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----- Original Message -----
From: <A
title=mike-burk@xxxxxxxxxxxxxxxxxxxxxx
href="">Mike Burk ; <A
title=mike-burk@xxxxxxxxxxxxxxxxxxxxxx
href="">Mike Burk
To: <A title=mike-burk@xxxxxxxxxxxxxxxxxxxxxx
href="">Mike Burk
Sent: Saturday, May 01, 2004 11:54 AM
Subject: 5/1 Report
<A
name=OLE_LINK4><A
name=OLE_LINK1><SPAN
><SPAN
>Technical market report for May 1,
2004.The good news is:
<LI class=MsoNormal
><SPAN
><SPAN
><SPAN
>Next week is seasonally
strong.
<SPAN
><SPAN
><SPAN
>
<SPAN
><SPAN
><SPAN
>From time to time I have alluded to “normal”
markets. For many (70 + that we
have data for) years the market usually followed a cyclical pattern with the
following, bottom to bottom
characteristics:
<LI class=MsoNormal
><SPAN
><SPAN
><SPAN
>In the beginning, new lows diminish rapidly
while the NYSE advance – decline line (AD line) and small caps lead the way
up.
<LI class=MsoNormal
><SPAN
><SPAN
><SPAN
>Approaching a top, new highs diminish while
the small caps and AD line under perform the blue
chips.
<LI class=MsoNormal
><SPAN
><SPAN
><SPAN
>About 2-6 weeks after a cycle high for the
small caps and AD line a final top is made by the blue chips (DJIA).<SPAN
> The high is accompanied by an increase
in the number of new lows.
<LI class=MsoNormal
><SPAN
><SPAN
><SPAN
>After a final top new lows increase rapidly
and all of the indices decline.
If the decline was severe (more than 250 max new lows) there is usually
a re-test (in 2-6 weeks) of the low.
<SPAN
><SPAN
><SPAN
>This pattern failed from 1999 to 2002 when the
major averages were dominated by a few tech issues that inflated from October
1998 to March 2000 then deflated.
The severity of that distortion was addressed in an article in Barrons in
March of 2000 where the writer pointed out that there had never before been a
large cap issue that traded at over 100 times earnings and at that time there
were twelve. Since March of 2003
the market has appeared normal, that is, it has followed the pattern outlined
above where the secondaries lead both up and down.<SPAN
> I keep referring to “normal” because I
am still a little skeptical.
<SPAN
><SPAN
><SPAN
>Assuming the market has returned to normal,
where are we now?
<SPAN
><SPAN
><SPAN
>The chart below shows DJIA (in red) making a
cycle high on February 11, 2004 confirmed (confirmed means both the DJIA and the
AD line made a high on the same day) by the NYSE AD line (in
blue).
<SPAN
><SPAN
><SPAN
><v:shapetype id=_x0000_t75
coordsize="21600,21600" o:spt="75" o:preferrelative="t"
path="m@x@5l@x@11@x@11@x@5xe" filled="f" stroked="f"><v:stroke
joinstyle="miter"><v:f
eqn="if lineDrawn pixelLineWidth 0"><v:f
eqn="sum 0 0 @1"><v:f
eqn="prod @3 21600 pixelWidth"><v:f
eqn="prod @3 21600 pixelHeight"><v:f
eqn="prod @6 1 2"><v:f
eqn="sum @8 21600 0"><v:f
eqn="sum @10 21600 0"><v:path o:extrusionok="f"
gradientshapeok="t" o:connecttype="rect"><o:lock v:ext="edit"
aspectratio="t"><v:shape id=_x0000_i1025
type="#_x0000_t75"><v:imagedata
src=""
o:title="DJ30-ADL-2_11_04"><IMG
src="gif00131.gif">
<SPAN
><SPAN
><SPAN
>The next chart shows the AD line making a new
high on April 2, 2004 while the DJIA is not making a new high.<SPAN
> The implication of the AD line high is a
cycle high in the DJIA is yet to come.
