Oct 27, 2002 Indicant.Net Weekly Update

Volume 10, Issue 4 ISSN 1526 6516 © The Indicant Stock Market Report

  The Quiet before the Storm – Part V

We are now less than three weeks from the mid-term election and about ten weeks remain for this year. It is appearing more and more that the mid-term election year phenomenon of finding major market bottoms is unfolding. As stated last week, it is appearing more and more that big money now believes the war with Iraq is not around the corner.

There is no such thing as a sure thing. History quite often repeats itself. On the other hand, when you expect the repeat, it does not occur. This is one of those instances where the perfect record of the mid-term election phenomenon will continue. Again, it looks as if we are about to embark upon a meaningful and lasting bull market. It should last for at least two years. During that time, we will have about six to ten Quick-term Bull/Bear cycles.

Keep in mind we are in a secular bear market. The NASDAQ will not see 5,000 for the balance of this decade. Hey, that sounds like a forecast. Well, such a forecast is harmless enough. Remember, the Indicant does not officially forecast the market. We could care less if the NASDAQ again sees 5000 this decade. The Indicant is a heuristic. It focuses only on direction. Every now and then, on a cold and wintry day, we look at forecasting as an added service and we continue to arrive at the same conclusion. Forecasts are always wrong. It is a waste of time to do so, but the idea of knowing the future is very compelling. Many financial services do this all the time and they are wrong all the time.

That is why we try to blend our assessment of the market in two ways; words and numbers. Excessive focus on one is incomplete. We attempt to do both. The Indicant focuses on direction and attempts to avoid surprises.

When events unfold that were not anticipated, the emotional hangover stimulates irrational behavior. There are two types of emotional hangover; favorable and unfavorable.

In late 1999, the NASDAQ took off for the stars. Its explosion to the north was unprecedented. That movement to the north began to feed on itself. There was a favorable emotional kick to the market. Everybody was getting rich. Irrational behavior induces false thinking. That momentary feeling of wealth was short-lived.

In early 2000, the exact opposite occurred. The market began its long and nasty slide to the south. Unfavorable emotions kicked in. Many people held those $50 stocks that are now selling for less than a dollar. Low performing managers irrationally wanted a piece of the action and started lying on their financial reports. Voodoo bookkeeping was invented.

Everyone wanted to participate in the market’s explosive growth. A high number of people joined the financial industry. Mutual Funds exploded with more than 75% failing. Thousands of people at Enron lost their retirement.

Irrational behavior ensued on the up ticks as well as the downticks. In the end, it always averages out.

Irrationality invites higher volatility. High volatility can be good as that is an excellent source for individual profits. This year did not offer normal volatility. Each Quick-term Bull occurred on a severe drop to the south. The Quick-term Bear from April through August was one of the longest Quick-term Bears on the Indicant record. That was one of the most obvious and easiest to see. During the market’s decline from April through August, each major up move was obviously fake. The up move in August was especially difficult because it is a mid-term election year. Its perfect record could not be ignored.

The mid-term election year phenomenon is irrational, but the record is perfect. Politicians do not go to work everyday and produce a product or service of value. Therefore, they have nothing to do with a growing economy. In that sense, it is irrational the mid-term election year phenomenon has a perfect record. Again, perfect records are not to be ignored.

On the other hand, politicians have a lot to do with exerting negative influences on the economy. They can pass stupid legislation that makes the job of producing values harder. The stupid programs of FDR propogated over twenty years of a do nothing stock market. It took twenty-five years for hard working Americans to overcome the suppression of government from 1925 through 1950. In that sense the mid-term election year phenomenon has a degree of rationality supporting it. Politicians know that Americans will vote their pocket books in national elections.

The economy has natural boom/bust cycles in it. They teach that sort of thing in the Ivy League schools, which is where most of our presidents go to college. When politicians first take office, they induce/allow legislation that is unfavorable to economic growth. They want to expedite the down cycle so they can have the up cycle in place when their reelection bid takes place. They know they will not be reelected if the economy is down.

