Subj : Market Action To : All From : Paul Rogers Date : Thu Jul 01 2004 07:39 pm

Prices fell all day on slightly higher volume, +12% above average.  This
time the price change combined with the volume was enough for my formula
to call it a Distribution Day.

You've noticed I often disagree with the instant analysis that is
reported as "the reason" for the daily action.  Today it has been laid
to the fact a few companies confessed they aren't going to meet
expectations and reduced earnings outlook.  Is that right?

We know 2001 & 2002 were marked by a progressing Bear Market and
continued recession.  About St Paddy's Day in 2003 the market turned
around to gave us fantastic gains for the year, and later the economy
proved it had stopped shrinking.  Now, in large part that was because
corporate earnings were expected to improve with the economy.
Expectations were generally fulfilled, and that helped keep the rally
going.  But there were many warnings, mine among them, that the
year-over-year comparisons appeared to be inflated "artificially"
because 2002 was so bad.

Do you remember a couple weeks ago I warned you that it isn't correct to
try to average averages?  I think something of the same thing may be
going on here.  Now, I'm going to make up some numbers here to
demonstrate my point.  Analysts looked at quarterly and annual earnings
for 2001 and 2002 and said, say, "Earnings are down -30% in 2002!"  In
2003 they compared with 2002 and said, "Earnings have turned around, up
+30% for 2003."  (Note, that does NOT mean they're back to 2001 levels!)
And in 2004, with the economy continuing to improve, let's say earnings
are expected to grow at +30% again.  Now, does the progression, -30% to
+30%, to +30% mean earnings aren't growing?  That this is a bad year for
earnings, hence the market?  Do the "analysts" have that right?

WRONG!  What you really need to do is look at the raw earnings numbers
for the past 3-4 years to see how the company earnigns are faring.  Go
back to that word "artificially".  When you deal with "digested" numbers
you have to be especially careful about making comparisons!  Always use
raw numbers, and compare them on the same basis.

 Price     Vola-     Momen-    Volume    Oscil-    Summ.
 Change    tility    tum                 lator     Index
 -__+      -__+      -__+      -__+      -__+      -__+

 _|__      <___      __|_      ___<      __|_      __>_     06/25
 _<__      <___      __|_      __<_      __|_      __>_     06/28
 __<_      <___      __|_      __|_      __|_      ___>     06/29
 __|_      <___      __|_      __|_      __|_      ___>     06/30
 _|__      <___      __|_      __|_      __|_      ___>     07/01

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:  05/25/04 S&P:    1113
Winner or Loser:  tbd                   By:     tbd

See my market tracking charts for '02-'03 and my investment strategy
study at my website(s):
http://www.xprt.net/~pgrogers/Pers.html
http://www.angelfire.com/or/paulrogers/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 .... Only the survivors write histories. ___ MultiMail/MS-DOS v0.35 --- * Origin: The Bare Bones BBS (1:105/360) .