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----- Original Message -----
Sent: Monday, October 11, 2004 7:29 PM
Subject: Gordon Harms report
10/08/04 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; 3 down, Favorable
CPI, Aug 2.97% (Inflation), down from 3.10% in Jul.
PPI, Aug 3.85% (Inflation), down from 4.31% in Jul.
ECRI, Oct is 1.00%, down from 1.03% in Sept.
MARKET TREND: Favorable
S&P500 is 37.18% UNDERVALUED below an estimated 1786 fair
value,
based on
historical S&P 500 earnings, P/E and US30 bond yield.
S&P500 annual earnings growth is 62.58%/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 -1.16%.
Prior week was
-1.18%. BUY at greater than approx.-1.50%.
Dollar index is down 3.94% 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 9/29/04.
Short Term Index Cycles -Bullish, 7 of 8 moving up, 5 of 8
are OB.
SP-CP is 0.24% ABOVE 1120 the 200sma which is rising. Was
+1.19%.
SP-CP is 1.42% ABOVE 1106 the 50sma which is rising. Was
+2.56%.
MARKET TREND: Unfavorable
May through Oct is seasonally unfavorable on average.
Trailing S&P earnings -Bearish $56.17 up
from $52.00.
NYSE Volume Sum Index –Bearish, turned down
10/08/04.
MARKET VALUATION: Unfavorable
Estimated S&P500 P/E for the coming year is 16.16.
The S&P500 P/E ratio is 19.98(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 3.46 times book value. Was 3.49 last
week.
MONETARY LIQUIDITY: Favorable
Three month ROC of M3 money is 0.06%, last week was 0.65%.
Money Market yield is 1.00%. Was 0.87%.
Money Market funds are 1.918 trillion, was 1.922 trillion.
5 Yr Note yield is 3.35% down from 3.29%.
10 Yr Note yield is 4.10% down from 4.04%
20 Yr Note yield is 4.84% down from 4.80%.
10 Yr Note minus 13 wk T-Bill is 2.44(4sma).
PSYCHOLOGY: 2 Neutral, 1 Bull and 1 Bear
CBOE Equity Total Vol. Put/Call Ratio: .71, last week was .75.
Market: Bullish
> 0.60 and Bearish < 0.30
Market Vane(Commodity/Futures): 66% Bullish, last week was 62%
Bearish.
Market: Bullish
< 25% and Bearish > 65%
AAII 56.9 bull and 19.7% bear. 3 wk SMA Ratio = 0.61.
3 wk SMA Ratio > 1.10 = Bullish, >> Bullish = > 1.50, <
0.35 = Bearish
USB Index of Consumer Optimism 74 Sept. was 77 Aug. Estimated
neutral.
Estimated bullish < 41, bearish > 142.
RELATIVE VALUATION(Stocks to Bonds): Mixed
Stock Value Index is 2.54, was 2.48. Buy greater than 1.03.
S&P 500 dividend yield is 1.06 times 13 week T-Bill yield.
Five year note yield is 1.57 times S&P 500 yield.
BONDS: Unfavorable
The 30 year U.S. Govt. bond real yield is 1.94%, last wk was 1.98%.
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 4.91%. Was 4.95%.
STBI Bonds are up 9.43% from 5/13/04. Was up 9.54%.
Bd-Junk bonds up 8.61% from 5/17/04. Was up 8.14%.
Zero bonds are up 8.65% from 5/13/04. Was up 9.52%.
20 Yr Note yield minus 5 Yr Note Yield is 1.49%.
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 OB-Up,10/01/04 N-Up,10/05/04 OB-Up,08/26/04 OS-Up,09/02/04
DJ-30 N-Up,09/29/04 OS-Dn,09/20/04 OB-Up,08/26/04 OS-Dn,09/29/04
RUT-I OB-Up,10/01/04 OB-Up,10/01/04 OB-Up,08/25/04 OS-Up,09/10/04
NDX-X OB-Up,10/01/04 OB-Up,10/04/04 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 19.3
Cap-Micro -6.1
DJ-20 12.9 OTC-C -7.7
Realty
8.1 Japan
-8.4
Utilities 5.6
Health -8.7
Latin 4.5 Hi-Tech
-13.6
SYSTEM(NCALPHA)...TRADE....C/MDY..HOLD.....G/L.......ANN/MDD....ONE
YEAR
SHARP(Microc2x)...8/26/04....43...SHARP....7.13......47.8/12.1......22.9
LOSDF(Microc2x)...8/26/04....43...LOSDF....6.22......40.0/10.4......23.5
MDSDF(Microc2x)...8/26/04....43...MDSDF....7.35......42.6/10.4......20.5
NCALP(Microc2x)...8/26/04....43...NCALP....7.06......54.2/12.1......16.7
S&P500(Microc2x)..8/26/04....30...SP-CP....1.54......15.1/9.3........9.1
OTC-C(Microc2x)...8/26/04....30...OTC-C....3.62......32.2/16.7.......6.0
S&P500
Buy/Hold...10/08/03..252...SP500..............10.0/49.2.......8.5
OTC-C
Buy/Hold....10/08/03..252...OTC-C..............11.5/77.9.......1.4
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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