May 4, 2008 Indicant Weekly Stock Market Report

Volume 05, Issue 01 ISSN 1526 6516 © The Indicant Stock Market Report

This Week’s Report

Is Recent Bullish Behavior Sustainable – Part 5?

The average sustainable Quick-term bull legs last from seven to 12-weeks with some extending to over a year. Any bullish cycle less than seven weeks is a bullish spurt. On March 11, 2008, the major indices enjoyed a tremendous bullish surge. It was accompanied by very high volume, which is a significant bullish attribute. Without that volume support, it would have been identified as a bullish spurt.

Although of the ETF’s were deep Yellow Bears on March 11, the Quick-term Indicant uncharacteristically signaled buy for several of them based on the volume-bull relationship. No other Quick-term attributes supported those “premature buy signals.”

The idea at that time was the cumulative variance from a disappointing heart and soul of bullish seasonality in late 2007 and early 2008. Normal bearish seasonality starts on May 1 of each year. That coupled with cumulative variance expectations suggested strong bullish behavior should manifest ahead of bearish seasonality. That, in fact, has happened.

Unfortunately, deep Yellow Bears seldom move to bullish positions in a straight line. They encountered significant volatility while in their Yellow Bear configurations. The reward/risk ratio was solid on March 11, but quickly shifted to a high risk/reward ratio shortly thereafter. There were a couple of cycles of these changing expressions since March 11. The general rule of thumb is to never buy a Yellow Bear.

The recent stock market bullish cycle has not elevated many Mid-term Indicant Yellow Bears. This implies this bullish cycle is merely a technical one, but it can still be sustainable, but possibly not enough to shift out of the bearish trend that is currently underway.

Regardless of what fundamental rationalizations for this bullish cycle one may convey, non-participating Yellow Bears suggests the bounce is merely technical. Without fundamental support, all technical bullish cycles revert to the bearish trend. In other words, technical bullish rallies are based more on emotion than corporate profits or economic fundamentals. Again, a technical rally can enjoy sustainability, but it will be closer to spurt durations than a nice long-running bull leg.

There is one economic fundamental that may have some merit, but the jury is still out in spite of the hype surrounding the theory. That bullish fundamental is he strengthening dollar. Although this has no impact on the real cost of a barrel of oil, the import price will fall. Students of numbers will say the price of oil is falling. That should lead to a reduction in the price of gas at the pump. That is believed to lead to more consumer purchasing power. That should spread corporate profits from the narrowed few Exxon type of companies to the many others, such as Home Depot. That is the bullish interpretation of the underlying fundamentals influencing this bullish leg. It has the tinge of a technical bull, as opposed to a solid bullish trend.

Fundamentals, such as economic well being, are not officially known until well after the fact. It will be a couple of years before we understand the economic impact of the sub-prime lending crisis. Some professors will most likely bad-mouth the Federal Reserve for jacking up interest rates in 2004-07. The Federal Reserve should have a good defense as the cost of energy was moving north and they were simply doing their job to keep inflation under control. It is amazing they are paid to plot the price of oil a graph paper and then plot their interest policies along the same pattern until economic havoc is observed. The ability to anticipate and prevent catastrophe is usually the reason for fame and/or good salaries. Apparently, the Federal Reserve Board’s anticipatory skills are minimal.

The idiots who sold mortgages to people with, say a $1500 monthly payment, that would skyrocket to, say $4500 or so, with those crazy adjustable clauses, are also culprits. Who in their right mind can expect to sell something to an ordinary person and expect that ordinary person to be able to respond to a tripling of their biggest budget account? That had to be considered a high risk revenue stream, but when “things are going good, what the problem?” That is corporate America’s biggest problem; now worrying when they should. Chrysler is again an example of that; big gas guzzler’s in product offering and a shriveling market, which is no different than their stupidity in the late 1970’s only to be saved by evil politicians. What are they teaching in MBA programs these days? Apparently, commonsense is not in the curriculum.

Do not forget Bear Stearns lies. A group of people providing “okay profit guidance” two days before the reality of downright ugly losses will not escape the stock market that quickly.  The news reports, for the most part, quote Bear Stearns as being responsible for that misguidance. Bear Stearns is a legal entity; it was people lying. Apparently, Clintonian lying continues to pervade some corporate leaders. Providing misguidance can occur from time to time due to operational “surprises.” Although being surprised is an act of incompetence, a two-day misguidance includes dishonesty. The bull distains that and will have difficulty being a participant too long. Fictional fundamentals are always punished and severely.

Adding to the dishonesty factor is the upcoming presidential election. All politicians are dishonest. They could never have successful political careers being otherwise. The bull views political influence as a negative, while the bear delights in their mumbo-jumbo and interference with corporate profits. That is why the market has been bearish over the past 180-years in the presidential post election years. The year, 2009, is setting up to be solidly bearish.

