The Indicant Stock Market Report

May 17, 2009 Indicant Weekly Stock Market Report

Volume 5, Issue 03 ISSN 1526 6516 © The Indicant Stock Market Report

This Week’s Report

Capital Cleansing and Hard Assets

By 1985, one could buy oil field equipment for pennies to its book value. This oil field equipment was all that was left over from failed businesses. They were hard assets that remained long after the several organizations that managed those assets vanished.

Oil prices peaked in 1981 at around $36/bbl. U.S. Rotary Rig Count peaked at the same time with just under 5,000-running rigs. By 1985, U.S. Rig Count was less than 500, which represented a drop in industry activity of over 90%. Not too many organizations survived. However, all of the hard assets survived even if the parts were cannibalized from their original structures.

Petroleum industry organizations that could not survive vanished. Millions of people lost their jobs. The unemployment rate in Houston, Texas approached depression levels in the early 1980’s. There was no government bailout or help for those in the petroleum industry.

Just ahead of the petroleum industry’s demise, Chrysler was resurrected from bankruptcy with a loan from the Federal Government. Shortly after this resurrection, the economy improved enough to accommodate job retention for the demonstrated incompetence at Chrysler. For the next twenty-eight years, Chrysler continued churning out low quality products.

Chrysler was innovative in new product design under the leadership of then CEO Lee Iacocca. But, Chrysler repeatedly demonstrated an inability to place very high on any of the quality or consumer satisfaction surveys. They built pretty products, but for the most part, their quality consistently ranked near the bottom.

Chrysler’s inability to produce quality products, however, was not the reason for their demise at that time. Americans had grown accustomed to shoddy products as documented by low effort Ralph Nader types.

The reasons Chyrsler on the verge of bankruptcy in 1979 were two fold; economic recession and product/market mix was wrong. Their product offering were primarily gas-guzzlers and they did not sell in the face of then record-setting gas prices.

So, the government saved Chrysler in spite of its inability to manage its breakeven volume points and produce products that would sell with shifting market demands.

Now 30-years later, the same thing is occurring again; recession, shoddy quality, and product mix issues. Only this time, the victims of “protectionism” expanded to include General Motors.

Each time a society “protects the stupid and weak” the next cycle of unfavorability invites more victims. Chrysler should have not been allowed to survive in 1979. It takes some time and most are not capable of putting the big picture together. Every time an organization or any failed group of people are allowed to continue with their purpose, the underlying problem only becomes more pervasive.

Capitalism moves through cycles. As the economy expands, capacity expands. This expanded capacity eventually catches up to demand from the hot economy. Capacity expansion is not equal to the normalcy of incremental economic growth. A new plant is constructed, say with a million square feet of floor space. Once it reaches full production, the market is suddenly flooded with more product.

Capacity expansion eventually exceeds market demand. Prices begin to fall, profit margins become compressed, and work force reductions soon follow. Recessions are aligned to this natural ebb and flow of expansion and contraction of capacity. That is a very natural phenomenon of capitalism and has proven to be the most effective and efficient form of existence for humankind. Expanding governments has repeatedly demonstrated to be the most ineffective and inefficient when considering the quality of life for humankind.

The shrinking economy shows little mercy to those organizations that have trouble keeping their doors open. Those are the ones that should go out of business. Allowing failures to fail facilitates the process of continuous improvement in product, quality, and costs. That has been demonstrated and should be allowed to persist as they have for hundreds of years. Disallowing the incompetent to fail will lower the quality of life for all.

If Chrysler had been allowed to move into bankruptcy in 1979/80, the hard assets owned by Chrysler would have been purchased by those who had a better idea; that is improve the quality, broaden product offerings, and lower cost. When the government bailed them out, they facilitated a continuation of stupidity and sloppiness.

During Willie C. Durant’s and Alfred P. Sloan’s reign at General Motors, each recession brought on more bankruptcies of automobile manufacturers. In some instances, GM would buy the hard assets and very selectively retain some of the employees at those bankrupt companies. The industry thrived through several economic recessions and the Great Depression. That was capitalism and it worked.

Now, the government is again at it. Once this recession ends, rest assured the next one will be worse than this one. Universal law cannot be violated. That universal law is never protect incompetence. That weakens the entire species.

In early 1982, common forecasts included $85 oil prices by 1985 with over 8,500 U.S. Rotary Rigs running. That forecast was wrong. By 1985, oil was at less than $15 and there were less than 500 rigs running. There was no government help.

When oil prices rose rapidly in the U.S. in 2005 through 2007, the petroleum industry rose to the occasion by quickly developing new resources even the face of stupid governmental regulations. Without the petroleum industry’s relative high level of competence, oil prices would have surpassed $300/bbl. The increased supply in North America and non-OPEC places on the planet helped contribute to the fallback to $40/bbl from $140/bbl. The government had nothing to do with it. Capitalists did that in spite of OPEC’s price fixing system.

If the government had bailed out the incompetence that was running rampant in the petroleum industry in the late 1970’s, their ability to rise to the occasion in 2005 through 2008 would have been muted. That is because the methods, procedures, and organizational mantra’s of stupidity would have persisted if bailed out. What you want, as a citizen of the United States, is for the incompetent to either be demoted or fired. That is what accelerates the quality of your life. If the incompetent are retained, you will pay higher prices for shoddy product.

