Thread: Market Talk

Last Week Returns - Oct 07 - OCT 14

G-fund0.09%
I-fund-0.12%
F-fund-0.57%
C-fund-0.77%
S-fund-1.69%

I'm back to 100% C fund at Friday's close. I've been in G since August. Hope for a 4th quarter rally soon.Interesting article here .....



THE MARKET'S FAVORABLE SEASON APPROACHES! October 14, 2005.


As I remind you twice a year, in the spring and in the fall, the stock market moves in remarkably consistent seasonal patterns. It makes most of its gains in the winter and early spring, and suffers most of its declines in the summer months.

The pattern has been obvious for many years, as evidenced by the decades-old Wall Street maxim "Sell in May and Go Away". However, it wasn't as clear when one was to re-enter the market in the fall.

Research by Ned Davis Research Inc. in the 1980s indicated it was a good bet to re-enter on October 1, while research by Yale Hirsch of the Hirsch Organization came up with November 1 as the time to buy. Hirsch found that over the previous 50 years an investor who bought the S&P 500 index on November 1 each year, and sold it the following May 1, would have equaled the profits of a buy and hold investor, while cutting market risk by 50% (since he or she was in the market only six months each year). By doing so the 'seasonal investor' would also have avoided some nerve-wracking market plunges, including the worst months of the 1973-74 bear market, the 1987 crash, and the 1990 bear market.

However, the rally that begins the market's favorable season obviously does not begin exactly on either October 1 or November 1 every year, nor does the favorable season end each year on May 1.

So when I began my own research into seasonality in the 1990s it was my goal to find a way to catch the variations in seasonality as they take place each year. That research finally led me to combine the market's general seasonal pattern with a technical 'indicator', MACD, which was developed by Gerald Appel in the 1980s, to 'trigger' a signal when the market changes direction into either a sustainable rally or correction.

The result was my Seasonal Timing Strategy, introduced in Riding the Bear in 1999 as a means of continuing to make gains in the remainder of the 1990s bull market, and not give the gains back in the severe bear market I predicted was just around the corner.

The strategy says the earliest entry in the fall is October 17, but only if MACD is on a buy signal at the time. If the market remains in a decline, as indicated by MACD remaining on a sell signal, the entry is delayed until MACD triggers its next buy signal. In the spring, the earliest exit is April 20, but only if MACD is on a sell signal when that date arrives. If the market remains in a rally, as indicated by MACD remaining on a buy signal, then the exit is delayed until MACD triggers its next sell signal.

Back-tested over the previous 50 years, the entry was sometimes delayed by MACD to as late as late November, while the exit was sometimes delayed until mid-June. Thus the favorable and unfavorable seasons lasted between four and eight months, and the 'seasonal investor' was able to be aware of that at the time.

It made a big difference in what could be expected from seasonality. Back-tested over the previous 50 years, the strategy tripled the performance of the S&P 500, and used in my newsletter has had similar performance in real time. In particular it got us nicely through the severe 2000-2002 bear market by missing the biggest parts of the declines, which as seasonality tells us to expect, took place mostly in the unfavorable seasons each year.

I hope this market takes off in a V shape, as it didaround10/1/04 on this chart!!!!!!!

Comment from a Tech:

The S&P 500 bounced from below its uptrend line so it may take a little longer for it to make a sustained venture above the support band,but the index is likely to explore the four point range within the band for a day or so. The band is now serving as overhead resistance.

Notice that the Dow closed at the end of Friday's rally precisely on its uptrend line, and it can be expected to close below it a couple more times before a rally takes it much higher.

Some comments for bkrownd:

Before I start my analysis I want to communicate a few things that should help you better understand and make use of the information that you are receiving from me. Consider this an up-dade to the “Explanation� of how I arrive at my buy and sell signals.

It has taken me some time to fully understand the capabilities of the superb and intricate charting software to which I currently subscribe, and it has allowed me to construct three (proprietary) indicators that more accurately depict the significance of market fluctuations. They represent different aspects of price movement: the MSO (modified stochastic oscillator) measures the overbought/oversold market condition. The BSP (buying/selling pressure) index is self-explanatory and is more important as a short-term index. And the A/D (advance/decline) index, which is a measure of market breath. I also use the RSI in its conventional form to gauge market momentum.

Time-consuming experimentation was required to arrive at the best formulation of this data and to understand the capability of each indicator. Some of these have to be modified for different time periods.