However, in the meantime, we have Quick-term Indicant Red Bulls with positive Vector Pressure. That is cyclically bullish even though the trend is bearish.

Keep your eye on the daily stock market report. It will help you differentiate sustainability versus spurts regardless of the directional intensity underway.

Weekly Buy/Sell Summary – Stocks and Funds – Mid-term Indicant

Click this sentence for a graphical summary of what follows. Simply scroll down the page to see graphical and detail content of this section.

The Mid-term Indicant generated twelve buy signals and two sell signals. This brings the total buy signals to 85 since February 1, 2008. There have been 194-sell signals since October 26, 2007.

The most depressed stocks and funds are not participating in the current bull cycle. This limited breadth suggests bullish sustainability will most likely not last through the summer.

In addition to the buy signals, the Mid-term Indicant is signaling hold for 201 of the 345-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 147.9%. That annualizes to 60.5%. The Mid-term Indicant has been signaling hold for these 201-stocks and funds for an average of 127.0-weeks.

In addition to the sell signals, the Mid-term Indicant is avoiding 130-stocks and funds of the 345- tracked by the Indicant. The avoided stocks and funds are down an average of 15.4% since the Mid-term Indicant signaled sell an average of 28.0-weeks ago.

One year ago, on May 4, 2007, the Mid-term Indicant was holding 308-stocks and funds out of the 345 tracked for an average of 98.5-weeks. They were up by an average of 122.4% (annualized at 64.6%). There were 33-avoided stocks and funds at that time. Those avoided stocks and funds were down an average of 12.0% since their respective sell signals an average of 23.2-weeks earlier.

The Mid-term Indicant was signaling hold for 270-stocks and funds of the 345-tracked two years ago on May 5, 2006. They were up by an average of 144.8% (annualized at 75.5%) since their respective buy signals an average of 99.7-weeks earlier. The Mid-term Indicant was avoiding 67-stocks and funds at that time. They were down an average of 5.8% since their respective sell signals an average of 18.6-weeks earlier.

There were 201-stocks and funds with hold signals on May 6, 2005 since their buy signals an average of 88.7-weeks earlier. They were up by an average of 98.0% (annualized at 57.5%). There were 117-avoided stocks and funds at that time. They were down by an average of 27.8% from their respective sell signals an average of 53.7-weeks earlier.

On May 1, 2004, the Mid-term Indicant was signaling hold for 237-stocks and funds out of 296-tracked. They were up by an average of 72.1% (annualized at 70.9%) since their buy signals an average of 52.9-weeks earlier. The Mid-term Indicant was avoiding only 28-stocks and funds. They were down by an average of 27.5% since their sell signals an average of 39.5-weeks earlier.

Five years ago, on May 3, 2003, there were 255-hold signals for stocks and funds out of the 296 tracked by the Mid-term Indicant at that time. They were up an average of 31.4% (annualized at 102.2%) since their respective buy signals an average of 16.0-weeks earlier. There were 27-avoided stocks and funds then. They were down an average of 26.4% since their respective sell signals an average of 29.6-weeks earlier.

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

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

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

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

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

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

The Quick/Short-term Indicant Stock Market Report

The Indicant website maintains the last twelve months of daily reports on an annual basis. These weekly reports are maintained on the website for much longer periods. Beginning in March 2006, the daily stock market report for the last trading day of each week is imbedded in this weekly report. This allows web-based retention records of the daily report for much longer than the last twelve months.

The Daily Indicant Stock Market Report for the last trading day of the current week is near the conclusion of this weekly stock market report. It is emailed each weekend, separately, so you can read it, either as a separate document, or in this document.

The Indicant Stock Market Report’s Secular Market Blend

The Dow is up 79.2% since its secular low on October 9, 2002. The NASDAQ is up 122.3% and the S&P500 is up 82.0% since then. The small cap index, S&P600, is up 123.9%. Even with the S&P600’s dynamic bearish behavior the last several months, it still leads the major indices in bullish performance since the birth of the secular bear on October 9, 2002. As stated the past several months, the secular bull that originated on October 9, 2002 no longer remains solid. A secular bear could indeed be unfolding.

The Dow is down 7.8% since its last closing peak on Oct 9, 2007. The NASDAQ is down 13.4% since its last peak on Oct 31, 2007. The S&P600 is down 13.8% since its last closing peak value on Jul 19, 2007. The Small Caps Index was bullish last week with a meager 0.7% gain, while the blue chips were slightly bullish with a 1.3%-gain.  The NASDAQ100 was the most bullish index of the majors with a whopping 3.3% gain.