Americans were use to shoddy automotive products in the 1970’s and 1980’s. When the young yuppies bought the cheaper and gas friendlier cars from Japan, they could not help but notice the cars went from point A to point B without detouring to the repair shop most of the time. That was quite the contrast to cars made in North America. Hard assets were employed in Japan by competent management at that time and they knew how to use them much more competently than their American counterparts did.

Competence is hard to develop. Incompetence is not. Protecting incompetence only expands the population of the incompetent. Most choose the path of least resistance. They do not deserve protection. Everyone will share the burden imposed by the incompetent. That always leads to reductions in the quality of life.

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 no buy signals and no sell signals. There have been 540-sell signals since October 26, 2007 and 38-buy signals since October 31, 2008.

Although there were no buy signals, the Mid-term Indicant is signaling hold for only 21 of the 344-stocks and funds tracked by the Indicant. The stocks and funds with hold signals are up an average of 112.5%. That annualizes to 60.0%. The Mid-term Indicant has been signaling hold for these 21-stocks and funds for an average of 97.4-weeks.

Although there were no sell signals, the Mid-term Indicant is avoiding 323-stocks and funds of 344- tracked by the Indicant. The avoided stocks and funds are down an average of 32.2% since the Mid-term Indicant signaled sell an average of 49.6-weeks ago.

The Mid-term Indicant is avoiding all 100-Mutual Funds tracked by the Indicant, excluding the 31-ETF tracked daily. The Mid-term Indicant funds are down an average of 29.3% since their sell signals an average of 47.9-weeks ago. The 31-ETF’s trade more frequently and are updated in the daily stock market report.

One year ago, on May 16, 2008, the Mid-term Indicant was holding 210-stocks and funds out of the 345 tracked for an average of 126.0-weeks. They were up by an average of 151.7% (annualized at 62.6%). There were 130-avoided stocks and funds at that time. The avoided stocks and funds were down an average of 14.9% since their respective sell signals an average of 30.5-weeks earlier.

The Mid-term Indicant was signaling hold for 296-stocks and funds of the 345-tracked two years ago on May 18, 2007. They were up by an average of 123.6% (annualized at 64.6%) since their respective buy signals an average of 99.5-weeks earlier. The Mid-term Indicant was avoiding 31-stocks and funds at that time. They were down an average of 13.9% since their respective sell signals an average of 26.1-weeks earlier.

There were 272-stocks and funds with hold signals on May 19, 2006 since their buy signals an average of 98.8-weeks earlier. They were up by an average of 126.7% (annualized at 66.7%). There were 92-avoided stocks and funds at that time. They were down by an average of 6.8% from their respective sell signals an average of 16.1-weeks earlier.

On May 20, 2005, the Mid-term Indicant was signaling hold for 201-stocks and funds out of 320-tracked. They were up by an average of 99.4% (annualized at 57.0%) since their buy signals an average of 90.6-weeks earlier. The Mid-term Indicant was avoiding 112-stocks and funds at that time. They were down by an average of 26.6% since their sell signals an average of 55.8-weeks earlier.

Five years ago, on May 17, 2004, there were 218-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 75.4% (annualized at 68.5%) since their respective buy signals an average of 57.2-weeks earlier. There were 73-avoided stocks and funds then. They were down an average of 10.0% since their respective sell signals an average of 11.3-weeks earlier.

On May 17, 2003, there were 275-stocks and funds with hold signals from the listing of 296-tracked by the Mid-term Indicant at that time. They were up an average of 36.3%, annualizing at 111.9%, since the buy signals an average of 16.8-weeks earlier. There were eight avoided stocks and funds then. They were down by an average of 26.0% since their sell signals an average of 26.4-weeks earlier. There were 119-buy signals on Mar 22, 2003, which was the beginning of a nice Mid-term Bull Leg that lasted through that year. Most continued to hold through the meandering bear of 2004 and early 2005. Several did not receive sell signals until late 2007 and early 2008 since the March 2003 buy signals.

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.

Link to this week’s buy and sell signals.

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. Socio-economic interference can devastate your holdings from time to time. Right now, the pendulum is swinging to the left. That is not good for stock equity related investing.

All updated information can be accessed from the following link. You will need your login ID and password.

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

Comments about Mid-term Indicant Buy and Sell Signals This Weekend

Fundamentally, there is no reason to expect any bullish potential on a near-term, short-term, or mid-term basis. Earnings will continue to deteriorate and the normal capital “cleansing of the incompetent” is not being allowed by socialistic intervention. Wealth cannot be created when incompetent individuals are in the normal process of wealth creation; manufacturing, extraction, and agriculture. The natural ebb and flow of capitalism is not cleansing the inefficient and incompetent. Socialistic intervention will lead to higher costs, lower product quality, and a lower standard of living for all.

However, even with this “fundamental” gloom, there will be periods of technical rebounds. Those rebounds can lead to either bullish spurts or sustainable short-term rallies. Both spurts and rallies are configured the same in their first few days. After the first few days, the Near-term and Quick-term Indicant models differentiate spurts from rallies. Those of you who enjoy short-term trading will want to participate in rallies.

