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Subject: Gordon Harms report(with permision)
5/13/05 MARKET CLOSE
TIMING IS EVERYTHING
THE TREND IS YOUR FRIEND
MARKET CLIMATE/OUTLOOK- Unfavorable
Liquidity is favorable.
Market psychology: Bullish
Market 9 month price trends: All 4 are moving down.
Nine of 16 market cycles are moving up.
Bonds trends are up from 2/23/05.
May through Sept is seasonally unfavorable on average.
The trading systems bought money funds on 3/12/05.
Market valuation is unfavorable. Current P/E is 43% above avg.
ECONOMIC OUTLOOK: Favorable
Personal income is up 0.48% from the last period. Was up 0.44.
Unemployment rate is low at 5.2%. Was 5.2%.
Gross Domestic Product is favorable: 3.1 down from 3.8.
Purchasing Manager Index is 53.3(favorable > 50). Was 55.2.
INFLATION: 3 month moving averages; 2 down, 1 is up
CPI, Mar. 3.04% (Inflation), down from 3.08% in Feb.
PPI, Mar. 4.53% (Inflation), up from 4.33% in Feb.
JOC-ECRI(Industrial Price Index, May. is 0.98%, was 1.01% in
Apr.
STOCK MARKET PRICE TREND Indicators: Mixed
Ten week price trends: All 4 are moving up.
NYSE Volume Sum Index turned up 5/2/05.
NASDAQ Volume Sum Index turned up 5/2/05.
SP-CP is 0.39% BELOW 1159 the 200sma which is rising. Was
+1.26%.
SP-CP is 1.89% BELOW 1176 the 50sma which is falling. Was
-0.76%.
BOND PRICE TRENDS: Up
STBI Bonds are up 5.48% from 3/23/05. Was 4.24%.
Bd-Junk bonds down 4.47% from 3/8/05. Was down 3.82%.
Zero bonds are up 4.47% from 3/28/05. Was 3.30%.
MONETARY LIQUIDITY: Favorable
Three month ROC of M3 money is +0.92%, last week was +1.23%.
However, 3 month ROC of M3 is down from 2/14/05.
Money Market yield is 2.19%. Was 2.22%.
Money Market funds are 1857 billion, was 1862 billion.
Dollar index is up 6.16% from 12/30/04. Was up 4.23%.
PSYCHOLOGY: 2 Bull, 1 near bull, 1 Neutral
CBOE Equity Total Vol. Put/Call Ratio: .66, last week was .74.
Market: Bullish
> 0.60 and Bearish < 0.30
Market Vane(Commodity/Futures): 61% Bullish, last week was 61%
Bullish.
Market: Bullish
< 25% and Bearish > 65%
AAII 30.5% bull and 36.4% bear. 3 wk SMA Ratio = 1.31.
3 wk SMA Ratio > 1.10 = Bullish, >> Bullish = > 1.50, <
0.35 = Bearish
USB Index of Consumer Optimism 52 Apr. was 74 Mar. Near
bullish.
Estimated bullish < 41, bearish > 142. Mid-point
is 91.
RELATIVE VALUATION(Stocks and Bonds): Mixed
S&P500 Inflation adjusted real dividend yield is -1.12%.
Prior week was
-1.14%. BUY at greater than approx.-1.50%.
S&P500 is 15.21% undervalued below an estimated 1361 fair
value,
based on
historical S&P 500 earnings, P/E and US30 bond yield.
Stock Value Index is 1.55, was 1.53. Buy greater than 1.03.
13 week T-Bill yield divided by S&P 500 yield is 1.51.
5 Yr Note divided by S&P 500 yield is 2.05.
10 Yr Note divided by 13 wk T-Bill is 1.50(4sma).
20 Yr Note yield divided by 5 Yr Note Yield is 1.20%. Was
1.19.
BONDS YIELDS: Unfavorable
The 30 year U.S. Govt. bond real yield is 1.45%, last wk was 1.59%.
The historical
average, real yield is near 3.00%.
The average 30 year U. S. Govt. historical bond yield expected
is 6.04%,
current yield is 4.49%. Was 4.63%.
5 Yr Note yield is 3.88%. Was 3.91%.
10 Yr Note yield is 4.22%. Was 4.24%.
20 Yr Note yield is 4.64%. Was 4.64%.
STOCK MARKET LONG TERM VALUATION: Unfavorable
The S&P 500 P/E ratio is 19.71(4 to 20 is range: 1870 to
1997)
based on
trailing earnings. Trailing P/E was 45 in April 2002.
Estimated P/E for the coming year is 15.12; forecast $76.35
earnings.
the long term
average of S&P 500 P/E is near 14, median is 11.
S&P 500 past year earnings growth rate is 20.13%. Was
20.13%.
DOMINANT STOCK MARKET INDICATOR(Beasley): Favorable
OTC-C DOMINANT Neg Env, Score 9/15(IN > 4/15), IN
4/21/05.
NYC-I Neg
Env, Score 3/13(IN > 3/13), OUT 5/12/05.
Total score is 12 of 28,
last weeks score was 13.
PRICE TRENDS- 5 WEEK 10
WEEK
20 WEEK
9 Month
WIL-5 OB-Dn,05/12/05 N-Up,05/02/05 OS-Up,05/05/05 OS-Dn,01/14/05
DJ-30 OB-Dn,05/12/05 N-Up,04/25/05 OS-Dn,03/21/05 OS-Dn,03/18/05
RUT-I OB-Up,04/21/05 OB-Up,05/03/05 OS-Up,05/04/05 OS-Dn,01/12/05
NDX-X OB-Up,04/22/05
N-Up,05/03/05 OS-Up,05/04/05 OS-Dn,01/12/05
N = Stoch >20 <80, OS = Stoch <20 OUT/Buy, OB = Stoch >80 Hold/Sell
SECTOR Averages ranked by percent gain from 4/18/05:(Last intermed.
LOW)
HiTech 4.8 RUT-I
-0.6
Realty
3.9 BD-Junk -0.7
Telecom 3.3 Europe -1.7
NASDAQ 3.3 Energy
-3.7
Latin 2.8 Precious
-7.6
NCALPHA Mutual Fund Trading Systems using Mc2x signal.
Mc2x signal went to SELL on 3/13/05. Trade next day.
SYSTEM.....HOLDS......GAIN%....CAR/MDD....ONE YEAR
SHARP......VMFXX......0.40....30.5/6.8.......15.4
LOSDF......VMFXX......0.40....24.8/7.0.......17.2
MDSDF......VMFXX......0.40....23.3/8.3.......16.4
NCALP......VMFXX......0.40....28.8/8.6.......12.9
S&P500.....VMFXX......0.40.....7.4/13.1.......6.6
OTC-C......VMFXX......0.40....14.2/20.2......11.0
RUT-I......VMFXX......0.40....21.4/8.3........8.1
S&P500....Buy/Hold............-4.4/48.9.......5.3
OTC-C.....Buy/Hold...........-13.0/73.9.......2.6
RUT-I.....Buy/Hold.............2.7/40.0.......6.4
REF: Data from Barron’s weekly magazine.
Buy/Hold is for one year. Compound annual rate of return(CAR)
and maximum draw down(MDD)of holdings are for the last 5
years.
Note change from Microc2x.sig to Mc2x.sig. Both are now out.
Also, CAR/MMD changed from 10 years to 5 years.
NOTE: MC2X went to buy 5/10/05 and then to sell 5/13/05.
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