The NASDAQ is down 50.9% since its last weekly secular peak on March 9, 2000. The S&P500 is down 7.4% since its similar secular peak on March 23, 2000. The Dow is up by a mere 11.4% since January 13, 2000 when it peaked from the 1990’s roaring bull. It has expressed no timidity in roaming above the new peak area, while the S&P500 set a new record in early 2007 and then immediately succumbed to bearish influence. The NASDAQ needs to climb 103.8% to achieve a new record high. Do not be surprised if this occurs after the year, 2025.

The Dow is down 1.6% so far this year. The NASDAQ is down 6.6% this year. These conditions are incongruent with historical standards. 2008 should be a bullish year, based on those standards. The stock market occasionally delights in violating historical standards. This will always happen when such standards gain in popularity. The current bullish cycle is lending support to historical standards, but it will be challenged during the dog days of summer.

The NASDAQ year-to-date performance was bearish by 10.1% through this week in 2001. This particular week in 2001 was bullish by nearly 6%. Keep in mind the NASDAQ finished 2001 down by 21.1%.  So far, this year looks similar to that of 2001. There will be some more bearish cycles in 2008 and one of the reasons for expectations of a solid bullish cycle ahead of those impending bearish cycles. This is now being challenged.

The NASDAQ was down by 15.7% through this weekend in 2002. Some of you recall the dynamic bear market in 2002, where the NASDAQ finished that year down by 31.5%. The NASDAQ YTD 2003 performance was up by 12.5%. It finished up in that solidly bullish year by 50.0%. It was down on this weekend by 4.2% in 2004. It was also down by 11.3% in 2005. Many of you recall that 2004 and 2005 were meandering bear markets. In 2006, it was up by 4.7% and up by 5.9% at this time last year.  

As previously stated, so far this year, the DOW30 is down 1.6% and the NASDAQ down 6.6%. Until the past two weeks, the NASDAQ and Dow were down at this time of year more than any other year this century. However, 2008 has risen to the middle of the pack with the current bullish cycle.

This paragraph, originating in the March 30, 2008 Weekly Stock Market Report, will remain unchanged until it becomes irrelevant. Bearish behavior this year contradicts historical standards whereby the presidential election year is typically bullish. The political establishment and their appointees are doing their part to support bullish behavior with interest rate cuts and tax rebates. On the other hand, the stock market appears to be short of buyers who at one time refinanced their homes to buy stocks. Their replacement buyers are expected to be foreign investors, where the weak dollar is an added bonus for those who desire bullish market behavior. If the Fed strengthens the dollar next week by stabilizing interest rates, this bullish option may wane.

May 2, 2008 comment regarding the previous paragraph. Last week’s Fed mild interest rate adjustment to the south indeed strengthened the dollar. Keep in mind the U.S. is a net importer. This increases the supply of dollars abroad. As long as the U.S. is a net importer there will be a continuing increase in supply of dollars, which will continuously keep a “real economic” lid on its value.

The bullish bias shift on August 15, 2006 expired on January 4, 2008. The heart and soul of bullish seasonality also expired on January 4, 2008.  The Dow increased 14.0% since the bullish bias shift on August 15, 2006. The S&P500 was up 9.8% and the NASDAQ up by 18.4%.

A bearish bias shift was identified by the Quick-term Indicant on January 4, 2008. It lasted until March 11, 2008. The Dow was down 5.0% and the NASDAQ was down 9.9% during that time. On March 11, 2008, the Quick-term Indicant shifted away from bearish bias. Although the Quick-term Indicant endured fluttering since the March 11 bearish bias shift expiration, the NASDAQ is up by 9.8% since then. In other words the NASDAQ is basically flat since January 4, 2008.

As previously stated in the daily stock market reports, the Quick-term Indicant endured two violations since March 11 and encountered fluttering behavior until April 11. On April 29, 2008, the Quick-term Indicant conformed to its standards of Red Bull recognition with positive Vector Pressure and signaled bullish bias. Several buy signals for ETF’s were generated on that day. Since then, the Dow is up 1.8% and the NASDAQ is up 2.1%. The lesson learned is to never argue with Red Bulls with positive Vector Pressure.

As stated last week, the presidential pre-election year of 2007 was below average (+10.5%) with the Dow gaining 6.4%. This was the smallest gain since Reagan’s 2.3% gain in 1987, when the market endured sharp sell off in October of that year.

Where is the market headed in 2008, the presidential election year, which is the second most bullish year on the four-year presidential election cycle? If historical standards prevail, which is bullish, the market is setting up nicely for a tremendous profit this year. All that is needed is a bottom to this bear, as 2008 should finish up on the year, based on historical standards and falling interest rates. The fundamental requirements are limited inflation and economic stabilization.