The current Near-term Indicant’s Bull is no longer solid. Force Vectors are beginning to penetrate bearish domains. However, their cycles are mature and a bullish bounce in the next few days would not be surprising.

As stated several days ago, the current Near-term Bull is tiring. Vector Pressure is at or near a maximum value. Force Vector is not being as responsive to bullish rallies, as it was earlier in the cycle (early March). However, until you see Near-term sell signals, the Near-term bull will remain in tact.

Click the following link that will take you to the Near-term, Quick-term, and Short-term Indicant models.

http://www.indicant.net/Members/Updates/STI-Mkts/STI-10-Indices/STI08.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 13.5% since its secular weekly low on October 9, 2002. The NASDAQ is up 50.8% and the S&P500 is up 13.7% since then. The small cap index, S&P600, is up 48.1% since October 9, 2002. All of the major indices were at new lows on the same week in 2002, which is a common attribute for bottoming. Interestingly, the NASDAQ100 is up 67.8% since October 9, 2002, which is more than the other major indices. RIMM, Apple, and a few others who have strongly performed are the primary contributors. Now, the current economic environment is challenging them. They did not participate in last week’s bullishness. That is a source of concern at this time.

The Dow is down 41.6% since its last weekly closing peak on Oct 9, 2007. The NASDAQ is down 41.2% since its last peak on Oct 31, 2007. The S&P600-small cap index is down 43.2% since its last closing peak on Jul 19, 2007.

The NASDAQ is down 66.7% since its last weekly secular peak on March 9, 2000. The S&P500 is down 42.2% since its similar secular peak on March 23, 2000. The Dow is down by 29.5% since January 13, 2000 when it peaked from the 1990’s roaring bull. As stated the past several years in this report, do not be surprised at the NASDAQ equaling its March 9, 2000 high until after 2025.

As socialism increases, the NASDAQ may not hit its 2000 peak until after 2050. Even that depends on resurgence in entrepreneurialism and related capitalism. Politicians screwed up the economy and the majority apparently believes their proposed fixes.

The good news is the politicians in Washington D.C. have reduced their power by weakening their already weak constituents. International competitiveness will continue reducing their power and influence. With that, capitalists around the world will continue providing products of appeal, while politicians continue exuding irrelevant commentary. Let’s just hope that products of appeal is not weaponry, alone.

The Dow is down 5.8% so far this year. The NASDAQ is up 6.5% so far this year. Keep in mind the post election year is the most bearish and has lost money since 1832. So far, the stock market is conforming to this historical standard, but the NASDAQ is currently arguing with that standard.

The NASDAQ year-to-date performance was bearish by 15.6% through this week in 2001. Keep in mind the NASDAQ finished 2001 down by 21.1%., which was congruent with standards of post-election-year-bearishness.

The NASDAQ was down by 11.5% 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 bear cycle found bottom in October 2002, which is consistent with the mid-term year’s historical standards.

The NASDAQ YTD 2003 performance was up by 16.2%. It finished up in that solidly bullish year by 50.0%, which was consistent with historical pre-election year results. It was down on this weekend in 2004 by 4.9% and finished up by 8.6% for that year, which was congruent with election year bullishness although shy of magnitude standards. It was down by 9.1% in 2005’s post election year, which maintained congruency to the historical standards of losses. Many of you recall that 2004 and 2005 were meandering bear markets. 2005 finished up by a mere 1.4%, which was an excellent year based on post election year historical standards. In 2006, it was up 1.5% on this weekend and finished that year with a 9.5%-gain, which again maintained congruency of historical bullishness for a mid-term election year. It was down by 4.6% at this time in 2007 with the Alan Greenspan scare but finished up that year by 9.8%, which was consistent with pre-election year bullishness. It was down 4.5% at this time last year. The NASDAQ finished down by 40.5% in 2008. That was contrarian performance to historical election year bullishness and the most bearish presidential election year since related records from 1832.

So far, this presidential post election year is performing consistently with historical standards. The capital markets understand socio-political influences are predominant in the first year of most incoming administrations and thus generally non-bullish. Politicians offer nothing pertinent to the quality of life, including health or wealth. They “talk about it” but just one RN offers more toward health and one good entrepreneur offers more toward wealth than the collection of all politicians, kings, queens, and dictators since the beginning of time. Those “control freaks” only talk and rob folks of their wealth and health.

Keep your eye on the daily stock market report.

Stop Loss Management

The Mid-term Indicant recommends a trailing stop loss of 8% due to the Near-term Indicant continuing with bull/hold signals. The Mid-term Indicant for major indices is supporting with a bull signal while it is much more conservative in signaling buy for funds and stocks and thus the reason for continued avoidance for most of the stocks and funds.

Most of the longer-term holdings of stocks and funds continue with “avoid” signals, but a few are still holding. The risk of continued holding, even for the likes of Apple, remains relaxed.

If you feel you will need cash within the next two years, you should consider selling all stocks and funds. (The Indicant is not signaling hold for any mutual funds, including those that short the market at this time). The ETF’s are signaled on the Near-term, Quick-term, and Short-term Indicant and are updated daily. These shorter-term models participate in bullish spurts, while the Mid-term Indicant is focused on fundamentals and longer-term technical data, which remains bearish.