The basic nature of a politician is to “lead” and “control” huge numbers of people. It is all founded in self indulgence. They love to talk and tell the world how to behave. They are a hold over in genetic make up from the tyrants who use to try to conquer the world. The last one was Hitler. It is people like Hitler who give rise to Americans support of politicians. Our politicians know that Americans will think, the only two options for political leadership is Hitler or me! As harsh as it may sound, politicians actually like a tyrant or two on the world stage.

The electronic age is throwing these cycles off. George W. Bush did not have to stimulate this recession. It was already underway during the waning months of Clinton ’s final term. George H. Bush lost the election in 1992 due to the recession. He thought his victory in war would carry his popularity through to a reelection bid. But, he learned the lesson again and that is “Americans vote their pocket book on election day.” You can bet that George W. Bush knows this. Thus, this mid-term election year phenomenon will keep its perfect track record in order. “The market’s bottom is now behind us.”

One strategic view of the future: (A repeat from last week, as its accuracy is building)

- Defer the war with Iraq until 2004 elections.

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

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

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

- Prosperity will increase.

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

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

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

- Win the election.

- Regain control of the House and Senate.

- Push through whatever legacy the president wants.

- Leave office in 2008 with a big grin.

Divergence versus Convergence

This has not changed since last week. Divergence is building. There is an obvious shift in increased demand for equities and a reduction in demand for fear related investments. The oil field services stocks continue to hold up, but not nearly as strong as other equities. Fear related investments are losing popularity at this time.

Economic Outlook

Last week we helped in the observation that inflationary threat are waning, slightly. This week, we see something slightly different. The CRB Bridge Futures continues heading north. And with some gusto. This is not good. Greenspan looks at this one with a keen eye. He also looks at the stock market. His strategy is most likely to allow the seasonal bull leg to take hold, which is now underway. He will most likely begin his jacking up of interest rates next spring or early summer. That may be an excellent time to short stocks or buy put options.

If the CRB Bridge Futures continue to rise, there is little doubt that will ultimately influence the Consumer Price Index. 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. We will continue to monitor.

The remainder of this paragraph is unchanged from last week. 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 is already shriveling up and the others have been taking future sales from the market with price incentives. Even Detroit ’s’ cars are getting better, but mostly due to using more Japanese component content. That means they will perform better and last longer. That does not bode well for future sells. But once the twenty years of corporate stupidity in Detroit is cleansed then their better cars will help their businesses become less cyclical. All it will take is more and more Japanese parts. Detroit has been dumping their manufacturing operations since 1990 due to the profound number of incompetent managers that wormed their way to the top of those parts plants.

Let me point out there are exceptions to this about some of those managers. Several of them were excellent ones. But for every good one, you had ten bad ones. The Accord and Camry success proves the point.

Oil prices continue to weaken. Apparently big money strategic planners have concluded the war with Iraq will now be held just prior to the 2004 elections. A good war will ensure the reelection of George W. Bush. Gold prices appear to be topping on an up cycle giving further credence to reducing emotions of fear.

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

Fear Metrics: Economic and Terrorism

The fear element continues to weaken. The Gold and Precious Metals Options Index received a bear signal one week ago. It moved up slightly last week, but still is below the long-term blue curve. Movements toward two more years of peace will cause that index to move to the south. That is especially true if the economy heats up a little more.

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Twenty weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Thirteen weeks ago, it closed up 12.0% since the buy signal. Four weeks ago, it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 31.4%. The Mid-term Indicant continues to signal hold for this fund.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% nineteen weeks ago since the MTI buy signal in April 2001. Twelve weeks ago, it closed up 27.8%. Last week it closed up 35.5%, which is up slightly from the prior week.