Good indicators and learning to interpret them correctly is essential, but good visibility is also extremely important. E.G. the time periods chosen and how to position the charts and indicators are prerequisites to providing a clear picture of all the nuances of price movement and what they signify.

There is one more thing that I have mentioned before , but bears repeating: Technical analysis is a study in probabilities, not certainties. The best that the analyst can do -- not matter how good his tools are and how skillful his interpretation of them -- is to convey what will probably happen, and he must be ready to modify his views if market conditions change in some unexpected way.

The current market position is a good example of this because, although the short-term visibility is fairly good, the longer-term trend is unclear and difficult to forecast.

robo,
Hmm! This ought to be easy to figure out. Maybe!

Then there is Wilma

Can you believe it another storm is brewing in the Carribean?

:@

They just completed my screen room on Fridayfrom last year's storm.

The saga continues

robo wrote:

I hope this market takes off in a V shape, as it didaround10/1/04 on this chart!!!!!!!

Comment from a Tech:

The S&P 500 bounced from below its uptrend line so it may take a little longer for it to make a sustained venture above the support band,but the index is likely to explore the four point range within the band for a day or so. The band is now serving as overhead resistance.

Notice that the Dow closed at the end of Friday's rally precisely on its uptrend line, and it can be expected to close below it a couple more times before a rally takes it much higher.

Some comments for bkrownd:

Before I start my analysis I want to communicate a few things that should help you better understand and make use of the information that you are receiving from me. Consider this an up-dade to the “Explanation� of how I arrive at my buy and sell signals.

It has taken me some time to fully understand the capabilities of the superb and intricate charting software to which I currently subscribe, and it has allowed me to construct three (proprietary) indicators that more accurately depict the significance of market fluctuations. They represent different aspects of price movement: the MSO (modified stochastic oscillator) measures the overbought/oversold market condition. The BSP (buying/selling pressure) index is self-explanatory and is more important as a short-term index. And the A/D (advance/decline) index, which is a measure of market breath. I also use the RSI in its conventional form to gauge market momentum.

Time-consuming experimentation was required to arrive at the best formulation of this data and to understand the capability of each indicator. Some of these have to be modified for different time periods.

Good indicators and learning to interpret them correctly is essential, but good visibility is also extremely important. E.G. the time periods chosen and how to position the charts and indicators are prerequisites to providing a clear picture of all the nuances of price movement and what they signify.

There is one more thing that I have mentioned before , but bears repeating: Technical analysis is a study in probabilities, not certainties. The best that the analyst can do -- not matter how good his tools are and how skillful his interpretation of them -- is to convey what will probably happen, and he must be ready to modify his views if market conditions change in some unexpected way.

The current market position is a good example of this because, although the short-term visibility is fairly good, the longer-term trend is unclear and difficult to forecast.

I honestly believe if anybody thinks that the economy is good for business, they have got to be dreaming....o.....future economic prospects for the next year or sois nil in my view and the market will adjust to that......basically nil......

With that said again (seeing how some still hold hopes everyweek I try to reevaluated the situation and give my viewpoint :shock, it is high risk to get in the market with your money.....just look at the last two weeks and see how the gains vs losses on the C and S funds look.....its crapshooting and the odds are against you to strike any gains.......:s

I'm just trying to give a perspective by experience and my data....of course br.. you may want my formulas but you can't heve them....

:duder is it DWW???? Sometimes I really like that old handle of mine....and I haven't let it go yet.....

[align=left]For Sunday, October 16, 2005 [/align]





Current Strategy Positions
FibTimer currently has 11 successful timing strategies

Aggressive S&P Position - BEARISH
Aggressive Nasdaq Position - BULLISH
Aggressive GOLD Position - BULLISH [/b]
Aggressive BOND Position - BEARISH
Aggress. SMALLCAP Position - BEARISH
Conservative S&P Position - BULLISH[/b]
Conservative REIT Position - BULLISH[/b]
U.S. Dollar Timer Position - BULLISH

Of course one should take this prediction with a grain of salt. I find Fib Timer to be 50/50 with regard to accuracy.

50/50 wow what great odds. Sounds like every other investment company claiming to be smarter then the stock market.
Tenniguy

Food for thought....get a grip of the situation with this article....



