No. of Recommendations: 14
Although it is nice that the various indices have gone up for three weeks in a row now, I wouldn't get too excited just yet. There were 212 new 52-week lows on the NYSE this last week. I like to see this number less than 100, at least, and the lower, the better. In a roaring bull market, this number can get below 10! And there were only 66 new 52-week highs this last week, actually fewer than the week before (77) and the week before that (82) and the week before that (210). But the cumulative daily breadth was up for the second week in a row. Let's call it 22,000.

Early this year, I decided that the S&P500 was unlikely to go down for a third year in a row so I rebalanced my Vanguard S&P500 tracking mutual fund with my Vanguard Federal Money market fund. Shows what 50 years of investing will get you. Fortunately, I don't need the money, yet. On the bright side, the dividends on the S&P500 fund are about the same as the mutual fund. Now, how about a 4th down year in a row, something that happened in the late 1920s and early 1930s? Well, the Fed Funds rate is ridiculously low and inflationary, but the "official" inflation rate has hardly moved in over a year. The Federal government is back to deficit spending, also inflationary, and little seems to be happening. There has been some tax break for people also, which might or might not be inflationary, but its effects are not seen yet. If people weren't taking on new debt, things could be a lot worse than they are. When will the home refinancing stop? IMHO, we can't count out 2003 being another down year. I will be happy to be wrong.

Something going in our favor is that the year before the Presidential election year is usually the best in the four-year stock market cycle. From 1973-2001, this third year into the cycle averages up 20.0% (The Hirsch Organization as published in Barron's on September 16) whereas the year of mid-term elections (this year) averages up 3.6%. But four down years in a row has happened before, and we seem to live in unusual times for the stock market. A unique number of years up more than 20% happened in the Clinton stock market. There are those that say the market is still overvalued, and there is talk of the Fed lowering the Fed Funds rate yet again. Maybe Dubya will get a unique number of down years (Yikes!)?

As for the NASDAQ, there were 109 new 52-week highs and 214 new 52-week lows. Once again, I like to see those new 52-week lows below 100 though the new 52-week highs above 100 is somewhat encouraging. And the cumulative weekly breadth was up for the second week in a row (Don't knock it, that was the first time since the seek ending 19 April.) at -98,420.

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