Continued Caution Advised
Dow Jones Industrial Average 10,205
Value Line Arithmetic Index 1576
30-Year Treasury Index 4.87%
The Big Picture for Stocks
The bull market of 2000-2004 is probably defined.
Technical Trendicator Direction (1-4 month trend):
Stock Prices Down
Bond Prices Down
The chart below shows that the MidCap index is overbought and rolling over to the downside. We are coming into the seasonally weak October month. Short term interest rates have been rising for 15 months - long enough to precipitate a bear market. Our advice is to remain cautious.
Two groups that have been strong are utilities and REIT's as investors have bid prices of these shares up to buy dividends. I suspect that their craving for yield has forced these stocks to fully-valued if not overvalued territory. I would suggest selling them and going to T-bills or other high quality short term money market instruments. There are times to be more concerned about the return OF your money than the return ON your money. I would say that there is a better than even chance that the patient investor will be able to buy these shares back 15% or more lower than today's prices. If terrorists hit a power plant or a major mall, shares could plummet a lot more than that.
Markland Technologies (MRKL, $.72) had a good day today, up 60%! Their earnings are due out in the next several days. The market is just waking up to the probability that they will be very good. Put a limit sell at 99 cents. While it could go higher than that, this price would represent a double from our recent recommendation. If my guess is correct, you will get that price or better after the earnings are announced.