What 16 Presidential Cycles Tell You About The Current Situation

• August 4, 2003
• Peter Navarro

Market Trend: A turning point?

Market Outlook: Bearish

Sector Watch: Real estate and mortgage financing
down

Macroplays of the Week:  A Couple
of Pennies for your thoughts — Arotech Corporation
(
ARTX |
Quote |
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PowerRating), ACT Teleconferencing
(
ACTT |
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News |
PowerRating)

The Broad Market Outlook: What Goes Up, Must…

OK, so
we had a very nice March-through-May rally. 
As the market has essentially oscillated in June and July, many observers have
continued to portray that market in a manner suggesting that the rally has
continued. While it is true that some individual stocks have continued to put up
impressive gains, the reality is we’ve been in another holding pattern.

The Bullheads thought that pattern was broken last week as
the three major indices had explosive upside move on Thursday morning’s upbeat
economic data. At the head of the cheerleading pack was Jim Cramer (of CNBC) who
cocksuredly proclaimed, “Say good bye to this trading range, we’re going
higher!”  However, this explosive move was quick to reverse, and the market
finished in the red for the week.

At this point, the bad news for the bulls is that the
Dow has failed to break out of its consolidation range, the S&P appears to have put
in a “double top,” and the Nasdaq, although its price trend is still intact,
shows increased signs of technical internal deterioration.

One of our market indicators (sector breadth), shows that
only 16% of the market sectors rose last week, while 84% declined.  Our breadth
and momentum indicators continue to deteriorate, our sentiment indicators are
flashing “sell”, and the economic indicators appear toppy. 

Naïve individual investors continue to believe this rally is
a big party, and if your not in, you’re missing out. We can only respond that
both the large and commercial traders are “net short” with the same view on this
market as us—