If your stock or fund is above the bearish yellow curve and below the green curve, set your stop loss equal to the greater of the yellow curve and the trailing stop loss. If your stock or fund is above the green curve, set your stop loss at no less the value of the green curve or 8% trailing, whichever is greater. If your stock or fund is above the red curve and you bought at the Mid-term Buy signal, you should use the 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.

Economic Conditions – Inflation, Currency, Interest Rates

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

Short-term rates are bouncing at what appears to be a cyclical minimum. That is bullish for the stock market. Unfortunately, that is not the only variable influencing the stock market’s directional intensity.

You can see some early warning signs of impending inflation. Oil prices continue to rise. OPEC is expected to institute supply reductions. Demand for fuel will not subside with increasing socialism, but the rate of consumption will be muted with a decline in capitalistic opportunities. Research and development for alternative fuel sources will slow down during this socialistic phase of humanity. That will be inflationary. The capitalistic system will elevate the economy; nothing else will. If socialism existed to the extent of today in 1900, we would still be traveling by foot or horse and buggy.

As stated the past four weeks, the problem with the devolving economy is that those buying goods and services are not producers. Although some of the very rich are highly productive, they are too few in numbers to offset the increasingly higher number of the lazy poor-“give-me” generation. That will further depress the supply side, thereby adding socioeconomic problems in addition to the inflationary threats. The political structure is shortsighted due to “vote getting” mentality. Without strategic vision or for that matter, capability, political leaders endure their psychological problems and with that, wealth destruction by them continues.

There is no change from the past seventeen weeks. Interest rates remain at record low levels. That normally fosters a bullish stock market. Unfortunately, souring economic conditions at an accelerating rate have reduced the normal bullish relationship of low interest rates as irrelevant. Although rates are low, the process of borrowing money is not a capitalistic relationship between borrower and seller and thus irrelevant to the capital markets. Government intervention is going to wreak havoc on the United States economy. Governments simply cannot perform due to their riskless and reckless decision-making of using everyone else’s money plus a printing press.

As stated the past several weeks, the idea of capitalism is to borrow or capitalize and expanding the supply of money (wealth) through productive effort. That is not what is going on right now. Wealth creation will continue to slow and maybe even capsize. With that, there will be a reduction of the quality of life, which typically leads to war.

However, as the world shrinks and asset ownership is not isolated geographically, world wars will diminish as an option to overcome displeasure. It will be interesting to see what replaces it. Displeasure by the masses is certainly not an ever-lasting option. In the end, though, those with the most talent at physical object creation are always the winners.

The U.S. dollar continues enduring resistance in strengthening its bullish cycle. The dollar’s significance as an international currency is now under attack by the Chinese, who will eventually become the economic world power if they accelerate their capitalistic causes. The United States has been weakened severely by its “tyranny by the majority system” and excessive focus on socio-economic programs that have absolutely nothing to do with cultural strength and economic wealth. The printing presses and “politburo style politics” in the U.S. will reduce the dollar to just another world currency.

The U.S. economy is perceived to have the greatest chance of returning to robustness when compared to other countries. As stated the past sixteen weeks, the exception to this is China, who may or may not need U.S. consumption to bolster their economy. A weakening dollar against the Yuan may enjoy a longer-term labor relationship with the West. However, the stock market is focused only on the next six to nine months. China’s government can undo this bullish outlook for China in seconds, so keep your eye on it (the government). Their political leaders are no different from ours; that is they have the same “control freak” psychological problems as those of the west.

The commodities bearish cycle continues configuring at a bottom. It is already figured at prices supporting a low economic case. As long as they are bouncy near their cyclical minimums, the economic outlook should be considered as no worse than present. Although that is not positive, the magnitude of negatives has at least flattened for the time being.

Gold is an exception. It remains too risky to sell on a Quick-term basis. Longer-term hold positions are okay. Its strength is a testament to the fear elements inherent in the economy. Economic conditions will be fostering the “hate element” of humanity. Keep your eye on the daily report as gold appears nearing a cyclical peak on a short-term basis, but fundamentally remains a solid hold.

As stated 31-weeks ago, once the euphoria of the socialistic methods are complete, rest assured the bear market will continue and with gusto. This is not technical. This is fundamental. You will see that prognosis continuing in spite of recent bullish expressions.

As stated 27-weeks ago, “probabilities remain high that any bullish cycle will be followed by a deep bear market in 2009. If taxes are raised on the highly productive and capital gains, do not be surprised at a 1,000 Dow by 2010.”

As stated 23-weeks ago, this bear has teeth, is hungry, and is nowhere near expiration. Cyclical spurts of a bullish configuration will occur from time to time, but the trend should remain bearish throughout this year and into 2010. Bullish spurts will occur from time to time. As we learned from the November 28, 2008 – January 21, 2009 bullish spurt, profit potential from them is limited and in some cases disappoint rather rapidly. The attempted spurt on Feb 6, 2009 faded quickly and expired on Feb 19, 2009. The short-term trader will trade on those spurts, which is occurring now, while mid-to-long-term investor should remain on the sidelines. Finally, the current spurt underway has potential for sustainability through April and as you saw, it did that. So far, it has performed well. April has now concluded and the Near-term Indicant is now the primary focal point. As of this writing, it is still bullish.