Three of the big four are okay for the time being; inflationary threats have cooled but again threatening with a significant increase in the CPI. Interest rates remain low, which is bullishly favorable. Deflation is not threatening. In addition to a resurging CPI, another unfavorable condition for stock market bullishness is the weak economy. The unknown is voodoo bookkeeping. The market reacts to corporate earnings. If those earnings are perceived as fiction, the market will move bearishly. Fictional financial representations will enhance stock market bearishness.

Keep your eye on the daily stock market report.

Stop Loss Management

The Mid-term Indicant recommends a stop loss of 8% due to current bullish cycle.

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

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

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

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

Stock and Fund Update

Click the following link to see sorted performance of stocks and funds with hold/avoid signals. In the past, they were included in this email message but now display them on the website. This is available to the public, while the specific buy and sell transactions are limited to members only. The below table is public information and not updated on a frequent basis.

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

Economic Conditions – Inflation, Currency, Interest Rates

Click the above heading for a summary of hard economic indicators.

As stated the past twenty-five weeks, falling interest rates typically accompany stock market bullish behavior. The primary exception to stock market bullishness with declining interest rates is inflation or deflation.

The stock market was aroused with declining commodity prices last week. Their fall was indeed impressive. There is one major problem with this elation. The bullish trend in commodity prices has not been disrupted. Even their bullish cycle has not been disrupted. The emotional elements are driving the stock market’s bullishness right now. Emotion only provides a burst of energy.

Commodity prices tumbled the past two weeks. They have been bearish in four of the past five weeks. That suggests demand is softening; a common recessionary attribute. As stated last week, though, demand must fall in other countries. In other words, there needs to be a world wide recession for that to happen.

Interest rates are providing significant liquidity, but when budgets are strapped for fuel, expect little economic stimulus. The Federal Reserve relaxed interest rates last week.

The U.S. Dollar strengthened last week by virtue of the mild interest rate reduction. That has briefly contributed to the reduction in commodity prices. In other words, that reduction is an algebraic exercise as opposed to a physical reality. Those really close to the stock market believe in paper matters.

As stated last week, 2009 is setting up to be a solid recession and bear market. Historical standards support rising interest rates next year that will encourage the bear. Increased political mumbo-jumbo of protectionism enhances the probability of stock market calamity.

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 is up 398.6% since the April 13, 2001 buy signal. Its annualized growth since that buy signal is 55.7%. It moved to the north in 51 of the past 86-weeks. It has been bullish in 22 of the last 37-weeks. This fund has been bullish in seven weeks of the last 12-weeks. It has been bearish the past two weeks.

Fidelity Gold, Fund #28, is up 4.9% since its buy signal on September 7, 2007. It is annualized at 7.5% since that buy signal. This fund was solidly bullish in six of the past 12-weeks. It has also been bearish the past two weeks.

State Street Research Global #9, SSGRX, which is isolated in the energy sector, is up 371.5% since the Mid-term Indicant signaled buy on August 16, 2002. It is annualizing at 64.1%. This fund has been bullish in four of the last nine weeks. It has been bearish the past two weeks.

Vanguard Energy #18, VGENX, is up 262.7% (annualized at 51.0%) since the Mid-term Indicant signaled buy on April 5, 2003. Fidelity Energy Services #40, FSESX, is up 233.1% (annualized at 52.2%) since the Mid-term Indicant signaled buy on December 6, 2003. Fidelity Energy #39, FSENX, is up 207.2% since the Mid-term Indicant signaled buy on August 16, 2003. It is annualized at 43.3%.

These energy related funds have been bearish the past two weeks.

Investors in these funds are supporting a 1970’s type of market with high inflation and high oil prices. As long as capitalism remains in vogue around the globe and alternative sources of energy continue to lag exponentially increasing demand, a long-term perspective on holding strategy is appropriate.

The SQI (Consolidated Short-term and Quick-term Indicant) model signaled buy for the GLD-ETF#11 on August 3, 2005. It is up 92.6% since then. It is annualized at 33.2%. This fund has been bullish in 25 of the past 36-weeks. It has been solidly bullish in six of the last 11-weeks. It has been bearish the last three weeks.

The SQI signaled buy for ETF#03 – Energy and Natural Resources on March 26, 2003. It is up 272.7% (annualized at 52.7%). This fund has been bearish in seven of the past 16-weeks. It has been bearish the last two weeks, following bullishness in the previous four weeks.

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

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

The Mid-term Indicant signaled bull on March 20, 2008. All ten major indices are up by an average of 8.8% since then. They are annualizing at 74.1%. The most bullish is the NASDAQ100 index. It is up 13.1%. The DOW30 is the weakest. It is up 3.9%. Disappointedly, the most bullish during bull markets is the S&P600, which is up only 6.0% since the March 20, 2008 bull signal. This suggests the bull cycle may be short-lived, but so far has been demonstrating some sustainability.

