Monday, October 25, 2004


This might explain why December and January are historically the 2 best months of the year, including the Christmas rally and January effect. As noted earlier in a Leuthold Group table, when the Fed raises rates, the serious decline doesn't kick in until after the fourth raise, which is expected November 10. although I distrust surveys done on small samplings, as many technical ones are, there may be some human anomaly or Nature's law which may guide us in our market forecast. The table shows a .33% market increase 7 days after the raise, and a 1.95% increase 22 days after (Dec.13). It is even more doubtful that we will hit these average percentages exactly, but coupled with the Kinchen Election cycle, the recent weakness, my hibernation effect, and several longer term Sentiment Indicators, we could see a meaningful winter rally. Also based on small sampling: there has never been a down 5th year of a Decennial Cycle in the 11 decades since 1890 (Inflation included); in fact, every rally has been of a strong, Elliott 3rd Wave nature. As the opponents of Social Security privatization argue - if the stock market isn't a gamble, why do they call them "Blue Chips"?If a rally is to ensue, there is little, if any, evidence of it in the Sentiment Indicators this past week; even after the huge selloff (mostly in the Dow 30 stocks), complacency reigns - in the ISE put/call ratio, cumulative A/D and New Highs stats, and newsletter surveys. Although below the 200-day moving averages, only the DJIA is below short term Support - if we break that this week, I'll be a believer in Kerry for the next 4 years!

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