<SPAN
><SPAN
><SPAN
><v:shape id=_x0000_i1026
type="#_x0000_t75"><v:imagedata
src=""
o:title="DJ30-ADL-4_30_04"><IMG
src="gif00132.gif">
<SPAN
><SPAN
><SPAN
>The chart below is a little messy because it has
three lines, the DJIA in red, the NYSE AD line in blue and the Russell 2000 (RUT
or R2K) in green. The chart begins
with the first of this year. It
shows the February 11 high in the DJIA, the April 2 high in the NYSE AD line and
the April 3 high in the R2K (in green). <SPAN
> The secondaries (small caps represented
by the R2K) were leading the up move until early April.<SPAN
> This chart show that in spite of
contamination of the NYSE breadth numbers by fixed income related issues it
still correlates pretty well to a broad measure of the market, the
R2K.
<SPAN
><SPAN
><SPAN
><v:shape id=_x0000_i1027
type="#_x0000_t75"><v:imagedata
src=""
o:title="DJI_R2K_ADL_2004"><IMG
src="gif00133.gif">
<SPAN
><SPAN
><SPAN
> If
the market is behaving “normally” the charts above suggest there should be a new
high in the DJIA in the next few weeks.
<SPAN
><SPAN
><SPAN
>Some times the pattern fails and there is a case
to be made that the market is on its way to a cycle
low.
<SPAN
><SPAN
><SPAN
>The chart below shows the DJIA in red, a 10%
trend of NYSE new highs in green and a 10% trend of NYSE new lows in
purple. New lows are plotted on an
inverted Y axis so an increasing number of new lows moves the indicator
downward. Monday new lows hit a
high for this cycle at 211 on Friday both new highs and new lows hit lows for
the week at 26 new highs and 119 new lows.
The new high indicator made its cycle high in mid January and is now down
to the level it reached near the low last August.<SPAN
> The value of the new high indicator as
of the close Friday was 108. A new
high indicator value is used in many timing programs as a No Sell Filter, that
is when the value of the indicator is above the level specified in the filter,
no selling is allowed. The values
for these filters usually range between 100 for the most aggressive to 130 for
the most conservative so the current value would allow a sell on all but the
most aggressive programs. New lows
exceeding 200 is very scary, but, most of those have been interest rate
sensitive issues such as preferred's and bond
ETF’s.
<SPAN
><SPAN
><SPAN
><v:shape id=_x0000_i1028
type="#_x0000_t75"><v:imagedata
src=""
o:title="DJI_NH_NL"><IMG
src="gif00134.gif">
<SPAN
><SPAN
><SPAN
>The chart below is similar to the one above
except it has been constructed from NASDAQ data.<SPAN
> The chart looks a little more positive
because the new high indicator did not drop below the March low, but the data
was not much better. On Friday new
lows at 77 hit their highest level since March of 2003 while new highs hit their
lowest level since the recent March 2004
low.
<SPAN
><SPAN
><SPAN
><v:shape id=_x0000_i1029
type="#_x0000_t75"><v:imagedata
src=""
o:title="OTC_NH_NL"><IMG
src="gif00135.gif">
<SPAN
><SPAN
><SPAN
>The market is at a critical
point:
<LI class=MsoNormal
><SPAN
><SPAN
><SPAN
>All of the technical ingredients are in place
for significant decline to a cycle low which would require all of the averages
to drop below their March lows.
<LI class=MsoNormal
><SPAN
><SPAN
><SPAN
>The pattern for a developing top is also in
place. This would be fulfilled if
the DJIA rose to a new high unconfirmed by the breadth indicators and small
cap indices.
<LI class=MsoNormal
><SPAN
><SPAN
><SPAN
>It could turn out to be a consolidation period
following the rapid gains last
year.
<SPAN
><SPAN
><SPAN
>I am guessing it will be a consolidation period
because the advance into early this year was extremely broad and “normally”
there would be period of narrowing leadership before a final top was
reached.
<SPAN
><SPAN
><SPAN
>Last weeks decline was the worst last 5 trading
days May for both S&P 500 (SPX) and R2K in the 15 years covered by the
FastTrack database. For the R2K it
was more than double the previous worst
decline.
<SPAN
><SPAN
><SPAN
>Seasonally the first week in May has been pretty
good, especially for the small caps as can be seen in the tables
below.
