12/23/05 MARKET CLOSE
TIMING IS EVERYTHING
THE TREND IS YOUR FRIEND
MARKET CLIMATE/OUTLOOK- Mixed
Liquidity is favorable.
Market psychology: 2 are neutral, 1 is bear, 1 bull
40 week cycle price trend: All 4 are moving up.
Next 40 wk/9 Mo. cycle low is due mid Feb 2006. Last high was 8/31/05.
Bonds trends are down from 8/31/05.
NYSE dominant over NASDAQ: Unfavorable
Oct through Apr is seasonally favorable on average.
The small cap signal trading systems bought mutual funds on 11/3/05.
Market valuation long term: Unfavorable. Current P/E is 36% above avg.
ECONOMIC OUTLOOK: Favorable
Personal income(3 sma)is up 6.6% from the last year. Was up 6.3%.
Unemployment rate is low at 5.0%. Was 5.0%.
Gross Domestic Product is favorable: 4.1 up from 3.3.
Purchasing Manager Index is 58.1(favorable > 50). Was 59.1.
Capacity Utilization is 80.2%; Was 79.5%.
INFLATION: 3 month moving averages; 1 up, 2 down
CPI, Nov. 4.16% (3 Mo. Avg. Inflation), down from 4.23% in Oct.
PPI, Nov. 5.88% (3 Mo. Avg. Inflation), up from 6.03% in Oct.
JOC-ECRI(Industrial Price Index), Dec. is 1.05%, was 1.04% in Nov.
10 yr TN rate/FF rate is 1.07. Recession NOT expected. Was 1.13.
Expect recession when ratio is < 1.0. Ref: 1989-1990 and 2000-2001.
MONETARY LIQUIDITY: Favorable
Three month ROC of M3 money is +1.75%, last week was +2.07%.
Money Market yield is 3.70%. Was 3.62%.
Money Market funds are 2041 billion, was 2024 billion.
Dollar index is up 12.28% from 12/31/04. Was 11.34%.
PSYCHOLOGY: 2 neutral, 1 bear, 1 bull
CBOE Equity Total Vol. Put/Call Ratio: .62, last week was .53.
Market: Bullish > 0.60 and Bearish < 0.30
Market Vane(Commodity/Futures): 69% Bullish, last week was 70% Bullish.
Market: Bullish < 25% and Bearish > 65%
AAII 41.0% bull and 28.2% bear. 3 wk SMA Ratio = 0.52. Was 0.37.
3 wk SMA Ratio > 1.10 = Bullish, >> Bullish = > 1.50, < 0.35 = Bearish
USB Index of Investor Optimism 50 Nov. Was 47 in Oct.
Estimated bullish < 41, bearish > 142. Mid-point is 91.
BOND PRICE TRENDS: Down
STBI Bonds are down 2.12% from 8/31/05. Was -3.08%.
Bd-Junk bonds down 0.94% from 9/12/05. Was -0.98%.
Zero bonds are down 1.22% from 8/31/05. Was -1.97%.
BOND CURRENT YIELDS: Favorable
The 30 year U.S. Govt. bond real yield is 0.39%. Was 0.49%.
The historical average real yield is near 3.00%.
The average 30 year U. S. Govt. historical bond yield expected
is 7.23%, current yield is 4.55%. Was 4.74%.
5 Yr Note yield is 4.40%. Was 4.43%.
10 Yr Note yield is 4.49%. Was 4.52%.
20 Yr Note yield is 4.77%. Was 4.80%.
20 Yr Note yield divided by 5 Yr Note Yield is 1.08. Was 1.08.
STOCK MARKET PRICE TREND Indicators: Favorable
Long term 40 week price trends: All 4 are moving up.
Intermediate 10 wk trends: All 4 are moving down.
5 week cycle trends: 3 are moving up and 1 is moving down.
NYSE Volume Sum Index turned down 12/19/05.