As you can see, these two funds are enduring increasing volatility. Their recent behavior indicates a softening in the fear element. 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 20.2% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 68.5% 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

The Mid-term Indicant signaled new bulls for seven of the eight major market indexes last week. Those seven new bulls are up an average of 2.3% (annualized at 118.5%). The lone bear is the Dow Jones Utilities. It is down 20.4% since the bear signal on September 6, 2002 .

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 were four new bull signals and no new bear signals.

In addition to the four new bull signals, the there are thirteen older bull indexes that are up an average of 19.9% since the Mid-term Indicant signaled bull an average of 22.5 weeks ago for an annualized gain 46.1%.

Five index options are still bears. They are down an average of 8.2% since their respect bear signals an average of 11.2 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 ten buy signals and three sell signals. You received a report earlier this weekend about that.

In addition to the buy signals, the Indicant is now signaling hold for 58 of the seventy-six mutual funds it tracks. The 58 funds with hold signals are up by an average of 3.2%, which is down from last week’s 11.6%. The 3.2% gain is annualized at 35.5%. Last week that annualized gain amounted to 26.7%. The reason the actual gain is down from last weeks and the annualized gain is the opposite is due to the several new buys last week. The average holding period of the funds is now 4.7 weeks compared to last week’s 22.7 weeks.

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

10-27-02

Oct 20, 2002 Indicant.Net Weekly Update

Volume 10, Issue 3 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

The Quiet before the Storm – Part IV

Can you imagine a small country saying to the world, “Hey, what about us? We also are developing nuclear capabilities.” That small country has nothing in common with Saddam Hussein, except a disdain for the United States . Did the North Koreans make their announcement by their own volition or did U.S. political strategists help propagate this new angle on foreign policy? We will never really know the answer to that question. A theory is offered later in this paper, which of course, relates to the impact on the stock market.

It is becoming more obvious that big money strategists are concluding there will not a war with Iraq . Furthermore, there is an obvious shift from fear related investments to equity investments. Although corporate earnings are somewhat mixed, there is a slant in favor of improving corporate profits.

The investment community is gaining confidence in the reported earnings as some of the voodoo managers are going to jail. The big one is Andrew Fastow, Enron’s former chief voodoo bookkeeper. The reason he is targeted is that he is not a member of the energy circle of friends. Kenneth Lay, former CEO of Enron, is in that energy circle of good ole boys and will most likely not be punished.

There should be an increasing bullish sentiment, as the investment community gains confidence in the numbers reported by corporations. This increased confidence is obvious from the following:

- The Mid-term Indicant signaled bull for seven of the eight major market indexes.

- The Mid-term Indicant signaled bull for twenty-two of the option indexes.

- The Mid-term Indicant signaled bull for eight international markets, leaving only five bears. The world is gaining confidence in peace prospects.

- The Quick-term Indicant signaled bull last week.

- The Mid-term Indicant is now avoiding only 109 stocks and funds out of 295 it tracks.

- The Mid-term Indicant signaled “buy” for fifty-one mutual funds this past week.

- The Mid-term Indicant is now avoiding only six of the Dow Jones 30 stocks.

- The Mid-term Indicant signaled “bear” for gold and silver index options, meaning fear is waning.

All of the above points support a bullish demeanor in the stock market. But keep your eyes on the Short-term Indicant. If it continues to signal bear, you should not relax. It has been over two and a half years since the Short-term Indicant signaled bull for the NASDAQ, which is down nearly 70% since the Short-term Bear signal on March 30, 2000 .

Fundamentally, there are other reasons for the increasing confidence in equities:

The mid-term election year phenomenon is kicking into play. It has a perfect record since the 1920’s of finding market bottoms. We have less than ten weeks remaining for this phenomenon to maintain its perfect record of accomplishment. As we near the end of October, we near the end of the scariest month to be in stocks.

We are now entering a period of bullish seasonality. The market typically does well from November through April.

Political fervor will favor economic activity, as the incumbents know Americans vote their pocket books on Election Day. The 2004 elections are just around the corner. The focus of politicians and especially George W. Bush will be to ensure the publics’ wallets are thick with cash on the second Tuesday of November 2004.

