Subj : Market Action To : All From : Paul Rogers Date : Wed Jul 13 2005 07:24 pm Content-type: text/plain As I checked a 5-day chart the remarkable thing was that we've traced out a nice smooth ballistic curve since last Thursday morning, with each day picking-up from the previous as if there were no off-hours trading around the world and no weekend worries. We also seem to be at the peak of the curve. So prices were flat today, and volume trailed off to -1% below average. Beginning to look like the old resistance line is scaring them again. Why? Well, there are lots of "reasons". In the first place, these technical indicators, for all the graduate- student papers that have been written about them, are just empirical. They've been seen to "work", except when they don't. They aren't secret, many investors know about at least some of them. Therefore they can become self-fulfilling prophecies. Trust me, I'm not the only one with a horizontal pencil line somewhere between 1214 and 1225. Some investors aren't going to be the last to leave the party. Also, it is summer. The market often treads water through the "Summer Doldrums". It's not entirely because Main Street is thinking about vacation. There's nothing like the calendar year end driving a Santa Claus rally. No retirement funding trying to beat the April 15th deadline. When there is a summer rally it tends to be a low-volume affair, driven more by restricted supply than a Bull Market, and those tend to be short and constrained. No, what we've got coming is October when many of the mutual funds do their FY-end balancing and portfolio window-dressing. The extra selling in September and October often drives the market down. Main Street's vacations? We're usually down at the "noise level". We don't have the BIG pocketbooks of the institutional investors. We don't know what we're doing either, so taken en-masse we tend to cancel each other out! The President may have been happy with the economic numbers he got, but the Street is only loyal to the almighty buck. Like Oliver, it says, "Please, Sir, I want more." Some entertain the idea more would have been possible with other policies. Is 5% unemplyoment so good if less was possible? Is a $325B deficit good because it was predicted to be higher? Is halving the total Federal deficit by 2006, 2007 or 2009 good if we had a surplus? So the Street isn't so happy with what we've got. The Street doesn't always, but habitually it looks out 6-9 months in the future. If it can predict something profitable, it will move that direction right away to maximize its gains. In the mean time it will be over-priced on that expectation. So even if nothing bad happens to cause a necessary correction, when we get out there nothing happens because it's "already priced-in". There has to be something good coming to cause an improving market now, and apparently the Street doesn't see it--and hasn't all year! The Street hires the best sophisticated econometric models. They have exquisite balancing points between interest rates, dividends, and market returns to decide their daily allocations. When the market seems to react daily to such things as crude futures, in part it's the result of these models. These days those models are considering the future impact of the Fed raising rates out of the "accomodative" range, and a certain probability they might become "restrictive" at some time in the future. Traditionally there's an inverse relationship between the direction of interest rates and stock prices, because higher interest rates increase business costs and present greater attractions among short to intermediate term fixed income investments. Their models also produce an estimate of what "fair value" of the market is. But what we're hearing is more disagreement about whether the market is above, below or at "fair value". To some extent that's just talk, but it's not inspiring confidence. The Bubble is over. The Bear Market, well, probably. It's time we got back to traditional, conservative strategies. Most investors don't know what those are! So what else do you have to do this summer? Price Vola- Momen- Volume Oscil- Summ. Change tility tum lator Index -__+ -__+ -__+ -__+ -__+ -__+ __|_ _|__ __|_ __|_ __|_ ___| 07/07 ___> _|__ __|_ __>_ __|_ ___| 07/08 __>_ _>__ __|_ __>_ __>_ ___| 07/11 __>_ _>__ __|_ __>_ __>_ ___> 07/12 __>_ _>__ __|_ _>__ __>_ ___> 07/13 Timing Signals: I don't use or recommend timing signals, but they're fun to watch. If I did though, well, I might use something like this. (Be warned!! It tends to whipsaw around signal points!) Last Signal: BUY Date: 07/01/05 S&P: 1194 Winner or Loser: tbd By: tbd See my market tracking charts for '03-'04 and my investment strategy study at my website(s): http://www.xprt.net/~pgrogers/Pers.html http://www.geocities.com/paulgrogers/Pers.html Paul Rogers, paulgrogers@yahoo.com -o) http://www.angelfire.com/or/paulrogers /\\ Rogers' Second Law: Everything you do communicates. _\_V .... Gee! How'd you ever get it to do THAT? ___ MultiMail/MS-DOS v0.35 --- * Origin: The Bare Bones BBS (1:105/360) .