[align=center]







Mixed news
Econoday Simply Economics 10/14/05

By Evelina M. Tainer, Chief Economist[/align]
[align=justify]Recap of US Markets
STOCKS
Equity prices rose on Friday as crude oil prices fell at the same time that the consumer price index posted its largest one month gain since March 1980. Despite today's rise in prices, equity prices are still down for the week reflecting a generally negative. Economic news was not all bad - retail sales rose despite declining auto sales - but investors are concerned that rising interest rates will hamper spending eventually. The Fed's FOMC minutes from the September 20 meeting suggest that they are staying on course to wipe out inflationary expectations. Economists and market players are convinced that the Fed is likely to keep raising rates into next year. And some are even talking about 50 basis point hikes instead of the more measured pace to which we have become accustomed thus far.
[align=center][/align]

[/align]
[align=justify]BONDS
The shape of the yield curve hasn't changed this past week, but interest rates have certainly ticked higher across the board. Economic indicators were sparse early in the week with Monday a holiday, but the bond market got off with a bang in the form of FOMC minutes on Tuesday. The minutes from the September 20 meeting suggest the Fed will remain focused on inflation. The minutes also reveal that officials are starting to rethink the language of their post-meeting statement - and that could mean the language will become less measured and more focused on tightening. While economic news was generally mixed, markets were not particularly pleased with the 1.2 percent spurt in the consumer price index - even though the core CPI remained quiescent. While energy prices have not yet translated into higher product prices across the board, they could still lead to higher product prices down the road.
[align=center][/align]

[/align]
[align=justify]Markets at a Glance

[align=center][/align]

[/align]
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
[align=justify]The Economy
ENERGY INFLATION SPIKE
The consumer price index surged 1.2 percent in September, the largest monthly gain since March 1980! Energy prices jumped 12 percent during the month, although food prices only inched up 0.3 percent. Excluding energy prices, the core CPI increased 0.1 percent for the fifth straight month. Outside energy, price increases were mostly modest, except for larger gains in tobacco products and education costs. The September CPI is used for cost-of-living adjustments for social security recipients - and this year's gain of 4.1 percent (effective January 2006) will be the largest since 1990.
[align=center][/align]

[/align]
It is truly amazing that the core CPI has remained quiescent for this many months, despite surging energy prices. According to BLS officials, October energy prices have not picked up steam. It is possible that they may even fall slightly, but in any case, large gains are not expected in next month's report. Since Fed officials are worried about inflation, there is no question that market players will remain concerned about the possibility that the core CPI starts posting more rapid increases as well. For instance, higher jet fuel prices lead to higher airfares. And it is important to keep in mind that higher energy prices directly impact consumers. So while market players and Fed officials focus on "core" CPI figures, consumers are instead focusing on where their cash outlays are going.
INFLATION AND THE FOMC
Despite apparently good news on core inflation, the Fed remains concerned about inflationary expectations. The minutes of the September 20 FOMC meeting suggest that Fed officials are more concerned, not less, about inflation since Katrina. The general view on the reading of the minutes is that the Fed is not pointing to an end in raising the federal funds rate target. Some market players are even talking about 50 basis point rate hikes. It is important that Fed officials not only contain inflationary pressures, but also inflationary expectations. Once consumers and businesses believe that inflation is out of the bag, then it truly will be much harder for the Fed to contain it.
[align=justify]RETAIL SALES: POSITIVE AND NEGATIVE HURRICANE EFFECTS
The Census Bureau could not disentangle the impact of hurricanes Katrina and Rita on September retail sales, but suggest that they impacted the data both positively and negatively. Total retail sales inched up 0.2 percent after posting a 1.9 percent drop in August despite a drop in motor vehicle sales. Excluding the auto group, sales jumped 1.1 percent in September - spurred by a 4 percent hike at gas stations. Excluding autos and gas, sales increased 0.6 percent for the second straight month, but moderated significantly in the third quarter to a 4.5 percent rate from the second quarter pace of 7.9 percent.
[align=center][/align]