Fear Metrics: Economics and Terrorism

Vanguard Gold and Precious Metals (VGPMX) - #19 was up 162.2% from its April 13, 2001 buy signal until the Mid-term Indicant sell signal on October 3, 2008. It is down 28.6% since that sell signal. It has been bearish in eleven of the last 19-weeks. It was bearish last week, following four consecutive weeks of bullish behavior.

Fidelity Gold, Fund #28 is down 7.4% since the Midterm Indicant signaled sell on August 1, 2008. It was mildly bearish last week.

Vanguard Energy #18, VGENX, was up 144.9% from since the Mid-term Indicant buy signal April 5, 2003. It received a sell signal on October 3, 2008. It is down 14.1% since that sell signal. It has been bullish in seven of the last nine weeks. It was solidly bearish last week.

Fidelity Energy Services #40, FSESX, was up 107.2% since the Mid-term Indicant signaled buy on December 6, 2003. It received a sell signal on October 3, 2008. It is down 28.4% since that sell signal. It was bearish last week, following nine consecutive weeks of bullishness.

State Street Research Global #9, SSGRX, was up 174.2% from its August 16, 2002 buy signal to the Mid-term Indicant sell on October 3, 2008. It is down 44.9% since that sell signal and enjoyed bullishness the past few weeks, but was also bearish last week.

Fidelity Energy #39, FSENX, was up 81.2% since the Mid-term Indicant signaled buy on August 16, 2003 and the sell signal on October 3, 2008. It is down 14.7% since that sell signal. It was solidly bearish last week.

As stated the past few weeks, the energy industry will not be bullish as long as politicians are trying to run it. The North American automotive industry will be weak for years to come as long as government is loaning money to dilettante managers. The quality of the products, regardless if fuel-efficient or not, will deteriorate. If you want to buy a car for your young daughter, do not buy American.

The Near-term Indicant signaled buy for ETF#03 – Energy and Natural Resources on April 3, 2009. It is up 4.3% since then, annualizing at 36.9%. The Quick-term Indicant continues to signal hold from the May 4, 2009 buy signal. It is down 2.3% since then. It was up 242.4% (annualized at 44.8%) since its previous buy signal on March 26, 2003 until the September 2008 sell signal.

The Quick-term Indicant signaled buy for the GLD-ETF#11 on December 11, 2008. It is up 13.5% since that buy signal, annualizing at 31.4%. It gained 81.4% from its August 3, 2005 buy signal until the September 8, 2008 sell signal. Its annualized gain during that hold period amounted to 26.0%. The Near-term Indicant signaled buy on April 24, 2009. This is a technical buy with not real strong attributes. Vector Pressure is drifting south. It is up 2.0% since the Near-term buy signal, annualizing at 35.0%.

Gold was apparently overbought. It is simply enduring a near-term cyclical adjustment and sector rotation. Its long-term outlook appears solidly bullish. Keep your eye on its relative price position with respect to the Quick-term Indicant’s bearish yellow curve. As long as bearish yellow is inclining, long-term holding is with minimal risks.

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 April 3, 2009 for the ten major indices. The ten major indices are up 8.9% since then, annualizing at 464.1%. This “reluctant bull signal” was due to the strongly configuring near-term and quick-term bullish indicators. Do not be surprised at a bear signal once this short-term bullish cycle completes.

Click this sentence to view a summary of their performance.

The Mid-term Indicant Dow Jones Industrial Average performance is at $27,276,738.

That beats buy and hold performance of $1,304,526 on a $10,000 investment in the Dow stocks in 1900. The MTI S&P500 is at $133,158. That beats buy and hold’s $91,021 on a December 31, 1971 $10,000 investment. The MTI-NASDAQ is at $174,525. That beats buy and hold’s $60,298 on an October 18, 1985 $10,000 investment. The Mid-term Indicant model beats buy and hold by 1990.9%, 46.3%, and 189.4%, 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 Mid-term Indicant 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 approximately 2,000% covering the past 100+ years. It will not be surprising to see the Mid-term Indicant outperform buy and hold by over 3,000% before the end of this decade, as the bear will gain momentum.

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.

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 sell for ProFunds Ultra Short on April 3, 2009. It is down 12.8% since then. It is too risky to hold with the Near-term and threatening Quick-term bull cycle. Although this is classically a post-election-year hold, current technical indicators are advising to avoid this fund until the Near-term bullish cycle expires.

Click here for Mid-term Indicant Table of Mutual Funds

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 185.6% (annualized at 10.6%) since the Long-term Indicant signaled bull 915-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. Even with today’s economy and stock market position, the 1991 investor is still up triple digit amounts, which remains above average performance when considering long-term planning. However, the Long-term Indicant is getting very close to signaling bear. A link to the Long-term Indicant is below:

Keep in mind this recession is not yet as bad as the 1979-82 recession. The Long-term Indicant is not influenced by short-term or mid-term cyclical behavior. It also takes into account longer-term performance within the model, both past and projected.