The Mid-term Indicant Dow Jones Industrial Average performance is at $39,208,662

That beats buy and hold performance of $1,986,642 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $187,266. That beats buy and hold’s $138,495 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $229,880. That beats buy and hold’s $85,887 on an October 18, 1985 $10,000 investment. The Mid-term Indicant model beats buy and hold by 1,873.6%, 35.2%, and 167.7%, respectively, for these indices as of this past week.

The Indicant’s percentage advantage over buy and hold does not change during bull signals. The advantage changes only during bear signals. That is because the buy and hold model has to keep holding, while the MTI-RYS model avoids bear markets. The only purpose of the Mid-term Indicant model is to avoid the bear markets. That is why it beat buy and hold by nearly 2,000% covering the past 100+ years.

Click here to go to the current Mid-term Indicant assessment of the ten major indices.

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

Mid-term Indicant Positions - NASDAQ100 Stocks

Click here to see NASDAQ100 report card history.

Click here for Mid-term Indicant Table of NASDAQ 100 Stocks.

Mid-term Indicant Positions - Dow Jones 30 Industrial Stocks

Click here to see Dow 30 report card history.

Click here for Mid-term Indicant - Table of Dow Jones Industrial Average Stocks.

Mid-term Indicant Positions - Dow Jones 15 Utility Stocks

Click here to see Dow Utilities Report Card history.

Click here for Mid-term Indicant - Dow Jones Utility Stocks Table.

Note from April 5, 2008: Enron will be removed from Indicant tracking later this year. It was removed from the Dow Utility Index several years ago. It is now a penny stock, but the Indicant kept tracking it at the request of members. Its low cost nature is not friendly to Mid-term Indicant assessment due to small price changes and corresponding large percentage impact. The Mid-term Indicant is not designed for penny stocks. Although recovery is always possible, this stock has become too busy to track. This position will be re-accessed based on member feedback as the year progresses.

Mid-term Indicant Positions - Indicant Selected Stocks  

Click here to see Indicant Select Stock Report Card history.

Click here for Mid-term Indicant Table of Indicant Selected Stocks.

Mid-term Indicant Positions - Mutual Funds

Click here to see Mutual Fund Report Card history.

The Mid-term Indicant signaled buy for ProFunds Ultra Short on January 18, 2008. It was down 32.3% since the Mid-term Indicant signaled sell on September 15, 2006 until the buy signal on January 18, 2008. Historical norms of market cyclicality suggested the next buying opportunity for this fund should not occur until 2009.

The Mid-term Indicant again signaled buy for this fund on April 12, 2008 and signaled sell this past weekend. Unfortunately, it was sold at a loss of approximately 11.9%. It may offer more opportunities later this year or early next year.

Click here for Mid-term Indicant Table of Mutual Funds

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

Long Term Indicant Positions - Dow Jones Industrial Average

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

The Dow is up 351.1% (annualized at 21.2%) since the Long-term Indicant signaled bull 861-weeks ago. Economic data is the primary influence on the Long-term Indicant. Recessions, deflation, inflation, and unreasonable interest rates have not been strong enough to signal bear since that bull signal. A link to the Long-term Indicant is below:

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

Quick/Short-term Indicant Stock Market Report - Summary

Quick-term Red Bulls: Eighteen of thirty; offering significant bullish support.

Quick-term Yellow Bears/Threats: Two of thirty.  Solid non-bearish support.

Quick-term Non-Bearishness: QTI differential is bullish 6.4%. Solid non-bearish support.

Short-term Non-Bearishness: Breakout/breakdown differential is bullish by 6.3%. Solid bullish support.

Force Vectors: Force Vectors remain with bullish support. Bearish sloping the past few days has been lazy, offering combined bullish and non-bearish support.

Vector Pressure: Twenty-eight are in bullish domains. They are holding steady and should not be argued with. If they continue holding steady for a few more days, then this bullish cycle, may in fact, not be a short-cycle bullish spurt. Major inflection points are now forming which will enhance obviation of the stock market’s directional intensity.

Immediate Tactics: Buy with little sensation of bearish risks.

Current Quick-term Bias: Bullish bias on April 29, 2008 is solid. Bearish behavior on the immediate horizon will be mere profit-taking micro-spurts and until advised offer opportunities for additional buying.

Overall Market Status: Red bulls and positive Vector Pressure are dominant. They should never be challenged. Safe to hold until those two attributes wane.

Profit Potential from Naked Options: Volatility will decrease as long as this bull remains in tact, enhancing option opportunities.

