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----- Original Message -----
Sent: Monday, October 04, 2004 9:12 PM
Subject: Gordon Harms report
10/01/04 MARKET CLOSE
TIMING IS EVERYTHING
MARKET CLIMATE/OUTLOOK-
Low Interest Rates
-Bullish
Gross Domestic Product -Bullish Up 3.3%
was Up 4.5%
S&P500 Expected Earnings -Bullish $69.44 up from
$68.67
INFLATION: 3 month moving average; 2 down, 1 Up: Favorable
CPI, Aug 2.97% (Inflation), down from 3.10% in Jul.
PPI, Aug 3.85% (Inflation), down from 4.31% in Jul.
ECRI, Sept is 1.03%, up from 1.02% in Aug.
MARKET TREND: Favorable
S&P500 is 37.05% UNDERVALUED below an estimated 1797 fair
value,
based on
historical S&P 500 earnings, P/E and US30 bond yield.
S&P500 annual earnings growth is 62.01%/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 -1.18%.
Prior week was
-1.15%. BUY at greater than approx.-1.50%.
Dollar index is down 4.99% from 5/13/04.
Long Term Index Cycles
-Bullish, 7 of 8 moving Up, 4 of 8 are OS.
All six trading systems are holding mutual funds from 6/23/04.
NASDAQ Volume Sum Index
–Bullish, turned up from 9/29/04.
NYSE Volume Sum Index –Bullish, turned up
from 10/01/04
Short Term Index Cycles
-Bullish, 5 of 8 moving up.
SP-CP is 1.19% ABOVE 1118 the 200sma which is rising. Was
-0.62%.
SP-CP is 2.56% ABOVE 1102 the 50sma which is rising. Was
+0.82%.
MARKET TREND: Unfavorable
May through Oct is seasonally unfavorable on average.
Trailing S&P earnings -Bearish $56.17 up
from $52.00.
MARKET VALUATION: Unfavorable
Estimated S&P500 P/E for the coming year is 16.29.
The S&P500 P/E ratio is 20.14(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 3.49 times book value. Was 3.42 last
week.
MONETARY LIQUIDITY: Favorable
Three month ROC of M3 money is 0.65%, last week was 0.14%.
Money Market yield is 0.87%. Was 0.79%.
Money Market funds are 1.922 trillion, was 1.948 trillion.
5 Yr Note yield is 3.29% down from 3.35%.
10 Yr Note yield is 4.04% down from 4.14%
20 Yr Note yield is 4.80% down from 4.92%.
10 Yr Note minus 13 wk T-Bill is 2.48(4sma).
PSYCHOLOGY: 3 Neutral and 1 Bull
CBOE Equity Total Vol. Put/Call Ratio: .75, last week was .76.
Market: Bullish
> 0.60 and Bearish < 0.30
Market Vane(Commodity/Futures): 62% Bullish, last week was 65%
Bullish.
Market: Bullish
< 25% and Bearish > 65%
AAII 41.1 bull and 39.3% bear. 3 wk SMA Ratio = 0.73.
3 wk SMA Ratio > 1.10 = Bullish, >> Bullish = > 1.50, <
0.35 = Bearish
USB Index of Consumer Optimism 97 Sept. was 77 Aug. Estimated
neutral.
Estimated bullish < 41, bearish > 142.
RELATIVE VALUATION(Stocks to Bonds): Mixed
Stock Value Index is 2.48, was 2.56. Buy greater than 1.03.
S&P 500 dividend yield is 1.03 times 13 week T-Bill yield.
Five year note yield is 1.87 times S&P 500 yield.
BONDS: Favorable
The 30 year U.S. Govt. bond real yield is 1.98%, last wk was 1.83%.
The historical
average, real yield is near 3.00%.
The average 30 year U. S. Govt. historical bond yield expected
is 5.97%,
current yield is 4.95%. Was 4.98%.
STBI Bonds are up 9.54% from 5/13/04. Was up 11.07%.
Bd-Junk bonds up 8.14% from 5/17/04. Was up 9.52%.
Zero bonds are up 9.52% from 5/13/04. Was up 8.41%.
20 Yr Note yield minus 5 Yr Note Yield is 1.51%.
DOMINANT MARKET INDICATOR(Beasley): Favorable
OTC-C
DOMINANT Pos Env, Score 13/15(IN > 4/15), IN 8/20/04.
NYC-I Pos
Env, Score 12/13(IN > 3/13), IN 6/9/04.
Total score is 25 of 28,
last weeks score was 25.
CYCLES 5 WEEK
10 WEEK
20 WEEK
9 Month
WIL-5 OS-Up,10/01/04 N-Dn,09/22/04 OB-Up,08/26/04 OS-Up,09/02/04
DJ-30 OS-Up,09/29/04 N-Dn,09/20/04 N-Up,08/26/04 OS-Dn,09/29/04
RUT-I N-Up,10/01/04 OB-Up,10/01/04
OB-Up,08/25/04 OS-Up,09/10/04
NDX-X N-Up,10/01/04 OB-Dn,09/23/04 N-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 17.5
Health -5.5
DJ-20 11.6 Cap-Micro -5.9
Realty
7.6 OTC-C
-6.6
Utilities 5.0 Japan -9.6
Latin 3.9 Hi-Tech
-12.5
SYSTEM(NCALPHA)...TRADE....C/MDY..HOLD.....G/L.......ANN/MDD....ONE
YEAR
SHARP(Microc2x)...8/26/04....36...SHARP....7.46......47.8/12.1......23.9
LOSDF(Microc2x)...8/26/04....36...LOSDF....6.38......40.0/10.4......24.8
MDSDF(Microc2x)...8/26/04....36...MDSDF....7.34......42.6/10.4......22.9
NCALP(Microc2x)...8/26/04....36...NCALP....7.88......54.2/12.1......19.5
S&P500(Microc2x)..8/26/04....25...SP-CP....2.39......15.1/9.3.......11.7
OTC-C(Microc2x)...8/26/04....25...OTC-C....4.82......32.2/16.7......10.9
S&P500
Buy/Hold...10/01/03..252...SP500..............10.0/49.2......11.1
OTC-C
Buy/Hold....10/01/03..252...OTC-C..............11.5/77.9.......6.0
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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