<SPAN
><SPAN
><SPAN
><SPAN
>First 5 days of May.<BR
clear=all>The number following the daily return represents the day of the
week;1 = Monday, 2 = Tuesday etc.R2K<SPAN
>
Day1
Day2 <SPAN
> Day3<SPAN
> Day4<SPAN
> Day5<SPAN
> Totals<BR
clear=all>1989-1
-0.24% 1 0.15% 2<SPAN
> 0.15% 3<SPAN
> 0.24% 4<SPAN
> 0.33% 5<SPAN
> 0.63%<BR
clear=all>1990-2<SPAN
> 0.25%
2 0.40% 3<SPAN
> 0.37% 4<SPAN
> 0.42% 5<SPAN
> 0.21% 1<SPAN
> 1.66%<BR
clear=all>1991-3<SPAN
> 0.91%
3 0.84% 4<SPAN
> 0.18% 5<SPAN
> -0.10% 1<SPAN
> 0.10% 2<SPAN
> 1.93%<BR
clear=all>1992-4<SPAN
> 0.15%
5 0.62% 1<SPAN
> 0.36% 2<SPAN
> 0.33% 3<SPAN
> -0.10% 4<SPAN
> 1.36%<BR
clear=all>1993-1<SPAN
> 0.44%
1 1.12% 2<SPAN
> 0.69% 3<SPAN
> 0.10% 4<SPAN
> 0.01% 5<SPAN
> 2.36%<BR
clear=all>1994-2<SPAN
> 0.59%
1 0.18% 2<SPAN
> -0.02% 3<SPAN
> -0.14% 4<SPAN
> -0.96% 5<SPAN
> -0.35%<BR
clear=all>1995-3
-0.09% 1 -0.02% 2<SPAN
> 0.35% 3<SPAN
> -0.44% 4<SPAN
> -0.02% 5<SPAN
> -0.21%<BR
clear=all>1996-4<SPAN
> 0.57%
3 -1.24% 4<SPAN
> 0.26% 5<SPAN
> 0.01% 1<SPAN
> -0.35% 2<SPAN
> -0.74%<BR
clear=all>1997-1<SPAN
> 0.78%
4 2.41% 5<SPAN
> 2.39% 1<SPAN
> -0.19% 2<SPAN
> -0.42% 3<SPAN
> 4.96%<BR
clear=all>1998-2<SPAN
> 0.42%
5 0.11% 1<SPAN
> -0.77% 2<SPAN
> -0.49% 3<SPAN
> -0.71% 4<SPAN
> -1.44%<BR
clear=all>1999-3<SPAN
> 0.11%
1 -0.16% 2<SPAN
> 0.39% 3<SPAN
> -0.20% 4<SPAN
> 0.63% 5<SPAN
> 0.76%<BR
clear=all>2000-4<SPAN
> 2.50%
1 -2.62% 2<SPAN
> -1.93% 3<SPAN
> 1.28% 4<SPAN
> 2.18% 5<SPAN
> 1.41%<BR
clear=all>2001-1<SPAN
> 1.06%
2 0.24% 3<SPAN
> -1.22% 4<SPAN
> 1.49% 5<SPAN
> -0.66% 1<SPAN
> 0.91%<BR
clear=all>2002-2<SPAN
> 0.03%
3 0.50% 4<SPAN
> -0.20% 5<SPAN
> -1.84% 1<SPAN
> -0.78% 2<SPAN
> -2.29%<BR
clear=all>2003-3<SPAN
> 0.04%
4 2.22% 5<SPAN
> 0.52% 1<SPAN
> 0.72% 2<SPAN
> -0.61% 3<SPAN
> 2.89%<BR
clear=all>Averages
0.50%
0.32%
0.10%
0.08%
-0.08%<SPAN
> 0.92%<BR
clear=all> Winners<SPAN
> 87%<SPAN
> 73%<SPAN
> 67%<SPAN
> 53%<SPAN
>
40%
<SPAN
><SPAN
><SPAN
><SPAN
>SPX<SPAN
>
Day1
Day2
Day3 <SPAN
> Day4<SPAN
> Day5<SPAN
> Totals<BR
clear=all>1989-1
-0.17% 1 -0.32% 2<SPAN
> 0.01% 3<SPAN
> -0.13% 4<SPAN
> -0.05% 5<SPAN
> -0.66%<BR
clear=all>1990-2<SPAN
> 0.44%
2 0.67% 3<SPAN
> 0.33% 4<SPAN
> 0.84% 5<SPAN
> 0.63% 1<SPAN
> 2.91%<BR
clear=all>1991-3<SPAN
> 1.32%
3 0.06% 4<SPAN
> 0.07% 5<SPAN
