HENNING, The Curmudgeon

Take no prisoners

        Thomas Henning: "The Bonds are acting el-sicko on the verge of busting the key 113 level, which would cause the Weekly Hard Momentum to confirm to the downside.
        A downside bust would confirm the top and a rise in interest rates which will bust the in-hock, I-hate-money herd as they begin to default on their debts. Hello debt implosion.
        The Gold Complex is acting like a champ having broken out to the upside with the gold stocks confirming on a marginal basis. The favored count suggests that the juicy #3 wave has started.
        To be fair, I can't rule out another downleg to fulfill a potential alternate count. The jury is still out.
        Near term, the overbought complex is due for a breather. After the anticipated consolidation, clean closes above XAU 116, spot gold above 480, would rule out the potential downleg and would confirm the start of the fun #3 wave.
        At any rate, potential downleg or not, the bullish cycle is intact and the only proper tactic is not to get cute and overtrade. Simply ride the main cycle to the upside.
        The Stock Market is in the terminal phase of a bull cycle that started in August, 1982. When completed, a bear cycle of about a decade's duration is in the cards.
        Near term, for the last couple of months the internals have been failing as the final waves have been evolving. The recent near-term upleg off of the September lows has been feeble, which suggests that the next crack downward will be the real thing. Closes below the April low of Dow 10,000, Transports 3348, will leave nothing but air under the stock market. Considering what the bonds and gold complex is doing, it will probably be "take no prisoners."

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THE ALEXANDER PARIS REPORT
161 N Clark St., Ste. 2950, Chicago, IL 60601.
Monthly, 1 year, $195.

Presidential Cycle may work in reverse

        Alexander Paris: "As we approach 2006, the second year of the presidential term, we are starting to see articles on the connection between the presidential cycle and the stock market. Specifically, the theory is that the market hits significant low points in the second year of the presidential term, followed by a strong ensuing rally. Actually, there is a good correlation historically and the explanation makes reasonable sense. Presidents do seem to engage in very stimulative fiscal policy by the second year in a term to beef up the economy for the next election in an attempt to keep themselves or their party in power. But, like all such correlations, they don't work every time and the last time this one didn't work was as recent as 2003. This may be another time when the correlation doesn't hold since the Bush administration has already been extremely stimulative, not only with tax cuts, which were a good thing, but also very heavy continuing military spending for two wars in the Middle East and domestic spending for the war on terrorism. On top of that, the administration has also spent money like drunken liberals on nondefense spending. Most recently, it is pulling out the stops again to aid and reconstruct the Gulf Coast. If anything, the presidential cycle may work in reverse, stimulating a good stock market in 2006 second year and paying the price in the following year, when, according to theory, the market should be rallying strongly."

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NATIONAL TRENDLINES
14001 Berryville Rd., North Potomac, MD 20874.
1 year, 4 issues, $85.

Sharp decline ahead

        Doug Jimerson: "After twelve months of trendless trading, with no gains or modest losses for the year, stocks appear to be completing the topping process that has been under way since late 2004. A sharp decline should follow shortly, the timing of which may depend on when energy stocks and foreign stocks decline.
        Bonds have been range-bound all year and continue to search for direction. Bonds have benefited from the weakness of stocks this year and may gain momentum if stocks sell off during October as we expect. Gold has benefited recently from a "flight to quality." We expect this advance to be followed by a sharp reversal.
        The asset allocation accounts remain positioned 100% in money market funds."

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The Elliott Wave FINANCIAL FORECAST
P.O. Box 1618, Gainesville, GA 30503.
Monthly, 1 year, $228. Includes Special Reports and Interim Bulletins.

Market summary and outlook

        Steve Hochberg: "The stock market keeps hanging on to its choppy rise from April like a punch drunk boxer that refuses to give in, but a bearish technical pattern called a diamond appears at an end. An important timing sequence suggests that it should lead to the next leg down of the ongoing bear market soon. The spread between the yield on U.S. Treasury bonds are junk debt is in the early stages of a widening to record levels. Gold exceeded the November-December highs but the technical evidence strongly favors the imminent exhaustion of the rise. Silver remains well below its April 2004 top and should decline more or less in line with gold. The U.S. Dollar index remains in a multi-month bear market rally that is not over. The target remains near 100."

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INVESTECH RESEARCH
2472 Birch Glen, Whitefish, MT 59937.
1 year 17 issues, $295.

Nervously Bullish

        James Stack: "Our safety-first strategy and careful sector allocation continue to trounce the major stock market averages! But the going is likely to get tougher as headwinds turn into real economic risks...

