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May 26, 2007

Can A Major Stock Market Top Occur Here?
by Robert McHugh

While the following charts are meaningless for predictive purposes, what they do tell us is we currently have a price pattern set-up eerily similar to the price pattern leading up to the January 2000 major top in the Dow Industrials.

In 1999, prices staged a dramatic 2,750 point rally over a one-year period, that had folks talking about Dow 35,000, with no end in sight for the glorious bull market. To be bearish was ridiculous. However, the unthinkable happened. In January 2000, a major Bear market started, which lasted through March 2003. Just prior to this historic top on January 14th, 2000, the DJIA rose 2,750 points over a 12 month period, with a significant correction about two thirds the time and price move through this extraordinary rally. Following that correction, the Dow Industrials rose another 1,750 points in a parabolic ascension over three months.

In 2006/2007, since July 2006, we have seen a 2,850 point rally over a ten month period, which has folks talking about Dow 35,000, with no end in sight for this glorious bull market. To be bearish seems ridiculous. About two-thirds the way through this time and price move, a significant correction occurred (late February 2007), which has since been followed by another 1,689 points in a parabolic ascension over three months. The point is, there is historic precedent for a major bear market to start immediately after such a price pattern. Our Demand Power and Supply Pressure indicators will tell us when and if such a bear market decline occurs.

"These things Jesus spoke; and lifting up His eyes to heaven,
He said, "Father, the hour has come; glorify Thy Son, that the Son
may glorify Thee, even as Thou gavest Him
authority over all mankind,
that to all whom Thou has given Him, He may give eternal life."
John 17:1, 2

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Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

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