Tuesday, November 2, 2004


As the DJIA closes on Election Day a scant 200 points BELOW the Labor Day level (history shows a 91% chance of Kerry being elected later this evening), we await the returns. In a Contrarian victory, after pundits have recommended Large Cap, Dividend-Paying stocks all year, we find the DJIA, SPX and Nasdaq all down YTD, with Transports, Utilities, S&P Small and Mid- Cap Indicies at multi-year record highs. Although Seasonality points to higher market levels at year-end ( mutual funds have dumped their losers through October), there are a couple clouds on the horizon: the Nova/Ursa ratio climbed above 20 for the first time in several months to 23; the Public/Specialist shorting number at 2.34 is near a 5-year high; and the CBOE Eauity put/call ratio dropped dramatically from a Bullish 77 last week to 59. Short interest still remains large on the SWH software holder, the Energy XLE spider, and the TLT 20-year Treasury. We now await the FOMC results on November 10 (probably the 4th rate hike), then the typical upwave short term and downwave intermediate thereafter.

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