• The price of gold has broken out to a 17-year high in one of its convincing rallies since the inflationary 1970s.
• Today it costs $47.78 to fill up the gas tank of the average mid-size car - up 56% since last December.
• If one thinks prices at the gas pump have been obscene, just wait until you see the sticker shock of home heating bills this winter - with natural gas prices up 166% since this time last year!
• Credit-card delinquencies have risen to record highs with 1-in-20 now slipping past due, and the American Bankers Association has noted an increase in delinquent payments on personal loans, auto loans and home equity loans.
• Consumer Confidence just took its biggest plunge in 16 years - a decline that in all 5 previous instances has meant Recession!

        It would be too easy to lay all the blame for today's woes on oil prices. Such imbalances and "surprises" are a natural part of an aging economic cycle. At 3.9 years, today's recovery is already 2 months longer than the average economic expansion of the past century. So although the bull market is seemingly intact, and economists project solid growth well into 2006 regardless of energy prices, we continue to build our portfolio defenses."

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THE FINANCIAL REPORT CARD
P.O. Box 7173, Kensington, CT 06037.
Monthly, 1 year, $129.95.

Home on the range bound

        Dr. Robert Valuk: "The market has to cope with many negative forces. These negatives include oil prices that defy logic, natural disasters, interest rate increase, and an overvalued market. Also, the government is on a spending spree. We maintain the market is still range bound, and until it can break through our benchmarks (S&P 1230 and Dow 11,000) we would brace for a possible strong sell-off in October. Keep positions defensive and maintain a cash reserve to buy bargains. Purchase low PE stocks that pay dividends over 2% and have earnings that are increasing. Write covered calls on these positions. In the oil patch we see a sell-off to the high 50s. The smart way to play oil is to purchase oil trusts that have covered calls (Enerplus, Pengrowth Energy, Provident Energy, and Primewest Energy for example). You can get a high yield and pocket the call premium. If you write the calls in the money, you also get excellent downside protection. To use this strategy, you need cheap commissions of $10 or less per trade. The Money Machine is a 22-page primer we offer on writing covered calls, and it contains the actual techniques the author uses to greatly enhance his portfolio income (available for $29.95, 800-793-5686, www.mdrinf.com). The author also staggers purchases of these oil trusts, buying a hundred shares at a time up to a maximum of three hundred shares as oil prices sell off. For example, buy 100 Pengrowth Energy with oil at $63 a barrel, 100 with oil at $60 a barrel, and 100 with oil t $58 a barrel. You pay more commissions but reduce your risk and are often able to write options at different strike prices."

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THE MAJOR TRENDS
Published for clients of Sadoff Investment Management LLC
250 W Coventry Ct., Ste. 109, Milwaukee, WI 53217.

Back to back bubbles

        Ron Sadoff: "First came the high tech bubble followed by its implosion. Now comes the final feverish stage of an enormous speculative bubble in housing. The intense mania build up and the current nearly vertical parabolic curve for the housing stocks coupled with the current breakdown warn us that trouble is around the corner. Simply put the Federal Reserve has replaced one bubble with another. In effect the fallout from the high tech bubble was minimized by the creation of the more powerful housing bubble. Sizeable interest rates cuts followed the implosion of the high tech bubble. The federal funds rate dropped from 6.5% to 1%. This plunge in interest rates led to soaring home prices that, in turn, led to a construction boom, coupled with a significant increase in consumer spending as homeowners extracted equity from their homes. Over the last four years homeowners have pulled nearly $600 billion in equity out of their homes. Approximately 16% of those funds were spent. Homeowners used mortgage refinancing to plunge deeper into debt at the same time their cash savings dropped to nil.
        The stock prices for all the homebuilding stocks have decisively broken below their steeply acceleratory parabolic curves. Conclusion: The housing bubble has been pierced. In turn a sharp slowdown for the economy will take hold by next year. Lower interest rates will follow."

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THE PERSONAL CAPITALIST
6911 S 66th E Ave., Ste. 301, Tulsa, OK 74133.
1 year, 24 issues, $195.

Cautiously Bullish

        Sean Christian: "We continue to target a move a DJIA 12,000 or higher, although the move has been delayed at the very least. In addition, our confidence in a bull market advance has been shaken. Clearly, the economy and earnings will take a hit based on the "double-whammy" of two hurricanes and substantially higher energy costs. For now, we remain bullish, but are prepared to adjust as needed.
        Both our Model Portfolio and our Small-Position have enjoyed nice gains in 2005, up over 13% for the year.
        While the DJIA is essentially flat on the year (down approximately 2%)."

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