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----- Original Message -----
Sent: Monday, October 18, 2004 10:40 PM
Subject: Gordon Harms report
10/15/04 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, Sept 3.58% (Inflation), down from 3.85% in Aug.
ECRI, Oct is 0.97%, down from 1.03% in Sept.
MARKET TREND: Favorable
S&P500 is 38.04% UNDERVALUED below an estimated 1788 fair
value,
based on
historical S&P 500 earnings, P/E and US30 bond yield.
S&P500 annual earnings growth is 62.57%/year. Low -51.41% on
4/19/02.
Long term
S&P earnings growth rate average is near 6%.
Dollar index is down 4.80% from 5/13/04.
Long Term Index Cycles
-Bullish, 6 of 8 moving Up, 4 of 8 are OS.
All six trading systems are holding mutual funds from 6/23/04.
SP-CP is 1.05% BELOW 1120 the 200sma which is rising. Was
+0.24%.
SP-CP is 0.05% ABOVE 1108 the 50sma which is rising. Was
+1.42%.
MARKET TREND: Unfavorable
May through Oct is seasonally unfavorable on average.
Trailing S&P earnings -Bearish $56.15 up
from $52.00.
NYSE Volume Sum Index –Bearish, turned down
10/08/04.
NASDAQ Volume Sum Index
–Bearish, turned down 10/12/04.
Short Term Index Cycles
-Bearish, all 8 are moving down.
MARKET VALUATION: Unfavorable
Estimated S&P500 P/E for the coming year is 15.96.
The S&P500 P/E ratio is 19.74(4 to 20 is range: 1870 to
1997)
based on
trailing earnings. Trailing P/E was 45 in April 2002.
S&P500 Inflation adjusted real dividend yield is -1.14%.
Prior week was
-1.16%. BUY at greater than approx.-1.50%.
S&P 500 market value is 3.42 times book value. Was 3.46 last
week.
MONETARY LIQUIDITY: Favorable
Three month ROC of M3 money is 0.19%, last week was 0.06%.
Money Market yield is 1.00%. Was 1.00%.
Money Market funds are 1.918 trillion, was 1.918 trillion.
5 Yr Note yield is 3.46% down from 3.35%.
10 Yr Note yield is 4.20% down from 4.10%
20 Yr Note yield is 4.95% down from 4.84%.
10 Yr Note minus 13 wk T-Bill is 2.43(4sma).
PSYCHOLOGY: 3 Neutral, 1 Bull
CBOE Equity Total Vol. Put/Call Ratio: .79, last week was .71.
Market: Bullish
> 0.60 and Bearish < 0.30
Market Vane(Commodity/Futures): 63% Bullish, last week was 62%
Bullish.
Market: Bullish
< 25% and Bearish > 65%
AAII 44.7 bull and 28.2% bear. 3 wk SMA Ratio = 0.63.
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 2.58, was 2.54. Buy greater than 1.03.
S&P 500 dividend yield is 1.07 times 13 week T-Bill yield.
Five year note yield is 1.92 times S&P 500 yield.
BONDS: Unfavorable
The 30 year U.S. Govt. bond real yield is 1.88%, last wk was 1.94%.
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 4.85%. Was 4.91%.
STBI Bonds are up 10.72% from 5/13/04. Was up 9.43%.
Bd-Junk bonds up 8.79% from 5/17/04. Was up 8.61%.
Zero bonds are up 9.36% from 5/13/04. Was up 8.65%.
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 9/13(IN > 3/13), IN 6/9/04.
Total score is 22 of 28,
last weeks score was 25.
CYCLES 5 WEEK
10 WEEK
20 WEEK
9 Month
WIL-5 OS-Dn,10/11/04 N-Dn,10/12/04 OB-Up,08/26/04 OS-Up,09/02/04
DJ-30 OS-Dn,10/11/04 OS-Dn,09/20/04 N-Dn,10/14/04 OS-Dn,09/29/04
RUT-I N-Dn,10/11/04 OB-Dn,10/11/04 OB-Up,08/25/04 OS-Up,09/10/04
NDX-X N-Dn,10/11/04 OB-Dn,10/12/04 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 15.8
Cap-Micro -7.6
DJ-20 13.4 OTC-C -8.1
Realty
9.5 Health
-9.7
Utilities 5.6 Japan
-10.3
Bd-Zero 4.3 Hi-Tech
-14.2
SYSTEM(NCALPHA)...TRADE....C/MDY..HOLD.....G/L.......ANN/MDD....ONE
YEAR
SHARP(Microc2x)...8/26/04....50...SHARP....5.19......47.8/12.1......17.8
LOSDF(Microc2x)...8/26/04....50...LOSDF....4.40......40.0/10.4......19.1
MDSDF(Microc2x)...8/26/04....50...MDSDF....5.69......42.6/10.4......16.5
NCALP(Microc2x)...8/26/04....50...NCALP....4.91......54.2/12.1......11.9
S&P500(Microc2x)..8/26/04....35...SP-CP....0.28......15.1/9.3........6.5
OTC-C(Microc2x)...8/26/04....35...OTC-C....3.16......32.2/16.7.......3.1
S&P500
Buy/Hold...10/15/03..252...SP500..............10.0/49.2.......5.9
OTC-C
Buy/Hold....10/15/03..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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