signals. The Indicant has been avoiding these bearish funds for an average of 2.3 weeks.

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

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

Mid-term Indicant Positions - Indicant Selected Stocks

11-10-02

Nov 3, 2002 Indicant.Net Weekly Update

Volume 11, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

The Quiet before the Storm – Part VI

The strategic outlook in the next section appears to be increasing in credibility. Strategic planning seldom conveys the accurate predictions. Strategic planning helps you decide what to think about and study. It helps organizations and individuals modify behavior for profit. The wild turns and swings of nature are not as surprising when one practices strategic planning. When one is not surprised, then the element of panic is eliminated. With that, better decisions are made and much more crisply.

A strategic plan about the stock market is different than most strategic plans. The strategic planner (you and I) have no control over the market’s direction. Corporate America has control over their internal processes and the individual has control over all of their investment choices. The Indicant’s primary focus is on market direction. It does have a few strategic variables, such as political and economic data. One strategic variable is the mid-term election year phenomena. Many of you have seen how that can help. Anticipating future events helps guide current behavior for future economic gain.

In the early 1980’s we performed several strategic plans for a major corporation. It was updated every year. Much of the strategic planning data used external resources, such as economists reports on the S&P500, inflation, etc. It was amazing how little accuracy there was in these reports. Rather than trashing the reports, we found it advantageous to study error. In some instances it is easier to predict the error of a predicted event than predicting the event itself. Knowing the error directly predicts the event. After years of doing this, we found that no forecast is without error and if you could predict the side the error was going to be you were a step ahead of the competition. Errors are either positive or negative. In many cases that is all you need to know. If the market goes down by 20% or 50%, what does it matter? Who cares about magnitude. Direction is all that matters, unless some of you don’t mind losing twenty percent, but would find losing fifty percent unacceptable.

After a few years of using mostly external information, we developed more internal strategic data. We aggressively pursued productivity improvement in operations. We identified eighty-seven competitors in one product line. We learned their costs and marketing strategies. Our productivity methods kicked in and we aggressively lowered prices. Our gains in productivity allowed margin protection. Four years later, we had four competitors. The other eighty-three went bankrupt or discontinued competing.

During that four-year period, we learned to monitor the errors of external information that was seldom accurate. When the economy or political climate shifted from the “expected” we were never “surprised.” Panic never set in and clouded accurate thinking. All we had to do was quickly implement one of our pre-thought contingency measures. We were never “surprised.” Consequently, we never had to employ voodoo bookkeeping. We never had to react in a state of shock.

We used information from Harvard Research, Stanford Research Institute, Wharton School of Econometrics, etc. They were never accurate, much like the Harvard Professor’s projection that stock prices had bottomed in August 1929. Two years later stock prices were down 90% from the time of his statement. He had not done strategic planning. He lived off intellectualism, as opposed to reality. CNBC has a whole slew of those types all the time.

During the 1980’s and 1990’s marketing tactics and a rising stock market brought on a new breed of corporate leaders. They were the “hype” types. You know the “all form” and “no substance” types. Many of them still have their jobs. They are incapable of strategic thinking. It takes a discipline and an ability they simply do not possess. That is why many of you do not work for corporate America . Some can see through the hype and others rally around the hype. Most see right through it. Ninety percent of all new job growth comes from small business. The seven digit salaries paid to corporate America “hirelings” prevent positive effort on their part. Most of their time is spent making their surroundings and environment comfortable. Cronyism and credentialism facilitate that at the expense of the shareholder.

When the Exxon Valdez corrupted the Pacific waters off Alaska a few years ago, the CEO was notified at 10 AM CST . He was at home. It was a weekday. Why was a CEO at home at 10 AM on a weekday? He was just being comfortable.

Strategic planning involves getting into the minds of your foe. A bear market is your foe. It is also George Bush’s foe. Low interest rates are your foe, if money market accounts and CD’s are influencing your net worth. A bear market with low interest rates is strategically tantalizing. Do you continue earning 1% and allow the CPI erode your net worth? Do you buy bonds and hope the ones you buy will never be subjected to voodoo bookkeeping? Do you jump into a stock market that has demonstrated declines of 70%?

A bear market and soft economic conditions keeps George W. Bush a one-term president. It would be especially hard on his ego to follow the path of his “no new taxes” poppa. So George must do what he can to help propel the market to the north. The economy must heat up or he is off to Texas and playing golf with dad in 2004.

The mid-term election year phenomenon is alive and well. Enjoy, but keep your yawning to a minimum. The stock market is like a 1900 hurricane. It is sunny and mild outside - a beautiful day. Without radar or electronic communications, it hits the coast with a vengeance, wreaking death and damage. In 1900 there was no radar and a strategic plan. When the storm hits, it is too late to do anything about it.

One strategic view of the future: (A repeat with modifications)

Note new entry at step 10.1.

1. Defer the war with Iraq until 2004 elections.

2. Ensure democratic control of house and senate until 2004 elections.

3. Veto all the stupid ideas by the democrats, fostering a “do-nothing” government.

4. With the “do-nothing” government, the economy will improve.

5. Prosperity will increase.

6. Through covert operations, let or help Saddam Hussein do something stupid so the entire world will hate him, including many Arabs.

7. Through covert operations, help the North Koreans do something stupid so the entire world will hate them.

8. Wage war in October-November 2004 with Saddam Hussein and possibly North Korea .

9. Win the election.

10. Regain control of the House and Senate.

10.1 -> Added 11/03/02 . Secular bear market returns with full force in April 2005 and lasts until 2008.