People have been earning slightly above one percent on their money market accounts and CD’s for about two years. The consumer price index is up slightly over 1.7% in the past year. If you are earning less than that, your net worth is eroding. What does one do when there is a slight erosion in one’s net worth? The cure has always been to buy stocks.

That two trillion dollars setting on the sidelines is still there. Many expected that money to penetrate the equity markets earlier this year, but it did not. Voodoo bookkeeping and management stupidity acted as a propellant to any insertion of money into the stock market. The erosion in net worth will start being more noticeable in the next few months and years. That will increase the demand for stocks. However, keep in mind; we are in a secular bear market. The NASDAQ will not see 5000 again in this decade.

If there is no war with Iraq , the president will be giving up seats in Congress. The incumbent always loses seats if there is no war. That may induce a “do-nothing” government. The economy and the stock market do well when the executive and legislative branches do not get along with one another. Maybe George W. Bush has figured that out and is deciding to allow a “do nothing” government to manifest itself. It is sort of like playing chess. Sacrifice the queen to get the opponent’s king is what could be in the cards. By allowing the democrats to take control of the house and senate, he will increase the likelihood of his reelection in 2004. A president would much rather be a two termer, as opposed to having control over the legislative branch of government. He has the added pressure of not being a one-term president like his father who helped induce the recession in the early 1990’s that caused his defeat at the hands of Slick Willy.

The president may elect to defer the war with Iraq until the 2004 elections. He would have a much greater chance of gaining control over the legislative branch for his second term. That way he will enhance his chances of embellishing whatever legacy those guys look for in their political careers.

One strategic view of the future:

- Defer the war with Iraq until 2004 elections.

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

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

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

- Prosperity will increase.

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

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

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

- Win the election.

- Regain control of the House and Senate.

- Push through whatever legacy the president wants.

- Leave office in 2008 with a big grin.

Divergence versus Convergence

Divergence is building. There is an obvious shift in increased demand for equities and a reduction in demand for fear related investments. The oil field services stocks continue to hold up, but not nearly as strong as other equities. Fear related investments are losing popularity at this time.

Economic Outlook

Inflationary threats are waning, slightly. If you look at the charts, you would disagree as most of these indicators are moving in an inflationary direction. If you look closer, you will notice the cycles appear to be at a maximum. That is not to say they are at a maximum, but they are softening at what appears to be a peak. Weak economic activity should minimize demand for these resources and with that a reduction in price.

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.

All interest rates continue to remain at historically low levels. It would not be surprising to see an increase in rates in the near future.

Greenspan is in no hurry to accelerate interest rates, but rest assured at the first signs of an improved economy with peace on the horizon, he will have to begin a series of increases to ensure inflation is not a threat.

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

Fear Metrics: Economic and Terrorism

The fear element continues to weaken. The Gold and Precious Metals Options Index received a bear signal this past week.

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Nineteen weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Twelve weeks ago, it closed up 12.0% since the buy signal. Three weeks ago it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 30.7%. That is down slightly from the prior week. The Mid-term Indicant continues to signal hold for this fund.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% eighteen weeks ago since the MTI buy signal in April 2001. Eleven weeks ago, it closed up 27.8%. Last week it closed up 32.3%, which is down from the prior week.

As you can see, these two funds are a little bouncy, but the trend favors a softening in the fear element. 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.”

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 21.4% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 69.5% 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

The Mid-term Indicant signaled new bulls for seven of the eight major market indexes. The lone bear is the Dow Jones Utilities. It is down 26.7% since the bear signal on September 6, 2002 .

We 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 were eight new bull signals and no new bear signals.

In addition to the five new bull signals, the there are five older bull indexes that are up an average of 54.8% since the Mid-term Indicant signaled bull an average of 55.8 weeks ago for an annualized gain 51.0%.