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

Short-term Indicant Stock Market Report - Summary

Near-term bullish bias configured on March 31, 2009 with a solid bounce off of Blue. That attribute suggested this is not a short-term bullish spurt, but with a high probability of sustainability. The average duration of a Near-term cycle ranges from 10-14 weeks. (This one is ten weeks old).

Several indicators are moving north; Bullish Blue, Bearish Green, and Vector Pressure. Force Vector cycles are mature and most continue hovering in bullish domains, which correlates to cyclical sustainability on a short-term basis. A few, however, have fallen below bearish domains, suggesting a tiring bull. However, they can linger there for several more weeks before the Near-term Bull expires. There are several Quick-term Red Bulls, which mitigates dynamic bearish threats. It only takes one non-contrarian Red Bull to offer this obstinate resistance to bearish dominance.

Keep in mind, this Near-term Bull is fighting the trend, which is bearish. The Quick-term bearish yellow and bullish red curves continue moving south. Recent Red Bulls are challenging this bearish trend, but have not yet overcome it with the required breadth, but getting close to doing so. This is a long drawn out process. Commitments toward directional intensity of a sustainable duration are seldom smooth when confronting the underlying trend. The battle between bull and bear in the next few weeks will not be passive.

Keep in mind, classical bear market rallies do this. They make contact with one of the Quick-term Indicant curves, angering the bear. The Near-term Indicant will assists in determining if the bear has bite or just a harmless growl.

As stated the past several weeks, this Near-term cycle appears bent on contacting the Quick-term Red and/or Yellow Curves. That has now transpired with the exception of the Dow Utilities. This is a common occurrence in bear markets. The Quick-term curves are sloping to the south, so it will not take much bullishness for this “technical achievement.” Once contact is made, dynamic bearishness usually follows. The breadth of contact is no longer minimal, as Red Bulls now hold a solid majority of the ETF’s and all but one of the major indices. However, keep in mind such contact and current configurations are classically aligned to that of a bear market rally.

The focal point will be on Force Vector’s interaction with Vector Pressure. The Near-term Bull does not want to see Force Vectors move solidly to the south into bearish domains. When Force Vectors cross into bearish domains and prices fall below bearish green, you will know that Near-term Bull will be nearing expiration. Early warnings will be highlighted by collapsing NTI bullish blue curves. That should be several days from now, but it can change quickly.

Previous comments regarding XLF and UGY are still pertinent. Please click this sentence to link to prior comments. XLF received a near-term buy signal on March 31, 2009. If you enjoy higher risks and related reward potential, you may prefer buying UGY. They are configured identically.

Near-term, Quick-term, Short-term Indicant Stock Market Details

The Near-term Indicant signaled bull for the eleven major indices on Mar 31, 2009 and bear for Contrarian VIX on the same day. The 11-major indices are up by an average of 10.0% since that bull signal, annualizing at 80.6%. The VIX is down 25.0% since its bear signal.

The Quick-term Indicant is signaling bull for ten major indices. They are down by an average of 2.9% since their respective bull signals an average of 2.4-weeks ago. The DJU is the lone non-contrarian bear. Including contrarian VIX and the DJU, those two indices are down by an average of 20.1% since the QTI signaled bear an average of 23.6-weeks ago.

By default the Quick-term Indicant has to signal bull when prices cross above bullish red curve. Buying at that point will win 82% of the time. However, during bear market rallies, such crossings incite a bearish response. That is the other 18% of the time. So far, the response from the bear has not been silent. It is a bit too early to tell if the Near-term Bull and Quick-term Bull are about to expire, but do not be surprised if they do in the next few days/weeks. Current configurations are symmetrical to normal bear market behavior.

On-going attribute watch for major indices:

-Near-term Directional Intensity Unanimity-All eleven major indices received a bull signal on March 31, 2009. They all bounced north of their respective Near-term Bullish Blue Curves in response to bearish aggression on Mar 27 and Mar 30. That was “near-term” bullish synergy with breadth, following the initial surge in early March.

QTI Red Bull Status—Quick-term bias, favoring the bear, continues being threatened with several recent new Quick-term Bull signals. Ten are Red Bulls. Dynamic bearish behavior cannot occur as long as there is at least one Quick-term Red Bull. The problem confronting this “baby bull” is that most of the indices are now below bullish red. This is typical of bear market rallies, when bullish red curve acts as a ceiling to rising stock prices. However, as long as the Near-term Bull remains in tact, the Quick-term Indicant cannot signal bear. Continue reading.

QTI Yellow Bear Status-Quick-term bias favors bear, but weakening, with the recent surge in Quick-term Bull signals. Quick-term yellow bears offer no resistance level to falling stock prices, but such resistance is now manifesting. This bearish resistance is softening and threatening this baby bull along the same lines as classical bear market rally. Contrarian VIX fell prey to the bull on April 16, 2009 as it received a Quick-term Bear Signal. It is a passive bear, poised for a bullish recoil when the Near-term Bull expires. For those of you who delight in bearish stock market behavior, patience is the key at this point. Stalk related options. This Near-term Bull may have a few more weeks of life before its expiration.

