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Henning, THE STOCK MARKET CURMUDGEON
Bond market up-move looking old
Thomas Henning: "The Bond Market is in an upmove off of the 103 low. The upleg looks tired and is losing momentum. A close below 110 basis the spot month would suggest the next leg down. A close below 103 would bust the bonds and break the back of the debt bubble.
The Stock Market has formed a near-term bottom in early August, which is part of the sideways movement in force for the last eight months. All of the usual bullish divergences were present.
The uptrend must be represented because it's there, but closes below Dow 9780, confirmed by the Transports below 2950, would be the first suggestion that the anticipated cyclic bear market is starting.
Since late 2003, the Gold Complex has been consolidating the first upleg within a cyclic bull market.
Near term, there has been an upside confirmation by the gold and XAU, which have been confirmed by the volume studies.
I do have an alternate count that suggests another downleg for about three weeks, but clean closes above XAU 97, confirmed by the spot gold, would negate that count and confirm the start of the next upleg, which should be a dandy."
THE MAJOR TRENDS
250 W Coventry Ct., Ste. 109, Milwaukee, WI 53217.
Published for clients of Sadoff Investment Management LLC.
Ronald Sadoff: "Caution: don't get carried away with historical election year statistics. Yet the data is always interesting to observe. Since 1832 the year of the presidential election has been the second best year for market returns (the year before the election year is the best). The stock market has been up for 28 out of 42 presidential election years. Net total gains during an election year since 1833 have totaled 285.2% over 42 elections.
Over the last 13 presidential years the market has scored 10 advances versus only 3 declines.
It is not unusual for stock prices to sour in the late spring, early summer of an election year, then turn upward later. In eight of the last eleven election years the market hit its low in May, June, or July. In ten of the last eleven election years the S&P rallied into the year end (the exception was 2000). Over the last 26 election years the average first quarter return for stocks was 2.3%. The average for April - May produced a 1.77% decline. Over the last seven months the market has risen an average of 12.6% during an election year."
Sy Harding's STREET SMART REPORT
505 East New York Ave., Ste. 2, DeLand, FL 32724.
1 year, 17 issues, $250.
September to November time frame
will produce a substantial advance
Sy Harding: "Whether or not the market is able to produce a summer rally of some degree, we expect the market will not see its ultimate low for the year until the September to November time frame."
At that point, the extra chunks of money of the next favorable season should take over, and produce a substantial advance off of what should by then be very oversold conditions and extremes of investor pessimism."
Richard Geist's STRATEGIC INVESTING
1905 Beacon St., Waban, MA 02468.
Monthly, 1 year, $157.
Strong second half forecast
Richard Geist: "Our forecast for a strong second half remains in tact, based on the relative under-valuation of the S&P 500 to the 10 year Treasury note, increased pessimism (a contrary sign), economic strength, strong corporate earnings, high productivity, and minimal inflation. It's easy to get caught in the herd's pessimism as you watch your portfolio lose value each day. But as the shorts begin to cover in the months ahead, the market doldrums will change very rapidly, erasing much of the summer losses."
THE STEVE PUETZ LETTER
2800 Wilshire Ave., West Lafayette, IN 47906.
Monthly, 1 year, $185.
Odds extremely high that a
crash will start soon
Steve Puetz: "In spite of general optimism about prospects for both the stock market and the economy, a large number of powerfully negative factors are growing with ever increasing intensity. The fact that these factors are being ignored does not mean their negative impact will be minimized in any way. Instead, it virtually guarantees shock when recognition finally hits.
A list of these negative factors follows:
1) Weakness in retail spending has persisted for over two months. If
this weakness continues, it will surely precipitate an economic recession.
2) Because production is high and sales are weak, business
inventories have accumulated to dangerously high levels. To reduce inventories, business managers will soon have to make the decision to cut production and reduce employment.
3) There are growing signs of weakening employment in the previously
robust financial sectors of the economy. The next downturn is likely to be far reaching - affecting all sector of the economy.
4) A multitude of bubble markets exist in the US.
5) Even though none of the many bubbles have burst, these bubbles
are no longer providing the US economy a boost. These bubbles are no longer boosting the economy because the interest payments to finance them are now exceeding the benefits from the asset inflation they create.
6) Recognition of a looming economic recession has not yet hit the
market place. When recognition finally does occur, it will cause panic selling.
7) A tremendous liquidity squeeze, as measured by real M2 money
supply growth, is strangling spending of all types. This squeeze is more severe than the one in the year 2000, and it's at least as powerful as the 1987 squeeze.
8) Leverage of unprecedented proportions exits all of the bubble
markets.
9) Short-term, the stock market is overbought.
10) All Unified Market Theory components are in sync to the downside
until the end of October.
The odds are extremely high that a crash will start any day now. Maintain a maximum bearish strategy. Use 75% of your funds for short positions in S&P 500 futures. Allocate the rest to October S&P 500 put options with strike prices of 800 and 900."
NATE'S NOTES
P.O. Box 667, Healdsburg, Ca 95448.
Monthly, 1 year, $150.
Investors Going For Gold
At The Oil-ympics
Nate Pile: "Bubblin' crude, indeed! Gold too! Investors can't seem to get enough of these two commodities (as well as others) lately, with gold climbing over $6 today alone and oil clearing $49 a barrel for awhile before pulling back to the mid-$47 range. Though the talking heads on TV cannot seem to agree whether speculators or honest-to-goodness demand is driving up prices, the bottom line is that prices are going up for many commodities... and, at least over the short-term, this does not bode well for corporate earnings and consumer spending here in the U.S.
While there are a number of factors that are driving the price of oil higher, I think at least one of them is a growing level of uncertainty about the stability of the Middle East, and I believe that the growing demand for gold helps to support this idea, as gold has historically been considered among the safest of havens during uncertain times.
There are a great number of things for investors to feel uncertain about these days, and, despite the nice rally we had recently for most of the major averages, I continue to believe that there are quite a few more potential catalysts that could drive the market lower than there are events that might send it higher. I will obviously have to change my tune about the direction of the market if the current rally proves to have legs, as they say, but for now, I remain on the bearish side of the debate and believe we will do well for ourselves to keep some of our powder dry until we get closer to (or perhaps even past) the election in November.
Of course, if our economy starts to weaken due to the trickle down effect of higher oil prices, it will not help President Bush in the polls, and given that just two months a great majority of those on Wall Street had him pegged as a shoe-in to win, "bad" economic numbers are likely to drag stocks down on both a fundamental level (earnings estimates will have to be revised downwards) but on a psychological level as well (will the President collect enough votes to win the election after all?).
If uncertainty on Wall Street about the outcome of the election continues to grow, stocks in a variety of sectors are likely to suffer as investors take their bets off the table until they find out for sure whether or not the current capital gains tax rate will remain in effect or change; whether or not large pharma is likely to be a target of the next President's agenda for reform; whether or not our military efforts around the world are likely to remain on their current course or take a radical change in direction; etc. etc. etc.
I hate to be so pessimistic, but I have learned over the years that it is often wiser to take chips off the table when storm clouds are brewing than it is to stand there and yell into the stormfront "I don't care what happens - I love my stocks, and I ain't sellin' 'em no matter what!"
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