Nine index options are still bears. They are down an average of 6.2% since their respect bear signals an average of 9.7 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 fifty-one buy signals and one sell signal. You received a report earlier this weekend about that.

In addition to the buy signals, the Indicant is now signaling hold for ten of the seventy-six mutual funds it tracks. The ten funds with hold signals are up by an average of 11.6%.

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

10-20-02

Oct 13, 2002 Indicant.Net Weekly Update

Volume 10, Issue 2 ISSN 1526 6516 © The Indicant Stock Market Report  

This Week’s Report

The Quiet before the Storm – Part III

Congress acquiesced and decided to provide the green light for George Bush’s war with Iraq . As we have been saying, such a war will minimize the number of congressional seats the incumbent typically loses in mid-term election years.

You can see the nature and character of politicians. In 1998 Democractic leaders were eager to support a war with Iraq . In 2002 they resist it. It is obvious the only thing that motivates those people is political power, as opposed to justifiable reasons to engage in war.

How will this influence the stock market? It is difficult to believe the market can continue busting to the north with the high probability of war looming on the immediate horizon. The election is less than four weeks away. The “political” purpose of the war will not be realized if the first shots are fired after the election. Consequently, you can expect the war to start before the first full week of November.

The stock market typically dips on the first shots. If Americans die, it dips even more on the loss of their lives. These war dips are typically short-lived. After the shock of war, the market will set forth whatever direction it would with or without war. The nature of the war influences the magnitude of that direction, but not the direction itself. The Indicant strives to figure out the direction. The magnitude of the direction will always be too elusive. That is why stock market forecasters are quite often wrong.

Once the mid-term elections are over, the incumbent must immediately set forth a game plan that will ensure a “feeling” of prosperity for the American people by 2004. That is why bull markets typically begin in mid-term election years. Politician’s only influence on the economy can be negative. You and I are the only positive influences on the economy. Those of us that get up early in the morning and put in a solid hard days work is what makes the economy work. Politicians do not do that. They provide nothing of economic value. They don’t make cars, boats, CD’s, computers, etc. We do.

However, politicians can wreak havoc on the economy. Incumbents must set policies that minimize governmental controls and negative influences on the economy to stay in power. George W. Bush knows this better than anyone. His father was humiliated in 1992 because the country was still in recession. His father promised “no new taxes” in his 1988 campaign and proved to be a liar by implementing “new taxes.” That converted money from the productive to the non-productive. Retail sales were flat when he was campaigning around the country. Why? Tax dollars robbed the retailers. And that cost George H.W. Bush votes.

You can expect George W. Bush to be aggressive in setting policies to put money in the pockets of the productive (you and I). Many of George Bush’s sidekicks claim he inherited the recession. That is true to some extent, but a lingering recession of four years will not garnish him enough votes for a second term. Americans will not remember or care when the recession started. If you are in charge in unfriendly times, you are held accountable, regardless of who is at fault. Accurate perspectives by the voting public are never there. Wishing and a hoping on a wing and a prayer will not work here. It is how thick the wallet is on the very day of the election. If thick, then you are reelected. If not so thick, Hillary will be in there.

It is not probable that George W. Bush will attempt to expand the war through 2004. Americans will rally around their presidents during times of crisis. Politicians will play this out if they think it will work. If the war backfires with surprising Iraqi resiliency and increased terrorist activities, you can expect someone else to occupy the Whitehouse in 2005. The American people will conclude that if you cannot defeat cave dwellers quickly and efficiently, then you do not need to be our leader.

This is not saying anything our political leadership does not already know. The mid-term election year phenomenon of bull market performance is expected to come into play here. Moreover, it has to happen quickly. The quick removal of Saddam Hussein from power and Iraqi’s waving the American flag on CNN will do the trick. After the war, annex Iraq and make them the fifty-first state. With a few B52’s gassed and ready to go right out of Bagdad with a General Patton mentality, those religious loonies in that region will be ostracized from society once and for all. After all, they have positioned us into a mentality that it is, “you or us.”