Volume: The NASDAQ lost robustness earlier this week, which was configuring an increased probability of a bullish bias shift. However, that brief period of robustness remains pertinent and thus in support of bullish bias. Keep in mind that lethargy is commonplace during daylight savings time.

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

Click this sentence to view the VIX chart.   As stated since last Tuesday, this index continues configuring in favor of a bullish stock market. The bearish yellow curve continues movement favorable to the bull. It is nearing its breakdown line. It will be interesting to see if bullish VIX resistance occurs at contact.

Click this sentence to view the S&P600 chart. As stated the past several days, the configuration mentioned on Thursday, April 10, 2008 remains the most discerning at this point. This index remains well above the bullish red curve. You will notice a light blue line draw across the yellow curve. At some future point, the red curve will intersect with that tangential line. When that happens the current bullish cycle will expire. Yellow’s inflection is the first indicator of bullish tiring. That does not mean the bull is about nap, but the rate of increase should slow down. There is plenty of room before red contact with tangential. Therefore, fear of bear should be minimal at this point.

It is obvious this S&P600 will not fall below April 10 or April 11 values in a few days. However, the probability remains high that that will happen at some future point. That probability will adjust depending on when red interacts with tangential. If it does not occur this year, a deep 2009 bear would not be out of line.

As pointed out the past few days, the yellow curve inflecting back to the north without the index falling below yellow will offer bullish sustainability for several more weeks. There are early indications this is occurring.

As stated since last Tuesday, although there is currently a 97% probability the S&P600 will be lower at some future point than it was on April 11, 2008, the normal Quick-term Indicant has developed too many bullish attributes to continue avoidance tactics. Prices last Tuesday were back to approximately where most were sold after the 20-months of holding from August 2006 through January 2008. Consequently, there were several ETF buy signals on Tuesday, April 29. Solid bullish behavior occurred the next day, April 30. The Quick-term Indicant will not be slow in generating sell signals until the heart and soul of bullish seasonality starts in late August through early October of this year. There should be at least one, if not two bearish cycles before then.

This paragraph remains unchanged from Tuesday, April 29, 2006. QQQQ-Vector Pressure-Some of you recall the concerns about negative Vector Pressure on April 6, 2008. Click this sentence to review that concern.  As you can see by clicking the next sentence, QQQQ Vector Pressure appears comfortably residing in bullish domains. Click this sentence to review the current configurations.

As you can see, the bullish ambition did not meet bearish resistance. The risk/reward ratio on continued avoidance has shriveled. Several Quick-term Indicant attributes continue to shift into bullish support; very subtly. The current price is fairly close to that when it was sold at earlier this year from the August 2006 buy signal. It is a red bull, which can stimulate sell signals, but we have learned time and again to not argue with red bulls. The Quick-term Indicant will signal sell pretty quickly in the event Vector Pressure sours or Red Bull positions are lost. The most dangerous time in holding a security is shortly after buying it.

To view STI for the ten major indices, click here.  Keep in mind, some of the charts are being used for research, but the actual market data is pure. You can see that most of the indices remain above their bullish red curves, which is a bullish configuration. You will also notice most of the indices are enduring yellow inflection points. Scanning to the left on each of the charts reveals how the market behaves after Red intersects those blue tangential lines; always bearish.

The Short-term Indicant signaled bull on May 1, 2008. Although this is a period of bearish seasonality, this model was plummeted with too many bullish attributes to ignore. It even got its required four points, which was hard to do during bearish seasonality.

Please read on. Click here to see the Short-term Indicant’s history.

The NASDAQ Indicant Volume Indicator  has cooled off since late last week when it was configuring with robustness. The robust cycle, although brief, was concurrent to bullish behavior. As stated the past few days, this is a powerful bullish configuration. Volume the past two days has been relatively high and concurrent with bullish behavior, which is supportive of the current bullish bias.

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

There were no buy signals and no sell signals. Although there were no buy signals, the SQI is signaling hold for 28-ETF’s. They are up by an average of 57.5% (annualized at 46.0%) since their respective buy signals an average of 64.4-weeks ago. Although there were no sell signals, the SQI is avoiding three-ETF’s at this time. They are down by an average of 7.9% since their sell signals an average of 18.1-weeks ago.

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

Short-term Indicant Report Card, Status, and Charts

There were no buy signals and no sell signals. Although there were no buy signals, the Short-term Indicant is signaling hold for 28-ETF’s. They are up an average of 71.3% (annualized 49.4%) since the STI signaled, buy, an average of 74.2-weeks ago.  Although there were no sell signals, there are three ETF’s with avoid signals. They are down by an average of 8.6% since their sell signals an average of 18.2-weeks ago.

