THE DINES LETTER
P.O. Box 22, Belvedere, CA 94920.
1 year, 17 issues, $195.
James Dines: "Stocks: The month of May used to be an inauspicious month for new buying, but it has been improving. Despite many years of rising markets, May has seen the DJI decline in 22 of the last 40 years, 55% of the time, or has proven to be the prelude to significant declines in Junes or Julys - that pave the way for the traditional "Summer Rally." Since 1965, the period 1 May to 30 Jun has been a loser 60% of the time (24 out of 40 years.) But, 13 of the 16 exceptions (81%) occurred in the last 22 years, so the period has been getting less bearish. May is the beginning month for the worst six months (1 May - 31 Oct) of the year, a bullish factor for golds since they tend to move opposite the market. The statistics were based on the Dow's average percentage change for the six-month periods from 1950-2003 as applied to an arbitrary investment portfolio of $10,000. Specifically, when compounded annually starting in 1950, buying in May and selling by Oct, a $10,000 investment was reduced to $9,682 by 2003, reflecting a loss of $318. On the other hand, buying in Nov and selling by Apr resulted in an appreciated value of $492,060, reflecting a $482,060 profit by 2003.
Memorial Week Rally: Investors who nonetheless insist on buying might as well do so before the start of Memorial Day weekend, May 23 to May 27 this year. The DJI rose during that week 12 years in a row (from 1984-1995) - also 1999, 2000, 2003, and 2004. Downers during the Memorial Day holiday include 1996, 1997, 1998, 2001 and 2002. All told, the "memorial week rally" has come true 76% (16 of 21) of the time in the last 21 years.
Precious Metals: Both the Dines Gold Stock Average (DIGSA) and the Dines Silver Stock Average (DISSA) have risen 20 times and declined 16 times (neutral once) in the past 37 Mays, for a slightly bullish record of 56%."
ALLSTAR FUND TRADER
P.O. Box 203427, Austin, TX 78270.
Monthly, 1 year, $249.
Ron Rowland: "In the early 1990s, technology went into high gear and began making a major transformation of the U.S. economy. Technology stocks quickly became the place to be for investors. The rewards were handsome, and as more investors joined the crowd the tech stocks went higher and higher. Then came the year 2000, and the party ended unhappily for many.
Was technology in the 1990s a mania? It certainly became one, but it didn't start out that way. Computers and the Internet offered ways for companies and individuals to improve their productivity. So it made perfect sense to invest in the sector. Eventually, however, hype and speculation took over and tech stocks were bid up to unrealistic values.
Investing in the early part of a mania can be quite rewarding. The key is to get out in time with your profits intact. If you bought tech stocks in 1994 and sold them in 1998, you didn't get in at the bottom and you were left money on the table at the top. You still did very well, though - better than those who missed the whole move because they thought it had passed them by, and better than those who tried to squeeze out every last penny at the end.
We review this history because we are beginning to suspect the markets are in the first stage of a new mania: energy. Space precludes a complete analysis here. Suffice it to say that there are many reasons to believe that the energy sector could remain strong for several more years.
If this is the case there will, of course, still be periods of weakness for energy, just as there were for technology in the 1990s. There are also important differences this time. For one thing, we know that energy companies are producing something that people will actually buy. That was not the case for many tech start-ups that sought to sell products which, it turned out, no one really wanted.
Does this mean we plan to remain in energy funds for the foreseeable future? No, certainly not. We'll follow our time-tested methodology and go into the strongest market sectors, whatever they may be. It won't surprise us, however, if momentum remains with the energy sector a good part of the time for the next few years."
The Stock Market: The Bear will be Delivered
Thomas Henning: "The Bond Market has peaked out in early February at 117, legged down to 109. This downleg busted the Weekly Hard Momentum to the downside most probably signaling the start of a cyclic bear market.
Nearer term, a digestive upside rally has evolved. A close below 113 would suggest the start of the next downleg. A close at 108 or lower would leave nothing but air under the bonds with longer-term rates screaming upward putting the squeeze to the in-hock world. Hello default and implosion.
The Stock Market is in the process of giving birth to a cyclic bear market which would have a life expectancy of about a decade.
The near-term birthing process is still in question with the jury still out on the form of the delivery. There is a potential wave count (not favored) which suggests another upleg until late May, early June.
The potential upleg would be loaded with bearish non-confirmations with longer-term indicators simply setting up very bearish configurations. Again, while this is not favored, I can't rule it out.
The favored count suggests that the market peaked on March 7th, and that the bear has been delivered. Backing up this count is a bust of the January lows and key moving averages.