George W. Bush must play it this way; it is you or us that survives. It is going to be one of those things like, my way or the highway.

Did the mid-term election year bull market begin last Thursday? We don’t think so, but this is the trickiest time of year. We are very close to the expected timing of such a bull market. There are two major configurations we need to see before being convinced that a major bull market is in the making.

First, the force vectors must demonstrate a little more vitality than what they are showing right now. Even though they are now pointing north, they are in negative territory. The vector pressures need to shift direction. They are still in negative (bearish) territory and still point to the south. However, another up day or two, then we are on our way to a solid bull market. For those of you who are new, keep in mind the force vectors and vector pressures are eight dimensional and we have no way of producing a chart or pictorial of that data. However, we continue working on a way to be able to configure it in two or three dimensions.

Although not always a requirement, the Indicant Volume Indicator supported the recent bearish behavior. It is encouraging that the Indicant Volume Indicator is pointing north but equally discouraging that the market was moving south. However, last Thursday’s up day was encouraging. Friday’s up day was a little shaky in that the NYSE stock exchange volume did not show support while the NASDAQ volume showed some minor support. A solid bull market needs to express more conviction. Right now, there is too much timidity.

The Mid-term Volatility Index is positioned to support a solid and meaningful bull leg. It has been doing this since mid August. For eight weeks it has been at a cyclical maximum. Sooner or later, gravity must take hold and yank it to the south. When that happens, we will enjoy a solid and meaningful bull market.

The mid-term election year phenomenon now has a little over ten weeks to continue its perfect record of accomplishment of finding major market bottoms. We expect that phenomenon to continue on the basis of the reasons cited above. Incumbent political leadership will not stay in power without the continuation of this phenomenon.

Divergence versus Convergence

Convergence to the south remains as the current theme. The bullish spark in the stock market last Thursday and Friday was not very robust. The spark last March generated over a hundred buy signals for stocks and funds. This spark generated only twenty-seven. We need to see more robust behavior to offset the recent declines. We are within a few days or weeks of seeing the desired robustness. Keep you finger on your buy trigger.

Economic Outlook

The CRB Bridge Futures continues to stabilize for four weeks in a row after its rocket-like movement to the north-northeast. As long as it remains stable, although at a high level, it will not be an obstacle to the mid-term election year bull market we expect.

The U.S. Dollar remains weakened but as stated the past few weeks it is showing signs of strengthening. A strengthening dollar and stabilized commodity prices will influence Greenspan to hold interest rates steady. But rest assured, he has not intentions an immediate rate deop.

All interest rates continue to remain at historically low levels. It would not be surprising to see an increase in rates in the near future.

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

Fear Metrics: Economic and Terrorism

The fear element continues to weaken. Gold prices and the following two funds continue to soften. However, if the impending war with Iraq is not concluded decisively and quickly, you can expect the precious metals prices to increase.

The Indicant signaled "buy" for Fidelity American Gold (FSAGX) - #28 on December 7, 2001 . Eighteen weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Eleven weeks ago, it closed up 12.0% since the buy signal. Two weeks ago it closed up 42.9% since the MTI buy signal of December 7, 2001 . Last week it closed up 35.3%. That is down slightly from the prior week. The Mid-term Indicant continues to signal hold for this fund.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% seventeen weeks ago since the MTI buy signal in April 2001. Ten weeks ago, it closed up 27.8%. Last week it closed up 39.6%, which is up slightly from the prior week.

As you can see, these two funds are still a little bouncy. You can intuitively see the markets are engaged in a tug of war between fear and confidence in equities.

Gold and precious metals in general continue their ascent to the north. This is driven entirely by 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.”

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. Last week the market was trying to form a technical base for a bull leg. However, that technical base is quickly evaporating. The late August QT Bull signal never got full support from the other indicators. The Mid-term Indicant signaled bull for a week or two and then signaled bear. The Short-term Indicant never did signal bull.

