Opening Whisper

The market appears to be lulled into a near term story that we are in a sweet spot. And whether that story is fact or fiction perchance there's still a little energy left for August on top of a very profitable July rally. On Friday the Q2 GDP (advance) came in at 3.4%, just slightly below expectations. Of course this is for the quarter that is behind us and does not tell us necessarily what lies ahead. The real story however is that today the market did not crater too badly in the face of the lower GDP number and higher oil prices. When weaker economic news does not impact the market significantly, this is a bullish sign. Equity volume has been moderate to higher on the NYSE. The Chicago PMI came in stronger than expected.

One worrying sign for the bulls is the 10% rise on the VIX on Friday. In sympathy, the CBOE put/call ratio popped higher indicating that some fear is moving into the market. These fears may cool somewhat next week if we can continue to interpret earnings and economic news based on the fact that we are in the middle of a summer party.

Today was a down day, but for the NDX, COMP and SPX indices, we have had an up week. The OEX and INDU are not moving and have been flat for 2 weeks. That is a negative indicator. Big picture for the week - stock buying is still in place on good volume. The SPX finished the week at 1234. We did not get the big breakout above 1235. That also could stall the rally.

Our Trading System - What The Numbers Are Telling Us

Our BUY signal is still in place though it has lost some acceleration. Our indicators are all still solidly in buy mode. At this point there is no hint of getting a cash signal.

We appear to be moving into quadrant 3 where our weekly MACD histogram will be at a maximum and start to lose momentum over the next 3 weeks even if the market moves somewhat higher. Chaikin Money Flow has become more positive on the NDX daily charts. This week we will again watch the CCI closely and should it and StochRSI start their decline, we will look to move to cash or immediately to a sell.

NDX - Expanded 6 Month Chart Model - Friday July 29, 2005

What About Bonds? The ten-year note yield seems to be oscillating around the 200 day moving average for the last 2 years. The oscillations are decreasing, but still revert to the mean. Eventually we will see a breakout of the current 4.0 - 4.5% range. Conventional thinking is that we will breakout to the upside (inflationary - rising rates). Opposing viewpoints argue that yields will be range-bound for years to come as investors seek the safety of notes & bonds over stocks.

3 Year Daily 10 Year Note Yield

What About Gold? - Gold mining stocks ($HUI) appear to be fighting significant upside resistance. HUI is at a line in the sand that must hold here or it will be headed back down to the 165 support level.

3 Year Daily - Gold Bug's Index $HUI

What Is The Current Sentiment?

GE and Citigroup continued to lose ground this week. These leading stocks are giving us a leading indication of where equities prices are going. GE and C must hold here and make a dramatic turn if we are going to move the broader indices much higher. (No Charts)

This week the VIX and CBOE Total Put/Call ratio bounced off of bottoms and turned up rather dramatically as equity prices turned down. Next week will tell us if Friday was a fear blip or something of more substance. The $VIX and $CPC will naturally move inversely with stock prices, but there exists a certain level on both, above which we might get a substantial tidal reversal when the money once again starts flowing from buying to selling. I have taken a stab at those levels on both charts. A break above 17 on the VIX and 1.10 on the CPC could produce a six-month sell cycle crushing the hopes for the typical year-end rally. We are not predicting a sell-off, but we are simply placing our "watchpoints" for future reference.

6 Month Daily VIX

6 Month - Weekly CBOE Put/Call Ratio

Where Do We Go From Here and How To Listen For the Next Signal?

We are in that part of the MACD cycle where we need to be looking for any excuse to go to cash and perhaps then move to a sell signal. The king of indices, the S&P 500, must hold 1220 and make a push higher in the next few trading days. If repeated attempts at 1240 are met with continued selling, we might just go to cash and let the speculators sort out which way they want to take the index.

NDX closed the week at 1605. We have raised our stop to NDX = 1580 based on our gain for the week. Exit to cash (RYMXX) on any daily close of NDX below 1580. We recognize that this is a very close stop but we need to hold our substantial gains for the year and would prefer to be stopped out prematurely rather than lose some of those gains. We will figure out how to re-enter should that become necessary.

The Market is hesitating here. The next signal may be coming soon!

The Market Listener Indicators
(YTD Gain/Loss with RYVYX & RYVNX approx. +28.2% as of July 29 Close)

Listen To What He Says

NASB Mark 4:3-9 "Listen to this! Behold, the sower went out to sow; as he was sowing, some seed fell beside the road, and the birds came and ate it up. Other seed fell on the rocky ground where it did not have much soil; and immediately it sprang up because it had no depth of soil. And after the sun had risen, it was scorched; and because it had no root, it withered away. Other seed fell among the thorns, and the thorns came up and choked it, and it yielded no crop. Other seeds fell into the good soil, and as they grew up and increased, they yielded a crop and produced thirty, sixty, and a hundredfold. And He was saying, "He who has ears to hear, let him hear."

I am working on the art of listening and hope that you are also.

Wishing you all the profit you can handle,