Why I’m expecting a multi-week rally

And yet we suspect few have. Despite a market that has CLEARLY sideswiped most
investors INITIALLY, and shows the potential to be absolutely devastating to
everyone with assets from stocks to houses in the future, I find that very few
investors have a true sense of the urgency, precariousness, and DANGER of the
current environment to do substantially more damage, let alone an understanding
of what will determine its fate.

I have written the “2006 Investment Roadmap” and now the new “Mid-Year Update
2006 Investment Roadmap” (see below) precisely to analyze and explain why this
happened, how it was anticipated, and what it means for the future as well as
what to watch to determine how this GLOBAL TINDERBOX will blow. I still honestly
believe that the ramifications to investments of events over the period
directly ahead will be as substantial as any period in post WWII history.

This week again we have an even more likely interim low being made, with an
impressive 90% up day occurring off of the lows that tested the 80-week MA and
trendline support in the S&P. If I had to guess I would suspect that we’ll get a
multi-week rally off of this level, as it was accompanied by support in gold,
the Euro, XAU, and many other sub-components of the market. Of course if this
low gives way next week, it will be a fairly ominous sign. And moreover, I don’t
advise playing this rally, even if it materializes, unless MUCH stronger
indications of its staying power come forth. That would require a couple more
STRONG volume days with substantial breadth on days of rallies in a major index
over 1.5% at least. Until then, investors should stay on the fence and watch in
awe for the most part.

Many investors have asked if I am not even willing to call this a real bear
market for sure, as stated in recent columns, then how can I make such dramatic
statements about the downside potential of this global macro environment to
sideswipe investors in nearly all asset classes. The answer is that the
POTENTIAL for policy error is now greater than at any time since the late 1970’s
and a policy error now by China, Japan, or the US could lead to disastrous
economic and market consequences very quickly. It’s nail-biting time for those
who understand what’s going on, and for those who do not, may the force be with
you!

Our US selection methods, our Top RS/EPS New Highs list published on
TradingMarkets.com, had readings of 5, 6, 6, 3 and 2 with 2 breakouts of 4+ week
ranges; no valid trades meeting criteria, and no close call. This week, our
bottom RS/EPS New Lows recorded readings of 83, 12, 72, 120 and 93 with 22
breakdowns of 4+ week ranges, no valid trades and no close calls. The “model”
portfolio of trades meeting criteria has exited all positions and is 100% in
cash.

Mark Boucher has been ranked #1 by Nelson’s World’s Best Money Managers for
his 5-year compounded annual rate of return of 26.6%.