The Dow is down 25.8% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 71.3 since the Short-term Indicant signaled bear over two years 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

The eight major markets are down 12.3% on average since the Mid-term Indicant signaled bear five weeks ago on September 8, 2002 . The NASDAQ100 is the weakest with a drop of 12.3%, but that is up from last week’s decline of 19.3%. The strongest is the Dow Transports with 7.9% decline.

It is still possible for the mid-term election year phenomenon to occur. We now have only eleven weeks remaining for this phenomenon to continue its perfect track record since the 1920’s.

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 or bear signals. The Mid-term Indicant is now signaling "bull" for only five of the twenty-two international markets it tracks.

The five bulls are up 50.6% since the Mid-term Indicant signaled bull an average of 54.8 weeks ago for an annualized gain 48.0%.

In addition to the new bear signals, the seventeen bear markets are down by an average of 10.1% since their respect bear signals. Nineteen weeks ago, they were down 1.5%. Those seventeen markets have been bears for an average of 8.4 weeks. 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 three buy signals and one sell signal.

In addition to the buy signals, the Indicant is now signaling hold for only 8 of the 76 mutual funds it tracks.

The eight funds with hold signals are up by an average of 8.1%, which is down from nine weeks ago at 26.2%. If this had not been a mid-term election year, the many buy signals in August would have been deferred until late October.

In addition to the sell signals, the sixty-four funds being avoided are down 5.5% since the Indicant "sell" signals. The Indicant has been avoiding these bearish funds for an average of 4.5 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

10-13-02

Oct 06, 2002 Indicant.Net Weekly Update

Volume 10, Issue 1 ISSN 1526 6516 © The Indicant Stock Market Report

Dear Indicant Members:

This Week’s Report

The Quiet before the Storm – Part II

The arrest of Enron’s former CFO, Andrew Fastow, will influence bullish tendencies. The salient point here is “influence.” He will plead that he took orders from his superiors to commit his thievery. Even if he did take orders to defraud the hardworking employees and trusting shareholders of Enron, the true character of that man and the board of directors is already known. It all boils down to unearned wealth accumulation at the expense of others.

Former CEO, Ken Lay, is too close to the political leadership to spend anytime in jail. As memories fade, the arrest of Fastow will reestablish some confidence in the stock market.

The mid-term election year bull market phenomenon has exactly twelve weeks to continue its perfect track record of finding major market bottoms. The republicans must get the war started before the November elections to ensure the minimum number of lost congressional seats. The democrats do not want the war until after the election and that is why you hear them voicing their objections. With war the republicans gain more seats and without war, the democrats gain more seats. With politicians there is never an issue of what is right or wrong. The issue is always about gaining power, even at the expense of American lives and the economy.

As the world continues it movement in a positive, capitalistic direction, political power will continue to fade. We have come a long way since we had to get on our knees to some “get up at noon prince or princess.” The erosion continues against leech power. Perceived birthrights to take continue to erode, no matter how much politicians and big government proponents want status quo in that paradigm. Human leeches will continue to fade. That includes corporate and boardroom cronyism. It will take a few years, though, to complete wash through the stock market. That is why we continue to watch this secular bear market.

All of the above is bullish. If the governments of the world continue to be admonished and abandoned by their populace, the Dow would zoom well beyond 100,000 points. The NASDAQ even more. Leeches drain us all from our normal productive selves. Inherently people know this, but you now know it in black and white.

However, before all those good things happen, the market is still trying to find an elusive bottom. Where will it be? Will the Dow go to 5,000? Who knows, but the current Quick-term Bear has spotted the current direction and that is to the south. The Indicant Volume Indicator continues portraying big money movement out of the market.

