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----- Original Message -----
Sent: Monday, September 13, 2004 7:04 PM
Subject: Gordon Harms report
9/10/04 MARKET CLOSE
TIMING IS EVERYTHING
MARKET CLIMATE/OUTLOOK-
Low Interest Rates
-Bullish
Gross Domestic Product -Bullish Up 2.8%
was Up 4.5%
S&P500 Expected Earnings -Bullish $69.44 up from
$68.67
INFLATION: 3 month moving average; 2 of 3 down, favorable
CPI, Jul 3.10% (Inflation), up from 2.87% in Jun.
PPI, Aug 3.85% (Inflation), down from 4.31% in Jul.
ECRI, Sept is 1.00% (Inflation), down from 1.01% in Aug.
MARKET TREND: Favorable
S&P500 is 39.84% UNDERVALUED below an estimated 1868 fair
value,
based on
historical S&P 500 earnings, P/E and US30 bond yield.
S&P500 annual earnings growth is 85.26%/year. Low -51.41% on
4/19/02.
Long term
S&P earnings growth rate average is near 6%.
S&P500 Inflation adjusted real dividend yield is -1.30%.
Prior week was
-1.28%. BUY at greater than approx.-1.50%.
Dollar index is down 3.40% from 5/13/04.
NASDAQ Volume Sum Index
–Bullish, turned up 8/17/04.
NYSE Volume Sum Index –Bullish, turned up
8/16/04.
Short Term Index Cycles -Bullish, 7 of 8 moving up, 8 of 8
are OB.
Long Term Index Cycles
-Bullish, 8 of 8 moving Up, 6 of 8 are OS.
All six trading systems are holding mutual funds from 6/23/04.
MARKET TREND: Unfavorable
May through Oct is seasonally unfavorable on average.
SP-CP is 0.90% ABOVE 1114 the 200sma which is rising. Was
+0.12%.
SP-CP is 2.10% ABOVE 1101 the 50sma which is falling. Was
+1.05%.
Trailing S&P earnings -Bearish $56.17 up
from $52.00.
MARKET VALUATION: Unfavorable
Estimated S&P500 P/E for the coming year is 16.19.
The S&P500 P/E ratio is 20.83(4 to 20 is range: 1870 to
1997)
based on
trailing earnings. Trailing P/E was 45 in April 2002.
S&P 500 market value is 3.47 times book value. Was 3.44 last
week.
MONETARY LIQUIDITY: Favorable
Three month ROC of M3 money is 1.14%, last week was 1.30%.
Money Market yield is 0.72%. Was 0.72%.
Money Market funds are 1.969 trillion, was 1.951 trillion.
5 Yr Note yield is 3.39% down from 3.45%.
10 Yr Note yield is 4.19% down from 4.25%
20 Yr Note yield is 4.93% down from 5.05%.
10 Yr Note minus 13 wk T-Bill is 2.70(4sma).
PSYCHOLOGY: 3 Neutral and 1 Bull
CBOE Equity Total Vol. Put/Call Ratio: .77, last week was .71.
Market: Bullish
> 0.60 and Bearish < 0.30
Market Vane(Commodity/Futures): 63% Bullish, last week was 61%
Bullish.
Market: Bullish
< 25% and Bearish > 65%
AAII 50.5 bull and 23.8% bear. 3 wk SMA Ratio = 0.59.
3 wk SMA Ratio > 1.10 = Bullish, >> Bullish = > 1.50, <
0.35 = Bearish
USB Index of Consumer Optimism 77 Aug. was 88 Jul. Estimated
neutral.
Estimated bullish < 41, bearish > 142.
RELATIVE VALUATION(Stocks to Bonds): Mixed
Stock Value Index is 2.61, was 2.72. Buy greater than 1.03.
S&P 500 dividend yield is 1.08 times 13 week T-Bill yield.
Five year note yield is 1.93 times S&P 500 yield.
BONDS: Unfavorable
The 30 year U.S. Govt. bond real yield is 1.88%, last wk was 1.96%.
The historical
average, real yield is near 3.00%.
The average 30 year U. S. Govt. historical bond yield expected
is 6.10%,
current yield is 4.98%. Was 5.06%.
STBI Bonds are up 8.83% from 5/13/04. Was up 7.59%.
Bd-Junk bonds up 7.18% from 5/17/04. Was up 6.71%.
Zero bonds are up 7.73% from 5/13/04. Was up 6.68%.
20 Yr Note yield minus 5 Yr Note Yield is 1.54%.
DOMINANT MARKET INDICATOR(Beasley): Favorable
OTC-C Neg
Env, Score 9/15(IN > 4/15), IN 8/20/04.
NYC-I DOMINANT Pos Env,
Score 13/13(IN > 3/13), IN 6/9/04.
Total score is 22 of 28,
last weeks score was 21.
CYCLES 5 WEEK
10 WEEK
20 WEEK
9 Month
WIL-5 OB-Up,08/16/04 OB-Up,08/16/04 N-Up,08/26/04 OS-Up,09/02/04
DJ-30 OB-Dn,09/09/04 OB-Up,08/17/04 N-Up,08/26/04 OS-Up,08/25/04
RUT-I OB-Up,09/09/04 OB-Up,08/17/04 OS-Up,08/25/04 OS-Up,09/10/04
NDX-X OB-Up,09/09/04 OB-Up,08/17/04 OS-Up,08/31/04 OS-Up,09/10/04
N = Stoch >20 <80, OS = Stoch <20 OUT/Buy, OB = Stoch >80 Hold/Sell
SECTOR Averages ranked by percent gain from 4/5/04:(Last intermed.
High)
Energy 9.2
Cap-Micro -8.1
DJ-20 9.1 OTC-C -8.9
Realty
5.6 Japan
-9.6
Utilities 3.3 Precious
-12.3
Zero-Bd 2.7 Hi-Tech
-15.3
SYSTEM(NCALPHA)...TRADE....C/MDY..HOLD.....G/L.......ANN/MDD....ONE
YEAR
SHARP(Microc2x)...8/26/04.....1...SHARP....2.98......47.8/12.1......19.3
LOSDF(Microc2x)...8/26/04.....1...LOSDF....2.65......40.0/10.4......21.5
MDSDF(Microc2x)...8/26/04.....1...MDSDF....3.03......42.6/10.4......19.8
NCALP(Microc2x)...8/26/04.....1...NCALP....3.65......54.2/12.1......16.1
S&P500(Microc2x)..8/26/04.....1...SP-CP....1.70......15.1/9.3.......11.8
OTC-C(Microc2x)...8/26/04.....1...OTC-C....2.29......32.2/16.7.......8.6
S&P500
Buy/Hold...9/10/03...252...SP500..............10.0/49.2......11.2
OTC-C
Buy/Hold....9/10/03...252...OTC-C..............11.5/77.9.......3.9
REF: Data from Barron’s weekly magazine.
SHARP: RSPF,WWNP,ASQI
LOSDF: RSPF,WWNP,CSVF
MDSDF: RSPF,WWNP,DGSN
NCALP: RSPF,ASQI,DFAV
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