Financial Markets Forecast and Analysis

By: Robert McHugh | Sun, Dec 19, 2004
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Summary of Index Daily Closings for Week Ending December 17, 2004

Date DJIA Transports S&P NASDAQ Jun 30 Yr Treas
Bonds
Dec 13 10638.32 3724.96 1198.68 2148.50 112^27
Dec 14 10676.38 3757.30 1203.39 2159.84 113^06
Dec 15 10691.45 3759.61 1205.72 2162.55 113^31
Dec 16 10705.64 3732.16 1203.19 2146.15 112^19
Dec 17 10649.92 3751.07 1194.22 2135.20 112^11

SHORT TERM FORECAST
(Next Two Weeks)
     
TREND PROBABILITY   Legend     
Substantial Rise Low      
Market Rise Medium   Very High   80%
Sideways Medium   High   60%
Market Decline Med/High   Medium   40%
Substantial Decline Medium   Low   20%
      Very Low Under   20%
INTERMEDIATE TERM FORECAST
(Next 12 Weeks)
     
TREND PROBABILITY   Substantial   800 points+ (DJIA)
Substantial Rise Low   Market Move   200 to 800 points (DJIA)
Market Rise Medium   Sideways   Up or Down 200 (DJIA)
Sideways Medium      
Market Decline High      
Substantial Decline High      

Holiday Schedule: Next week's Midweek and Weekend issues will be combined and published on Thursday, December 23rd. The next issue after that will be as of Wednesday, January 5th, 2005.

This week the Dow Jones Industrial Average closed up 106.70 points, in spite of the risks noted from last week's Short-term TII reading of negative (88.25). It is the holiday season, and clearly excessive optimism is trumping the patterns. The DJIA has completed a perfect little Head & Shoulders top from Monday through Friday this week, and we have a five-wave decline today, so maybe the top is in. We'll see. We continue to believe it is a major top unfolding and will be looking for a gentle sloping descent after the first of the year - maybe starting next week, with a sharp decline eventually unfolding in the first quarter 2005. Friday was a key reversal day, with the DJIA hitting a new rally high, then closing down for the day, another reason to believe a top may be in.

Coming Soon, in 2005, "Trader's Corner," a special feature for traders.

Equities Markets Technical Indicator Index (TII) ™    
Week Ended Short Term Index Intermediate Term Index    
Aug 27, 2004 9.25 (39.81)   Scale
Sep 3, 2004 (39.25) (40.06)    
Sep 10, 2004 (49.25) (45.78)   (100) to +100
Sep 17, 2004 (69.00) (44.73)    
Sep 24, 2004 (52.25) (42.02)   (Negative)  Bearish
Oct 1, 2004 25.50 (37.23)   Positive  Bullish
Oct 8, 2004 (58.50) (35.56)    
Oct 15, 2004 (24.50) (35.48)    
Oct 22, 2004 (15.00) (36.93)    
Oct 29, 2004 39.50 (40.06)    
Nov 5, 2004 5.50 (35.28)    
Nov 12, 2004 (6.50) (27.63)    
Nov 19, 2004 (50.00) (23.18)    
Nov 26, 2004 (54.25) (26.88)    
Dec 3, 2004 (56.25) (30.50)    
Dec 10, 2004 (88.25) (42.42)    
Dec 17, 2004 (37.00) (44.25)    

This week the Short-term Technical Indicator Index comes in at negative (37.00), indicating a sideways to declining move is probable. The actual reading was more negative, but is mitigated by seasonal and holiday considerations. This indicator is a useful predictor of equity market moves over the next two weeks, both as to direction and to a lesser extent strength of move. For example, readings near zero indicate narrow sideways moves are probable. Readings closer to +/-100 indicate with a higher degree of confidence that an impulsive move up or down is likely over the short run. Market conditions can change on a dime, or the Plunge Protection Team can come in and temporarily stop market slides, so it may be unwise to trade off this weekly measured indicator.

The Intermediate-term Technical Indicator Index is useful for monitoring what's over the horizon - over the next twelve weeks. It serves as an early warning system for unforeseen trend changes of considerable magnitude. This week the Intermediate-term TII comes in at negative (44.25).

Our two sentiment charts continue to warn of a significant correction. The first one on the next page, the SPX/VIX Ratio, set an all-time record high Friday December 17th, 2004 of 99.93 - Bearish. Major tops take a while to form, and by the looks of this chart (which covers this ratio going back to 1998), the pattern looks very similar to that which formed at the 2000 all-time S&P 500 price peak. Since 1998, whenever this ratio has climbed to 68.00, a stock market crash followed starting almost immediately. The lone exception was in 1999 when a year-long warning of readings above 68.00 foretold the massive top to come in 2000. We have a similar situation again. Since late 2003 we have seen a yearlong series of readings above 68.00 without a crash. Our take on this is that - like 1999 - we are being forewarned of another major top, one that will be followed by a decline of perhaps as much as 30 to 50 percent. How can this be you ask? We believe this ratio's pattern is telling us that the start of the ominous Elliott Wave primary degree (3) down is about to begin (within the next two months). The SPX/VIX ratio is at a similar peak spike reading as in 2000 that kicked off an immediate decline that eventually took the S&P 500 down 50 percent over two years.