Divergence versus Convergence

Convergence to the south remains as the current theme. As stated last week, big money is not sure how to play their cards right now. Therefore, they are selling everything in nearly every sector. This is one reason for the recent increase in the Indicant Volume Indicator. Big money wants to be in cash, so they can divert funds to their strategic investments in the next few weeks. The issue at hand is the war with Iraq . If it is efficient and effective, then the psychological requirements for a bull market will be in order. One has to wonder if George Bush and his pals will want it this way. The presidential election of 2004 will be determined in part on how the impending conflict will be handled. The other element that will influence the reelection of George W. Bush is how well the American public feels about their pocket books. If containing heavy cash, he is reelected. If not, let us all welcome Hillary. If current economic and stock market trends continue, it is Hillary.

Economic Outlook

The CRB Bridge Futures continues to be stable for three weeks in a row after its rocket-like movement to the north-northeast. We will keep our eye on that as it is a favorite of Greenspan’s to watch. If it continues to move to the north, then you can expect the market to take a tumble with Greenspan’s increase in interest rates.

All commodity indexes are in a pause mode. Will they continue on their path to the north or will they fall back to the south? The latter is the desire for stewards of bull markets.

The U.S. Dollar remains weakened but as stated last week it is showing signs of strengthening.

Last week we were concerned about the Fed Funds rate increasing. However, it went back to the south this week.

All interest rates continue to remain at historically low levels. It would not be surprising to see an increase in rates in the near future.

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 . Seventeen weeks ago, it was up 66.1% since the Mid-term Indicant signaled buy. Ten weeks ago, it closed up 12.0% since the buy signal. Last week it closed up 42.9% since the MTI buy signal of December 7, 2001 . That is down slightly from the prior week. The Mid-term Indicant continues to signal hold for this fund.

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 75.2% seventeen weeks ago since the MTI buy signal in April 2001. Ten weeks ago, it closed up 27.8%. Last week it closed up 39.6%, which is up slightly from the prior week.

As you can see, these two funds are still a little bouncy. You can intuitively see the markets are engaged in a tug of war between fear and confidence in equities.

Gold and precious metals in general continue their ascent to the north. This is driven entirely by 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.”

Quick-term and Short-term Indicant - Markets

You received details about this yesterday. Last week the market was trying to form a technical base for a bull leg. However, that technical base is quickly evaporating. The late August QT Bull signal never got full support from the other indicators. The Mid-term Indicant signaled bull for a week or two and then signaled bear. The Short-term Indicant never did signal bull.

The Dow is down 28.9% since the Short-term Indicant signaled bear on March 20, 2002 . The NASDAQ Composite is down 73.0% since the Short-term Indicant signaled bear over two years 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

The eight major markets are down 14.6% on average since the Mid-term Indicant signaled bear four weeks ago on September 8, 2002 . The NASDAQ100 is the weakest with a drop of 19.3% in the past three weeks. The strongest is the Dow Composites with 13.3% decline.

It is still possible for the mid-term election year phenomenon to occur. We have exactly thirteen weeks for this phenomenon to continue its perfect track record since the 1920’s.

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 or bear signals. The Mid-term Indicant is now signaling "bull" for only five of the twenty-two international markets it tracks.

The five bulls are up 51.6% since the Mid-term Indicant signaled bull an average of 53.8 weeks ago for an annualized gain 49.8%.

In addition to the new bear signals, the seventeen bear markets are down by an average of 9.0% since their respect bear signals. Eighteen weeks ago, they were down 1.5%. Those seventeen markets have been bears for an average of 7.4 weeks. 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 three sell signals.

The Indicant is now signaling hold for only 9 of the 76 mutual funds it tracks.

The nine funds with hold signals are up by an average of 10.6%, which is down from eight weeks ago at 26.2%. If this had not been a mid-term election year, the many buy signals in August would have been deferred until late October.

In addition to the sell signals, the sixty-four funds being avoided are down 8.0% since the Indicant "sell" signals. The Indicant has been avoiding these bearish funds for an average of 3.6 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

10-06-02

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