Monday, August 2, 2004


Orange Alert: After a 10% decline on the Nasdaq (5% on the SPX) in July, one would expect more of a retracement rally ( so far less than .3%), even if it is August. Most Sentiment Indicators are resting comfortably in Neutral except for a crossing of the AAII Bulls/Bears at 34 & 36, respectively. This is usually a strong signal, even if it is only 1 Indicator. Even the ratio-adjusted McClellan Oscillator is exactly at zero. Perhaps the heightened Terror alert on the East Coast has frozen everybody's assets, providing a potential summer rally. Hardly boring, August will bring us the FOMC meeting on the 10th, the Olympics on the 13th and the Republican Convention in New York at the end of the month.
A Leuthold Group survey show the following effects of 6 interest rate increases on the market, in percentage.
Rate increase 7 days 22 days 126 days 252 days
1st .57% .76% 3.91% 9.87%
2nd .05 .96 3.93 .45
3rd .23 -.36 3.46 .72
4th .33 1.95 -1.37 -2.79
5th -1.44 -1.12 -5.38 -2.86
6th .13 -1.92 -5.20 -6.98

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