-NTI Blue Bull Direction-This indicator is moving north, favoring the Near-term Bull, but being confronted by the bear.

-NTI Green Bear Direction – Moving north; non-bearish.

-STI Force Vector Position- No longer in bullish domains and thus allowing bearish interest to manifest.

-STI Force Vector Direction – As stated yesterday, they are bearishly mature leaving open an opportunity for a bullish response. You saw the bullish response yesterday. The bull’s weakness in that response is cause for concern. Today’s mild bearish follow-on behavior heightens that concern. However, the bearish cycle is mature, which affords a bullish opportunity to express itself.

-Vector Pressure Position- Short-term bearish bias concluded on Mar 24, 2009. None are in bearish domains, except the VIX. As stated for the past several days, many are near a peak, though, suggesting this Near-term Bull is nearing respective peak prices in this near-term cycle. Keep in mind this “peaking” can last for several days.

-Vector Pressure Direction –Short-term bearish bias concluded on Mar 21, 2009. After moving in support of the bull, they are now being challenged by the bear. Due to their aggressively bullish position, increased volatility is highly likely. In other words, this Near-term Bull should not expire without a good fight.

-Tangential Protection - None of the 11-major indices possess this attribute.

-Reverse Tangential Bearish Detection - Construction will begin upon the expiration of the current Near-term Bullish cycle now underway. It will identify a future lower trading range upon completion of its construction. It is 100% accurate in predicting this future phenomenon. In other words, after this bullish cycle completes, another bearish cycle will follow. Depending on breadth and bullish magnitude of the current near-term bullish cycle, do not be surprised at a 5,000 or lower Dow by August/September. This should lead to a 3,000 Dow just ahead of the mid-term election year in 2010. Of course, keep in mind, the Indicant does not officially forecast. Fundamentally, either inflation or deflation always favors the bear. Right now, the additive values of interest rates to the absolute value of inflation/deflation is okay (not supportive of the bear).

Click the Short-term Indicant to see the combined table of the Near-term Indicant and Quick-term Indicant. The table has links to charts for each. There is one chart containing both the Near-term and Quick-term Indicant.

The tour is still being developed, but most of you are now familiar with the Near-term bull/bear cycles as well as the tangential protections and reverse tangential bearish detectors. Those latter two will be explained as they evolve in the next two to three weeks. It could be a bit longer as those constructions cannot occur until the current Near-term Bull cycle expires.

The NYSE and NASDAQ Indicant Volume Indicators aborted robust behavior on Mar 31, 2009. As stated since then, they appeared to have pinnacled, which suggested stock market stability. Also, as stated since then, volatility should wane, which favors the underlying cycle of directional intensity. That is bullish on a near-term basis. (This paragraph will be repeated until conditions change).

As stated on April 22, 2009, the NASDAQ Indicant Volume Indicator is rising again. This supports near-term bullishness. The NYSE halted its lethargic configuration. That is supportive of stability. That combination biases in favor of the Near-term Bull.

As stated on April 30, 2009 – Volume support has been mixed with vacillating Indicant Volume Indicators. Although this Near-term Bull is impressive, this lackluster volume support suggests it will be followed by an equally impressive Near-term Bear. Keep your eye on the Near-term Bullish Blue Curves; there is no need to anticipate. As long as they continue to rise, the Near-term Bull will remain in tact. The first thing to change before expiration is a collapsing of bullish blue.

Short-term Report Card, Status, and Charts

The Near-term Indicant generated no buy signals and no sell signals.

Although there were no buy signals, the Near-term Indicant is signaling hold for 28-ETF’s. They are up by an average of 12.6%, annualizing at 101.8% since their buy signals an average of 6.5-weeks ago. Although there were no sell signals, the NTI is avoiding three ETF’s. They are down by an average of 6.4% since their sell signals an average of 7.9-weeks ago.

The Quick-term Indicant generated no buy signals and no sell signals.

Although there were no buy signals, the Quick-term Indicant is signaling hold for 25-ETF’s. They are up an average of 1.6% since their buy signals an average of 3.8-weeks ago. Those with hold signals are annualizing at 22.2%. Six ETF’s are down by an average of 20.5% since their sell signals an average of 21.3-weeks ago.

The recent Quick-term Red Bulls significantly reduces the threat of dynamic bearish behavior. That attribute has not been enjoyed with the current breadth since early 2008. As long as there are Quick-term Red Bulls, one does not have to worry about bearish dominance.

The Near-term Bull remains in tact. Yesterday’s mild bullish response to last Wednesday’s bearish aggression is consistent with technical adjustments to a stock market remaining close to the desires of bullish ambition. The problem is that the bear is expressing its displeasure with the new Red Bulls. The bull/bear battle will continue for a few more days before directional intensity is again obviated.

The selling and avoidance of the 99-non-contrarian funds were triggered by the Mid-term Indicant. Click here to get a quick overview of the regular mutual funds as they stood a few months ago. As you can see, many of them are down by double digit percentage points since the Mid-term Indicant signaled sell in late 2007 and in early 2008. The Mid-term Indicant is updated each weekend with a link to the member’s section. Members can click this sentence to get a more recent update.

