TimingCrystal

[teabull]

Editorial

It was another week for the bulls on Wall Street in the most recent 5 day market stretch. The Nasdaq 100 Index continued to impress, tagging on an substantial 1.86%. This was even outdone by the once lagging Russell 2000 Index that galloped ahead by 1.96%. And, to a lesser extent this week, the S&P 500 Index marched forward 1.03%


- Our Primary Trend Indicator is Bullish.
- Our Sentiment Indicator is Bullish.
- Our Interest Rate Indicator is Neutral.
- Our Valuation Indicator is Bearish.

Once again our Primary Trend Indicator closed the week entrenched in Bullish Mode. We would interpret the occurrence of this happenstance as mainly the result of the US public being underinvested in US equities. This has the net effect of the market evolving from one that was heavily supported by Value Investors at the market lows in June and July of this year to one that is being rallied by Momentum players i.e., the general US investing populace. If this analysis proves correct, we may well be in the beginning innings of a new bull market up leg.

Our Sentiment Indicator finished Friday situated nicely in Bullish Mode. This Indicator is giving no indication that there is much of any market risk on the short-term horizon. However, this does not mean that stocks can not be taken down from time to time on negative media hysteria that often leads to strong bouts of profit taking.

Our Interest Rate Indicator closed the week on a more shaky footing. Reacting to the Friday US Government Jobs Report, Bond traders decided that the economy was not about to fall off a cliff. In fact, the September 2006 increase in jobs of just 51,000 would normally have sent the debt market rallying. However, upward revisions in the July and August Payroll Reports and a slight drop in the unemployment rate led to concerted profit taking by the Bond gules. We continue to pay close attention to this Indicator, however, currently the 30 year bond, with a yield at 4.84%, still presents a strong underpinning to the stock market.

Our Valuation Indicator finished the week, once again, in Bearish Mode. However, stocks, in general, did become a little bit cheaper on Friday as some mild profit taking took place after the week's solid gains. It should be reemphasized, that the stock market may be in the process of transforming itself into a Momentum market. This can best be illustrated by the recent succession of record highs set by the Dow Jones Industrial Average. Therefore, we will continue to let the Primary Trend override our mild concerns of an overvalued stock market, at least for now.

In conclusion, we continue to be guarded against the possibility of market weakness if 3rd quarter earnings surprise to the downside. However, to date, the stock market has given no indication that this is a high probability. Therefore, we will remain cautiously optimistic that the general public is just now warming up to the fact that Corporate America and the US economy continue to chug along at a healthy clip. In fact, we find it quite remarkable that the Nasdaq 100 Index is still showing a modest loss for those buy and hold advocates since our first live signal of November 18/05. Clearly the general populace is underinvested.

We wish you continued good luck with your investments next week.

Sincerely,

The TimingCrystal Team

http://www.timingcrystal.com