NASDAQ Volume Sum Index turned down 12/14/05.
SP-CP is 4.90% ABOVE 1209 the 200sma which is rising. Was 4.91%.
SP-CP is 2.72% ABOVE 1235 the 50sma which is rising. Was 3.28%.
RELATIVE VALUATION(Stocks and Bonds): Currently Mixed
S&P500 Inflation adjusted real dividend yield is -2.24%.
Prior week was -2.24%. BUY at greater than approx.-1.50%.
S&P500 is 0.16% OVERVALUED above an estimated 1267 fair value,
based on historical S&P 500 earnings, P/E and US30 bond yield.
Stock Value Index is 1.15, was 1.17. Buy greater than 1.03.
13 week T-Bill yield divided by S&P 500 yield is 2.13. Was 2.09.
5 Yr Note divided by S&P 500 yield is 2.40. Was 2.42.
10 Yr Note divided by 13 wk T-Bill is 1.15(4sma). Was 1.15.
STOCK MARKET LONG TERM VALUATION: Unfavorable
The S&P 500 P/E ratio is 19.00(4 to 20 is range: 1870 to 1997)
based on trailing earnings. Trailing P/E was 45 in April 2002.
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 15.60%. Was 12.84%.
DOMINANT STOCK MARKET INDICATOR(Beasley): Unfavorable for Stocks
OTC-C Pos Env, Score 10/15(IN > 4/15), IN 10/30/05.
NYC-I DOMINANT Pos Env, Score 13/13(IN > 3/13), IN 11/25/05.
Total score is 23 of 28, last weeks score was 21.
PRICE TRENDS- 5 WEEK 10 WEEK 20 WEEK 9 Month(40 wk)
WIL-5 OS-Up,12/22/05 N-Dn,12/07/05
DJ-30 OS-Up,12/22/05 OS-Dn,12/05/05 OB-Up,11/02/05 OB-Up,11/11/05
RUT-I OS-Up,12/22/05 OS-Dn,12/07/05 OB-Dn,12/21/05 OB-Up,11/17/05
NDX-X OS-Dn,11/28/05 OS-Dn,12/07/05 OB-Up,11/03/05 OB-Up,11/17/05
N = Stoch >20 <80, OS = Stoch <20 OUT/Buy,
SECTOR Averages ranked by percent gain from 4/18/05:(Last intermed. LOW)
Latin 55.9 DJ-30 8.1
Japan 43.3 Bd-High Yield 4.7
Precious 40.2 Bd-Zero 2.4
Emerge 33.1 VMFXX 2.1
Energy 31.9 Bd-USGOV 1.6
NCALPHA Mutual Fund Trading Systems using Mc2x small cap signal.
Signal went to buy on 11/2/05. Trades made next day.
SYSTEM.....HOLDS.....GAIN%........CAR/MDD.....ONE YEAR
SHARP......SHARP.....7.85........23.3/4.4.......22.5
LOSDF......LOSDF.....8.87........22.5/7.4.......21.4
MDSDF......MDSDF.....8.98........27.8/4.2.......28.9
NCALP......NCALP.....9.68........33.2/5.9.......28.8
S&P500.....SP-CP.....3.99.........7.4/13.1.......4.0
OTC-C......OTC-C.....4.13........14.2/20.2.......4.1
RUT-I......RUT-I.....4.20........21.4/8.3........0.7
S&P500....Buy/Hold...............-4.4/48.9.......4.8
OTC-C.....Buy/Hold..............-13.0/73.9.......4.1
RUT-I.....Buy/Hold................2.7/40.0.......5.7
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.
Gains are real time achieved. CAR/MDD and ONE YEAR are backtest results.
SHARP:LZOEX,EITEX,IEMFX
LOSDF:EITEX,AEMMX,AEMKX
MDSDF:LZOEX,HLEMX,EITEX
NCALP:LZOEX,IEMFX,FIMKX
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