> -0.19% 1<SPAN
> -0.73% 2<SPAN
> 0.53%<BR
clear=all>1992-4
-0.58% 5 1.06% 1<SPAN
> -0.02% 2<SPAN
> -0.01% 3<SPAN
> -0.23% 4<SPAN
> 0.22%<BR
clear=all>1993-1<SPAN
> 0.52%
1 0.36% 2<SPAN
> 0.11% 3<SPAN
> -0.28% 4<SPAN
> -0.21% 5<SPAN
> 0.48%<BR
clear=all>1994-2<SPAN
> 0.47%
1 0.00% 2<SPAN
> -0.29% 3<SPAN
> -0.08% 4<SPAN
> -0.79% 5<SPAN
> -0.68%<BR
clear=all>1995-3
-0.09% 1 0.12% 2<SPAN
> 1.09% 3<SPAN
> 0.01% 4<SPAN
> -0.08% 5<SPAN
> 1.05%<BR
clear=all>1996-4<SPAN
> 0.06%
3 -1.71% 4<SPAN
> -0.27% 5<SPAN
> -0.13% 1<SPAN
> -0.40% 2<SPAN
> -2.45%<BR
clear=all>1997-1
-0.35% 4 1.81% 5<SPAN
> 2.13% 1<SPAN
> -0.30% 2<SPAN
> -1.47% 3<SPAN
> 1.82%<BR
clear=all>1998-2<SPAN
> 0.83%
5 0.10% 1<SPAN
> -0.59% 2<SPAN
> -0.95% 3<SPAN
> -0.89% 4<SPAN
> -1.49%<BR
clear=all>1999-3<SPAN
> 1.46%
1 -1.67% 2<SPAN
> 1.15% 3<SPAN
> -1.13% 4<SPAN
> 0.97% 5<SPAN
> 0.78%<BR
clear=all>2000-4<SPAN
> 1.09%
1 -1.50% 2<SPAN
> -2.16% 3<SPAN
> -0.39% 4<SPAN
> 1.64% 5<SPAN
> -1.32%<BR
clear=all>2001-1<SPAN
> 1.36%
2 0.08% 3<SPAN
> -1.49% 4<SPAN
> 1.44% 5<SPAN
> -0.24% 1<SPAN
> 1.15%<BR
clear=all>2002-2<SPAN
> 0.89%
3 -0.17% 4<SPAN
> -1.03% 5<SPAN
> -1.93% 1<SPAN
> -0.30% 2<SPAN
> -2.55%<BR
clear=all>2003-3
-0.07% 4 1.50% 5<SPAN
> -0.38% 1<SPAN
> 0.85% 2<SPAN
> -0.51% 3<SPAN
> 1.39%<BR
clear=all>Averages
0.48%
0.03%
-0.09%
-0.16%
-0.18%<SPAN
> 0.08%<BR
clear=all> Winners<SPAN
> 67%<SPAN
> 67%<SPAN
> 47%<SPAN
> 27%<SPAN
>
20%
<SPAN
><SPAN
><SPAN
>As of Friday’s close the NASDAQ composite was 1%
above its March low while the R2K was only 0.4% above its March low.<SPAN
> The R2K was down the last 3 days of last
week. The R2K has exceeded 3
consecutive down days only 5 times in the past year and each of those preceded
strong rallies.
<SPAN
><SPAN
><SPAN
>I expect the major indices will be higher on
Friday May 7 than they were on Friday April
30.
<SPAN
><SPAN
><SPAN
>Last weeks forecast was a spectacular miss.<SPAN
> When the indicators are unanimous they
can be unanimously wrong.
<SPAN
><SPAN
><SPAN
>This report is free to anyone who wants it, so
please tell your friends.They can sign up
at:http://www.guaranteed-profits.comIf it is not for you, reply with
REMOVE in the subject line.Thank you,Mike Burk W6/L9/T2<BR
><BR
>
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