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

Quick-term Report Card, Status, and Charts

There were no buy signals and no sell signals.  Although there were no buy signals, the Quick-term Indicant is signaling hold for 29-ETF’s. They are up by an average of 12.9% (annualized at 43.2%) since the QTI signaled buy an average of 15.4-weeks ago. Although there were no sell signals, the Quick-term Indicant is avoiding 2-ETF’s. They are down by an average of 10.3% since their sell signals an average of 14.2-weeks ago.

You will notice the April 29 and April 30 buying and selling among the models was in tandem. This is common during inflection periods and conflicts in the directional intensity of trend and cycle. In this case, the cycle is up while the trend is south.

Conflicts Between the Short-term and Quick-term Indicants

There is only one conflict, whereby the Short-term Indicant and the Quick-term Indicant are in disagreement between hold and avoid status. The combined Short/Quick Indicant models identify 85-hold signals and only 5-avoid signals, providing a bullish bias. The bullish bias shift on August 15, 2006 expired on January 4, 2008, but a potential bullish bias shift was born on March 11, 2008, which has now expired. After some jittery behavior, a new bullish bias shift was born a few days ago, but the measurement of performance will commence on April 29, 2008.

The following paragraph has a 97% probability of being accurate. Configurations suggest the market and most of the ETF’s will be lower than they were in early April at some future point. Timing will be more predictable when bearish yellow curve inflects and tangential intersects with red. Some are now configuring with inflection points. This price depression should occur in 2009, but it could occur sooner.

Although the above may manifest with 100% accuracy by direct observation, the major indices and most of the ETF’s did not bounce south off bullish red the past few days. The Quick-term Indicant is designed to participate in bullish spurts with some degree of sustainability. As long as Vector Pressure is positive with bullish red configurations, the Quick-term Indicant cannot avoid participation in a potential sustainable bullish spurt, regardless of duration. That is the reason for the high number of buy signals this past Tuesday.

If bullish red configurations evaporate and Vector Pressure shifts to bearish domains, the Quick-term Indicant will signal sell.

The Quick-term Indicant’s March 11 and March 18 buy signals were unusual. Most of the ETF’s at that time were deep yellow bears with negative Vector Pressure. There were procedural and algorithmic violations with those buy signals. The March 18 buy signal was more classical, but the errors made on March 11 induced sell signals on April 11. Once violations occur, it takes a few cycles to return to normalcy. Last Tuesday’s buy signals will not reverse unless red bull and Vector Pressure discontinue supporting the bull cycle now underway. That will not happen very quickly since the number of non-contrarian red bulls continues to increase. Some have healthy margins with respect to magnitude above red. They can become too hot and cool down, but as long as they are red bulls, the Quick-term Indicant will continue to hold.

The yellow bear buys were tricky. Holding red bulls is a no brainer. Holding positive Vector Pressure is also a no-brainer. Vector Pressure has been obstinate the past several weeks, which is a bullish attribute. Force Vectors have dipped south three times since March 11 and had zero impact on positive Vector Pressure. That is also bullish. All of this could be obsoleted by the bear within a few days, and if so, the sell signals will be quick.

This is a bear market due to trend, but bullish spurts can rise as much as 15 to 30% before capsizing back into bearish mode. The market is more diverse with about three billion people contributing to the cause of capitalism as opposed to just a few million in the last century. Behavioral patterns will be different to extent there will be more of a bullish influence as long as the capitalistic movement flourishes. Even with that, the current market is a bear, but with the potential for a nice bullish spurt of some duration. That was observed several weeks ago, but the Quick-term Indicant lacked the proper number of supporting attributes to maintain that conviction.

Quick-term Indicant Bull/Bear Health Report

Only two of the 30-ETF’s are below their respective bearish yellow curves. That is non-bearish. The average relative position of all thirty ETF’s is above bearish yellow by 6.1%. This is the twenty-fourth consecutive trading day with non-bearish support, which is increasingly suggesting non-bearish sustainability.

A whopping eighteen of the ETF’s are above their bullish red curves. All thirty ETF average positions are flat with respect to their bullish red curves. This is a solid bullish attribute. This is the first time in several months the average relative position has not been negative.

The QTI differential is bullish by 5.4%. This is the twelfth consecutive trading day of bullish support.

Click the heading link in this section to view the charts. As earlier stated, there was no violent bullish response to Vector Pressure crossing into bullish domains from yellow bear status.

Short-term Indicant Bull/Bear Health Report for ETF’s

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

One of the thirty ETF’s is contacting its breakout line, which is bullish. This is the third consecutive trading day with breakout contact, which is bullish. It is non-contrarian ETF#21-Latin American Stocks.

The average distance from breakout contact is 11.2%. Double digit variances from breakout contact for 82-consecutive trading-days is not supportive of the bull. As you can see, it is nearing single-digit values.