[/align]
On the whole, the retail sales figures were not all that bad considering that consumers had to increase their cash outlays for higher gas prices. Third quarter retail sales are certainly lower than the second quarter - particularly taking into account motor vehicle sales - but keep in mind that automakers are responsible for much of the seesaw pattern in motor vehicle sales as they offer and remove incentives.
[align=justify]It will be interesting to see how retail sales hold up as we enter the holiday sales period. As frequent readers of this column know, we don't believe that consumer attitude surveys are necessarily good predictors of spending. However, the University of Michigan's consumer sentiment index declined again in early October, to 75.4 from a level of 76.9 in September. This suggests that consumer attitudes are not improving. While it may not mean that retail sales will show a similar weakness, it does suggest that consumers believe their personal finances are less than stellar and this will play a role in hampering retail sales this fall. Certainly, a drop in gasoline prices would help improve consumer attitudes, but although crude oil prices have fallen, refineries are not yet fully operational and this is preventing gasoline prices from falling significantly. If consumer attitudes remain this depressed for another month or two, it would be cause for concern about retail sales this season.
[align=center][/align]

[/align]
[align=justify]KATRINA AND BOEING STRIKE DAMPEN PRODUCTION IN SEPTEMBER
The index of industrial production fell 1.3 percent in September after posting a modest 0.2 percent gain in August. Among major market groups, consumer goods production increased 0.2 percent, business equipment fell 3.7 percent, materials dropped 2.1 percent and construction supplies production gained 0.2 percent. Among major industry groups, manufacturing production fell 0.5 percent, mining plunged 9.1 percent and utilities decreased 0.9 percent. According to the Federal Reserve, hurricanes Katrina and Rita reduced output growth by 1.7 percentage points in September while the machinists' strike against Boeing reduced output by 0.5 percentage points during the month. Outside the energy sector, hurricane-related production declines were in industrial chemicals. As refinery capacity gets back on board, we will see a rebound in production. Also, the Boeing strike has been settled and workers are back on the job. This should also help boost production in October.
[align=center][/align]

[/align]
The Bottom Line
Some economic indicators are obviously affected by hurricanes Katrina and Rita, while others are not. Market players are trying to discern not only how the underlying economy is faring but how the Federal Reserve is also assessing these data. On the whole, underlying momentum was strong going into the hurricane. The question has not changed, though: how long can consumers weather such high gasoline prices before we see spillover effects? Furthermore, the minutes of the FOMC meeting suggest that Fed officials will remain focused on inflation. And even if high gasoline prices don't impact retail sales too much over the holiday season, further Fed rate hikes surely will.
Looking Ahead: Week of October 17 to October 21

Monday
The Empire State manufacturing index decreased to 17 in September after reaching a high level of 23.9 this summer in July. The NY Fed did not note whether or not any of the moderation in activity was due to Katrina last month.
Empire State index Consensus Forecast for Oct 05: 20
Range: 10 to 21
Tuesday
The producer price index increased 0.6 percent in August, spurred by a 3.7 percent hike in energy prices. Excluding energy and food, the PPI was unchanged for the month. The CPI surged 1.2 percent in September, and it is possible that the PPI will also post another spurt for the month, but keep in mind that the two don't move in tandem on energy prices from one month to the next.
PPI Consensus Forecast for Sept 05: 1.1 percent
Range: 0.1 to 2.1 percent
PPI ex food & energy Consensus Forecast for Sept 05: 0.2 percent
Range: 0.1 to 0.4 percent
Wednesday
Housing starts decreased marginally in August to a 2.01 million unit rate with stable single family construction, but a decline in multi-family construction. Most likely, we will see a negative impact from hurricanes Katrina and Rita. The positive impact of rebuilding is not likely to show for several months.
Housing starts Consensus Forecast for Sept 05: 1.95 million-unit rate
Range: 1.85 to 2.05 million-unit rate
Thursday
New jobless claims fell 2,000 in the week ended October 8 to 389,000. Labor Department officials estimate that about 75,000 new claims were related to Katrina and Rita. This was the sixth straight week in which jobless claims were affected by the hurricanes.
Jobless Claims Consensus Forecast for 10/15/05: 370,000 (-19,000)
Range: 330,000 to 400,000
Several components of the index of leading indicators were negative in September: consumer expectations, jobless claims and the yield spread. The factory workweek was unchanged. Vendor performance did increase, and stock prices rose modestly for the month.
Leading indicators Consensus Forecast for Sept 05: -0.4 percent
Range: -0.8 to -0.2 percent
The general business conditions component of the Philadelphia Fed's business outlook survey dropped to 2.2 in September from a level of 17.5 in August. This was in sharp contrast to other manufacturing surveys last month.
[align=justify]Philadelphia Fed survey Consensus Forecast for Oct 05: 10
Range: 5 to 20 [/align]