To confirm the bear near-term closes below Dow 9900, Transports, 3350, would validate the downtrend and the bust of the January lows. Given the putrid shape of the bond market, I'm having a hard time gagging down the concept of another upleg, but one must stay humble to the markets. Don't take your eye off of the bonds. If they close at 108 or lower, the implosion is most likely starting.
Understand, all of this debate is only a question of the form of the bear birthing process, not of the substance, which is that the bear will be delivered.
The Gold Complex has been in a corrective wave since early 2004, digesting the upleg that started in late 2000.
Near term, the overall correction has a complete look to it, but to hint at the start of the next upleg, the XAU has to close above 94 with the June Gold confirming above 450. Closes above XAU 114, June Gold 463, would suggest an acceleration to the upside. In all likelihood, an upside gold confirmation will probably coincide with the Dollar Index busting 80 as the world "diversifies" out of Dollars."
Sy Harding's STREET SMART REPORT
505 E New York Ave., Ste. 2, DeLand, FL 32724.
1 year, 17 issues, $250.
Indicators on sell signal
Sy Harding: "The consensus of the 35 technical indicators we use remains on the sell signal of March 22 for the S&P 500, Dow, Russell 2000, and the rest of the market.
We expect the market will see its low for the year between October and November.
Minimum downside targets are: Dow: 8,800 to 9,100, S&P 500: 920 to 1,000, Nasdaq: 1,500 to 1,650.
Not in a straight line down, but with up and down volatility, with the lows being reached in October to November. Overhead resistance for the S&P should be around its 20-week m.a., currently at 1,190.
In addition to the technicals, seasonality supports the prospects for a serious decline. The market is now in its unfavorable seasonal period according to our Seasonal Timing Strategy, when it has historically suffered almost all of its serious declines. And it has earned this unfavorable season in the first year of the Four-Year Presidential Cycle, historically the weakest of the four years in the cycle.
In addition to the technicals and seasonality, the economic fundamentals support the prospects for a serious decline. Interest rates are on the rise, with the "Three Hikes Bring a Tumble" rule triggered last fall. Inflation is on the rise, and the market dislikes inflation as much as it dislikes rising interest rates. The economic numbers are becoming dismal; new records in the trade and budget deficits, with retail sales and housing, the two engines that have been driving the economy, now under pressure. And they are weakening at a time when consumers are up to their necks in debt and consumer sentiment is plunging, which further cripples their ability to spend and thus continue to provide the main support for the economy."
Harloff's THE INTELLIGENT FUND INVESTOR
26106 Tallwood Dr., North Olmsted, OH 44070.
Monthly, 1 year, $179.
Market capitulation or Bear?
Dr.Gary Harloff: "The market has all the signs of a capitulation with very heavy selling, and the put/call ratio over 1. Our sense is that we are quite near a short term market correction low. We think that large cap growth will reign before we go into a new long term bear market perhaps sometime in 2006.
The health care and biotech areas are nearly the only sectors worth new investment. Oil and gold are lower, large cap beat small cap, even though both are negative at this time. The U.S. dollar has appreciated recently due to further increasing short term interest rates by the Fed, relative to other central banks.
The European and emerging markets are also showing weaker equity markets."
THE YAMAMOTO FORECAST
P.O. Box 573, Kahului, HI 96733.
Monthly, 1 year, $350.
Time's short for the bulls
Irwin Yamamoto: "Time's short for the bulls. In our estimation, there were 3 to 4 short-term rallies left. Today, perhaps 2 to 3 advances exist. The danger is the end appears with no warnings. Alarms won't be ringing to alert you. The safest action would be to stay completely out. Easier said than done. Hence, if you have to participate, enter at undervalued conditions. Do not touch stocks at elevated heights.
An in-and-out scheme may work for a while. However, our advice is to avoid a long-term commitment. No, we're not envisioning the destruction of mankind. Then again, the next couple of years will likely be painful. The beginning of this period could be a few months away. However, tread carefully in the meantime."
Kenneth Coleman's INVESTMENT TRACKER
4805 Courageous Ln., Carlsbad, CA 92008.
Monthly, 1 year, $139.
Dr. Douglas Anderson: "If you are into stocks, I would suggest a rather close stop on each stock to protect your capital. I believe it is still important to hold some precious metal and resource stocks as insurance against the further fall of the dollar.
I would also recommend lowering your debt as much as possible and reduce spending to build an emergency fund. Remember, savings is foregone consumption. Then I believe it wise to hold onto your job and attempt to build other sources of income perhaps a home business taking advantage of your hobbies or interests."
INVESTECH RESEARCH
2472 Birch Glen, MT 59937.
1 year, 17 issues, $295.