11. Push through whatever legacy the president wants.

12. Leave office in 2008 with a big grin.

Divergence versus Convergence

There is little measurable difference between convergence and divergence. Oil field services are bouncy at the top. If Middle East peace ensues and the Russians continue their friendly pace, expect oil prices to drop. The stock market will seesaw north and the oilfield service stocks will seesaw south. Divergence was building last week, but the gap is narrowing. During periods of convergence, it is hard to be wrong. During periods of divergence, you want to be on the upside of the seesaw. The Indicant will spot which side of the seesaw to be on.

Economic Outlook

Interest rates are maintaining historical configurations. They are flat and at historical lows. The economy continues to grow at modest rates. The biggest threat is inflation, but oil prices appear to be poised for a decline. They are now in neutral territory.

If the CRB Bridge Futures continue to rise, there is little doubt that will ultimately influence the Consumer Price Index, which is inching upward. That is Greenspan’s bible. If the CRB Bridge Futures start a cycle to the south, then Greenspan may back off on jacking rates up next spring when the market will stall at its seasonal high.

The remainder of this paragraph is unchanged from the past few weeks. The U.S. Dollar remains weakened but as stated the past few weeks it is showing signs of strengthening. A strengthening dollar and stabilizing commodity prices will influence Greenspan to hold interest rates steady. But rest assured, he has no intentions of offering an immediate rate drop.

The Japanese Yen is weakening against the dollar. If it continues to do so, the best cars in the world will become cheaper; not a good sign for Detroit . Ford continues to shrivel. GM is one of the few avoided Dow 30 stocks. It is down 21% since the September 20, 2002 bear signal.

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

Fear Metrics: Economic and Terrorism

The fear element is a little bouncy at what appears to be a pinnacle. The Gold and Precious Metals Options Index received a bear signal two weeks ago. It is up 3.8% since then, but still below the long-term blue curve. It is mirror imaging several of the inflation indexes. There is some indecisiveness right now. The longer-term strategic plans include major wars will be deployed just prior to the 2004 election to help ensure a Republican sweep.

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Twenty-one weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Fourteen weeks ago, it closed up 12.0% since the buy signal. Five weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 36.4%. The Mid-term Indicant continues to signal hold for this fund.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% twenty weeks ago since the MTI buy signal in April 2001. Thirteen weeks ago, it closed up 27.8%. Last week it closed up 38.8%. The Mid-term Indicant continues to signal hold for this fund.

As you can see, these two funds have been stabilizing after a few months of significant volatility. Their recent behavior indicates a softening in the fear element, but not enough to get a sell signal. Inflation is a growing threat and these two funds will help ascertain the market’s perception of that more than the reality of that. Perceptions rule the market.

We will continue with the following observation until it becomes a non-issue. There is a growing underline consensus the war with Iraq will not happen and the fear of terrorism is waning. You can intuitively see that equities are beginning to win the tug of war with fear.

As stated in the past you can monitor these two funds to help you gauge fear related investments. These two funds will need to have avoid signals for the market to embark upon a meaningful and lasting bull leg. Right now, they are still signaling, “hold,” but appear to be nearing a sell signal.

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. All eight major indexes are now Quick-term Bulls. However, the Short-term Indicant is not yet signaling support.

The Dow is down 19.5% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 67.8% since the Short-term Indicant signaled bear over two and a half year ago on March 30, 2000 .

Keep in mind, the Short-term Indicant outperforms buy and hold alone. It is used primarily for confirming the legitimacy of Quick-term and Mid-term Indicant positions. Its behavior also indicates the relative position of the current secular bear market.

Additional Quick-term and Short-term Indicant information was in the preliminary report you received earlier this weekend. If you already deleted it from your email inbox, you can find it and all other back issues at the following link.

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

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

The Mid-term Indicant signaled new bulls for seven of the eight major market indexes on October 18, 2002 . Those seven bulls are now up an average of 3.4% (annualized at 107.2%). The Mid-term Indicant signaled bull for the Dow Jones Utilities this past weekend.

We continue to believe the mid-term election year phenomenon has now kicked into play.

For those of you, who have not looked at the mid-term election year phenomenon, please click on the following link. It will take you directly to the charts with market behavior following mid-term election year behavior.

http://www.indicant.net/Members/Updates/History-Seasonal/HS0090.htm

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

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

Mid-term Indicant Positions - International Markets

There was one new bull signal and no new bear signals.

In addition to the new bull signal, 17 older bulls are up an average of 15.6% since the Mid-term Indicant signaled bull an average of 18.2 weeks ago for an annualized gain 44.6%.

Four index options are still bears. They are down an average of 10.3% since their respect bear signals an average of 14.0 weeks ago. Click the following hyperlink to view the status and charts.

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

Mid-term Indicant Positions - Mutual Funds (Timing the Sectors)

There were five buy signals and no sell signals. You received a report earlier this weekend about that.

In addition to the buy signals, the Indicant is now signaling hold for 68 of the seventy-six mutual funds it tracks. The 68 funds with hold signals are up an average of 3.7%, which is down from 11.6% two week’s ago. The 3.7% gain annualizes to 37.3%. Two weeks ago the annualized gain amounted to 26.7%. The reason the actual gain is down and the annualized gain is up is due to the newness of the funds being held. The average holding period is 5.2 weeks, compared to 22.7 weeks that was reported two weeks ago when very few funds were being held.

In addition to the sell signal, the fourteen avoided funds are down 11.0% since the Indicant sell signals. The Indicant has been avoiding these bearish funds for an average of 8.9 weeks.

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

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

Mid-term Indicant Positions - Indicant Selected Stocks