Current Market Comment

Expert Volatility

Since the “Buy Signal” given in our Investment Strategy Letter #551 dated Late July 2006, the Dow has risen some 500 points. This buying opportunity occurred exactly at the bottom of an upward channel established since the October 2003 bottom. An extension of this movement to, or above, the upside of the channels (See ISL #551) would establish new annual high for the markets and would put the Dow close to its all time high (above 11,800). However we don’t see this happening until the end this year or the beginning of next year. As our Strategy Index is getting close to overbought territory, we see some volatility that may temporarily interfere with the markets rise to the top of their channels. However after that volatility we see the current rally extending itself until the Fall. We like WAB, SNDK, NSC, MT, EBAY, AAV.

The upside long-term projections for the Giant Head and Shoulders Bottoming Formation (using technical measurement methods, footnoted in ISLs #539 (Early March 2005) and #540 (Early April 2005)) are for the Dow above 14,300, up 32%, for the S&P 500 above 1572, up 31% and for the NASDAQ Composite above 2892, up 45%. We believe this is a new Bull Market and will differ from the previous 1990’s Bull Market, in that any upsurge should come in volatile up and down stages. A good plan needs to be developed where individual issue selection and a buy and sell strategy will determine the difference between a moderate and a high return.