Catherine Hetrick: "In spite of a weak start, we still look for modest gains this year. After all, the DJIA has lost ground during the first quarter in four out of the last five years, regardless of whether it turned out to be a bull or bear market year. Ironically, the only period that saw a first quarter gain in the Dow later saw the bear market bottom...that was in 2002. We can't say whether these statistics should be reassuring, but our strategy remains unchanged.
For now, we plan to hold the present course with our emphasis on inflation and recession resistant sectors. From a stock selection perspective, our focus will be on holding undervalued or fairly priced companies that have strong balance sheets, meaningful control of their cost structure, and adequate pricing power to generate revenue growth. Also, we're prepared to increase our cash position if inflationary pressures pick up or technical models turn south. While it's still possible the Fed can engineer a "soft landing" later this year, in the interim prudence dictates that we structure our portfolio in a defensive manner - consistent with our safety-first philosophy."
The Elliott Wave FINANCIAL FORECAST
P.O. Box 1618, Gainesville, GA 30503.
Monthly, 1 year, $228.
Overall market on extremely shaky ground
Peter Kendall: "All major indexes now join the Nasdaq, which topped January 3, in what should be the broadest leg of the ongoing bear market. With the help of a mini-panic out of GM bonds, March brought a widening in credit spreads between low-quality bonds and U.S. Treasuries. It should mark the kick off to the record widening, which EWFF called for last month. As 10-year Treasury note yields push to 5.00% and above, junk yields should rise even faster. The U.S. Dollar Index is in a rally that should carry to at least the 89 area, with more bullish potential should prices exceed this level.
Gold & Silver. Gold has started its third-wave decline as forecast. Over the next several months wave (3) should draw gold toward $350. Though we don't expect it, a push above $448 would require a relabeling of gold's wave pattern.
Silver has also started a third-wave decline. Silver's wave and trading patterns are now more attuned to the market for industrial rather than precious metals. So its weakness signals that the economy's tepid recovery will give way to economic contraction in coming months."
CMI's STOCK OPTIONS TRADER
P.O. Box 5379, Destin, FL.
1 year, 26 issues, $595.
The tracks of a cyclical bear?
Gretchen Marszalk: "Many weeks ago, when some of the market indicators began to support topping action, we made and repeated the comments that it takes time to form longer term market tops. In due course more indicators started to fall in line and it was increasingly evident that the market was indeed topping.
The confirmation of the formation of a top was some time in coming. As we have explained over the years, on many occasions, for a top to occur and for a major trend change to take place requires a number of technical conditions to develop in the principal market averages - in this case the SPX, the Dow Industrials and the Nasdaq Composite. These conditions are: first, the penetration of well defined long term support trendlines, then reversal of intermediate term trends and declining 10-week moving averages; second, the breach of significant intermediate term support levels; and finally the turning down of the 200-day moving averages.
Currently, against the background of a rush by investors out of cyclical stocks and high techs, and into defensive issues, all the above-mentioned preconditions have been satisfied, except one - the 200-day moving average of SPX is still very slightly positive. If and when that line will turn down we will have a confirmation of the onset of a cyclical bear market that may be coinciding with the developing downward leg of a 4-year cycle.
This is the language of the market - so when the market speaks, we listen.
If the bear market will fully develop, how long will it last? We don't know. Probably until the end of the 4-year cycle, through the better part of 2006 - with many intermediate rallies along the way. Meanwhile, we'll just have to stick to our knitting and keep an eye on our technical indicators, because trying to outguess the long-term direction of the market is an exercise in futility...
In short term option trading it does not matter which is the prevailing direction of the market, as long as the market volatility and trading volume remain at reasonable levels."
EQUITY FUND OUTLOOK
P.O. Box 76, Boston, MA 02117.
Monthly, 1 year, $149.
The Market: Handshake or a wave
Thurman Smith: "Since the high at the end of December, the market has undergone a typical secondary correction, bringing the EFO Market Index back to get reacquainted with its 39-week trendline. If this retrenchment is just a secondary correction, the market will resume an upward path after fluctuating around its 39-week trendline for a few weeks. If one views the 2002 low as the bottom of a new rising market, there is a case for seeing the December high as the top of a four-to-five year cycle with more downside to come. However, the more persistent ten-year cycle suggests that 2005 should be up; this could mean a delay of the start of a bear market. The next few weeks will tell."
THE MASTER INDICATOR of the Stock Market
11371 Torchwood Ct., Wellington, FL 33414.
1 year, 17 issues, $175.
Stocks will turn back down
John Goddess: "Once the current rebound ends, stocks will turn back down and break under their recent bottom. And buying pressures, which suffered a compound failure at the early March top, will come up short again."
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