Click the below link to see today’s Near-term, Quick-term, and Short-term Indicant signals. Links on that page will take you to a single chart with all the model’s position on each ETF.

http://www.indicant.net/Members/Updates/STI-SQI-QTI-ETF-SumPage/0UD%20QTI-ETF0-Sum.htm

Current Strategy-Short-term Indicant- May 15, 2009-Fri-Same as last Wednesday. May 14, 2009-Thu-Same as yesterday. May 13, 2009-Wed-Vector Pressure is past a peak and even though the Near-term Bull remains in tact, it will either rest for the next several days or expire. Explosive and sustainable bullish potential is low right now, while configurations are not in support of any dynamic and sustainable bearish behavior in the next few days. May 12, 2009-Tue-Same as Friday, May 1, 2009. May 11, 2009-Mon-Same as Friday May 1. May 1, 2009-Fri-As long as the near-term bullish blue curve continues moving north, the Near-term Bull remains in tact. The newly forming Red Bulls are offering significant resistance to dynamic bearish behavior.

Contrarian Funds

ProFunds Ultra Short mutual fund moves inversely to the QQQQ by exponential amounts. See the Mid-term Indicant for its status.

The Near-term and Quick-term Indicant signaled sell for QID on March 26, 2009. It is down 14.2% since then. Its configuration is similar to VIX, but the math of double downs/ups is sometimes distorting. It, along with VIX, is poised for a bullish cycle, but they can both linger for several more weeks by scraping along the edge of bearish domains. Recent behavior suggests they are comfortable laying in bearish domains, while they contemplate their next attack on the near-term bull. QID Force Vectors are supporting bullishness, but need to cross into bullish domains before a buy signal can be generated.

Note May 6, 2009-QQQQ’s Force Vectors are weak and have not participated dynamically in the recent bullish behavior. It was a leader and now stalling. It will be interesting to see if its bullish position erodes following the current stagnant configuration.

Note-May 11, 2009-On today’s above average bearishness, you noticed QQQQ was mildly bullish, contrasting its recent bearishness on bullish days. This money rotation and related synchronization suggests the underlying bias remains in tact; that is bullish.

Note-May 13, 2009-QQQQ’s Force Vector is bearishly mature. It is configured with bullish bounce potential, while at the same time its Force Vector is threatening to cross into bearish domains. It will be interesting to see if it succumbs and falls into bearish domains.

Note-May 14, 2009-QQQQ enjoyed the anticipated bullish bounce today, while QID crossed above bearish yellow. QID did not receive a buy signal since the Near-term Indicant continues signaling the avoidance of QID.

ETF#03-Natural Resources - The Quick-term Indicant signaled buy on May 4, 2009. It is down 0.2% since that buy signal.

Force Vector jumped north on Apr 3 and the Near-term Indicant signaled buy. It is up 4.3% since the Near-term Indicant signaled buy on April 3, 2009, annualizing at 36.9%. As stated since that buy signal, the Near-term bull is being challenged by the oil bear, but recent behavior suggests this bear is all growl and no bite. Its bullish blue curve is weakening, but still holding up. The problem with this hold signal is that Vector Pressure is at a maximum. This does not mean it is about to become bearish, but that has been the response to this configuration this past year when bullish blue is lazy. Set your stop loss at green price minus 50-cents or so. Green should rise and you need to reset every now and then.

ETF#11-Gold and Precious Metals is up 13.5% since the QTI signaled buy on December 11, 2008. It is annualized growth is at 31.4%. The model’s intent is to beat buy and hold. Bearish yellow is a good price to set stop losses for a longer-term hold position.

The Near-term Indicant signaled buy on Apr 24, 2009. It is up 2.0% since then, annualizing at 35.0%. Its Force Vector moved into bullish domains and its price moved above the bullish blue curve. This buy signal is not a comfortable one as it is against the declining Vector Pressure. However, it is not at a maximum, offering the possibility of a new bullish cycle. As indicated several days ago, money rotation is shifting to gold, driving its price higher. You saw some of that last week with gold being strongly bullish, but stalled later in the week. It was again bullish most of this past week. Rest assured money will rotate into gold once the Near-term Bull expires for the stock market.

Gold remains fundamentally sound for long-term holding and a technical measure of authenticity in that assessment is in its bearish yellow curve. If it crosses below bearish yellow, you will not want to be holding. The Near-term Indicant will highlight that potential when this occurs.

ETF#14-Long Government is down 4.6% since the Near-term Indicant signaled sell on Apr 7, 2009. Although it’s Vector Pressure remains positioned to support bullish behavior, and very much so, its Force Vector remains in bearish domains and its price remains below bullish blue. Its bullish blue curve remains in collapsed condition. That is bearish on a near-term basis.

This fund is up 1.0% since the Quick-term Indicant signaled sell on May 1, 2009, when it fell below bearish yellow.

Major ETF Events Today

Following Transports Force Vector falling into bearish domains yesterday, the S&P400 and NASDAQ100 followed suit today. This is a bit unsettling to the Near-term Bull, but prices remain well above the rising Near-term Green curve, which provides non-bearish protection right now.

Click Quick-term Indicant, Near-term, and Short-term for all 31-ETF’s.