None of the thirty ETF’s are contacting their breakdown lines, which is non-bearish.

The average distance between the price and breakdown is 17.6%. This configuration is providing non-bearish support, which has been the case since March 2003.

The breakout/breakdown differential is bullish by 6.3%, which is supportive of the bull.

ETF Force Vector Configurations

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

Twenty-five Force Vectors are in bullish domains. That is up by sixteen from April 16. Overall bullish support is configured. The question regarding sustainability has now subsided. This Quick-term bull leg will be sustainable, which was the interpretation on March 11, 2008, but regrettably, without adequate conviction. Bearish yellow is now inflecting, which suggests a tiring bull, but a bull nonetheless.

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

ETF Force Vectors/Vector Pressure Crossings/Option Signals

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

Click this sentence for Vector Pressure Option Signals. There were no option buy signals after Friday’s close. Today’s flat market was not helpful to yesterday’s 3-call option buy signals.

Twenty-eight of the thirty ETF Vector Pressures are in bullish domains, which for the twenty-first consecutive day since several months ago is no longer configuring in support of the bear.

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

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

Quick-term and Short-term Indicant Summary

The bullish bias shift that began on August 15, 2006 expired on January 4, 2008. However, a new bullish bias was born on March 11, 2008. It is not a thoroughbred, though. It is tainted with Enron-like misguidance from Bear Stearns. The March 11 bullish bias shift expired on April 11, 2008. It was expected to be just another short bullish spurt. The Quick-term Indicant is incapable of ignoring red bulls and a new bullish bias shift was started on April 29, 2008.

Continue avoid writing covered options due to obstinate bullishly Vector Pressure and an increasing number of red bulls.

ProFunds Ultra Short mutual fund moves inversely to the QQQQ by exponential amounts. The Mid-term Indicant signaled sell for ProFunds Ultra Short this weekend. 

The Quick-term and Short-term Indicant tracks ETF#31, QID, which is the ETF cousin to ProFunds Ultra Short. This ETF is relatively new and has not yet developed enough data to formally track its outlook. It is excluded from overall ETF statistics because it is purely contrarian. It is designed to move bullishly during bear markets and bearishly during bull markets. This exclusion is required for convergent/divergent monitoring.

The Indicant signaled sell for QID  on April 29, 2008. It is down by 5.3% since that sell signal. Although its Force Vector is attempting to rise, its Vector Pressure has fallen deeply into bearish domains and with yellow bear configurations. 

Other Contrarian Funds

ETF#03-Natural Resources   - is up 43.6% (annualized at 28.3%) since the Quick-term Indicant signaled buy on Oct 25, 2006. Vector Pressure is well inside bullish domains, but Force Vectors are declining. This fund remains a red bull and is configured consistently with one that is just too hot and merely cooling down. Drilling and exploration will continue to be a growth industry regardless of the strengthening dollar’s impact on the price of oil. Rest assured this is a powerfully bullish ETF. If it falls to yellow, it may be a good time to buy for those late arrivals.

ETF#11-Gold and Precious Metals   is up 94.3% since the Quick-term Indicant signaled buy on August 3, 2005. It is annualizing at 33.8%. Its Force Vector continues wandering with a pitiful configuration. This fund could fall to bearish yellow, which could be an excellent buy point for those who are getting in late. Rest assured if the CPI continues to rise, this fund will be holding and leading the way. Although it is bordering with negative Vector Pressure its rising bearish yellow curve is preventing sell signal.

LETF#14-Long Government  - This fund is down 3.3% since the Quick-term Indicant signaled buy on April 7, 2008. This fund has little volatility. It is mildly contrarian to the stock market. If the market turns bearish this fund should perform okay. If the market turns bullish, this fund will continue underperforming. The Quick-term Indicant will be slow to signal sell since the market’s trend is bearish, even in the face of a bullish spurt. Keep in mind this fund has little movement in price, while it also is stable and safe in bear markets.

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

Quick-term ETF Options

Quick-term Indicant for ETF’s

Short-term Indicant for ETF’s

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

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

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

Short-term Indicant for DJIA and NASDAQ

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

Short-term Indicant Table for the NASDAQ Composite Index

Indicant Volume Indicator

Divergence versus Convergence

The market has enjoyed a combination of bullish convergence and divergence in seven of the past eight weeks. Bullish divergence has been enjoyed the past two weeks. For the second consecutive week, nearly all sectors were bullish with the exception of precious metals and a few other commodities. 

The energy sector was again bearish and thus one reason for divergent performance. Much of that bearishness was due to the expectation of dollar strengthening. The dollar is now strengthening in the face of interest rate stabilization by the Federal Reserve Board.

Indicant Conclusion