The second sentiment chart - a contrary indicator - is the 10 Day Average CBOE Call/Put Ratio. Consistent with the SPX/VIX's warning, the Call/Put Ratio has triggered a sell signal by dropping below its 1.40 topping threshold to 1.35 on December 17th, 2004. Tops are indicated by readings above 1.40 and bottoms are indicated by readings below 1.00. Sell signals occur once the ratio declines back below 1.40, and buy signals occur once the ratio rises back above 1.00.

The chart below is another of many Analogs we are tracking that warn that investor psychology in 2004 is the same as seen at major tops just prior to stock market crashes in past years. This one compares the price action of the S&P 500 during 2004 with the price action in the Dow Industrials just before the most famous and devastating of all crashes - 1929. The correlation is incredible and if the analog holds up, we should see the S&P 500 meander higher for another week or two, then like a roller coaster at the top of a hill, gradually and slowly decline until all the cars are finished climbing, free falling into a fast and furious descent, the worst of which would occur from late February 2005 throughout the typically horrid month of March.

Back in 1929, record Bullish sentiment reigned and there was no hint of collapse. They didn't have the plunge protection team to bail them out back then, but they did have powerful individuals who stepped in to stop periodic sharp declines throughout early 1929, and were successful in keeping the markets buoyed. But by October 29th, their efforts failed and prices plummeted. It will be interesting to see if the PPT can stop the coming slide of 2005.

The above chart (courtesy of www.stockcharts.com) shows that the Dow Industrials completed their impulse rally from October 25th with a micro degree 5th wave top at 10,739 intraday on Friday December 17th, which we have labeled minuette degree wave v. Originally we believed that this was minuette degree wave i of v up, largely based upon the power of the move (thus we expected much more to come). However, the pattern of the top and the Bearish divergences with the RSI and MACD lend strength to the argument that this minor degree wave 5 is about over.

We see a Broadening Top - a Megaphone - which is a highly reliable topping pattern. Plus, today's price action creates a Double Top with February 2004. The Elliott Wave count in the S&P 500 looks like a minor degree wave 5 top, so confirmation between these two major averages would suggest the DJIA is also wrapping up a minor degree 5. Another reason to believe primary degree (2) is topping here is that minor degree wave 1 (from March 12th, 2003's low of 7,416 to April 7th, 2003's high of 8,520) is within 70 points of being equal to minor degree wave 5 (from October 25th's 9,708 low to December 17th's 10,739 high). This is important because when the third wave extends (and minor degree wave 3 of intermediate degree C did) then waves 1 and 5 tend toward equality. We have equality right now. The DJIA could rally another 100 points or so and all of the above would remain valid. Given the holiday period coming up, another 100 points cannot be ruled out.

What is clear is that we are reaching some sort of top and that prices should decline further, to at least to 10,345, the 38.2 retrace of the rally since October 25th. Should the DJIA drop below October 25th's 9,708, then primary degree wave (3) down is clearly underway.

The Dow Transportation Average hit another new high this week at 3,770 intraday on Wednesday, and has risen 808 points, 27 percent, since August 2004 without a correction - which meets the criteria for a Parabolic Spike. The PE for this index is over 90x. What we have here is a manic bubble. Parabolic Spikes do not have soft landings. Once the air comes out of this balloon, this index is going to crash and burn. It's been a nice ride for the trend-seeking hedge funds, but both the Elliott Wave count and the Rising Bearish Wedge pattern also indicate the party is about over.

We are not quite ready to declare the Parabolic Spike blow-off rally over, as Wednesday's thrust higher forces us to be patient. As long as prices remain inside the rising trend-channel, the spike could gain altitude - but the air is getting thin. The RSI has turned down from overbought territory, a sign that the rising trend is losing participation, its direction diverging with price. The MACD has formed a small Head & Shoulders top, and has turned down, momentum about to fall. Its direction is also diverging against price's direction. Because of the mania characteristic of Parabolic Spikes, once momentum gets legs, there should be accelerated selling as speculators dump and run, knowing full well the greater fool game is over. Left holding the bag will be the innocent.

The S&P 500 is closing in on its minimum upside target for its Bullish Head & Shoulders pattern - 1,220, hitting 1,207 Thursday. That also happens to be .786 of the all-time high of 1,553. It looks like a major top is in the books or very close. The Elliott Wave count looks complete, we have Broadening " Megaphone" and Rising Bearish Wedge top patterns in place, and Bearish divergences between the RSI's direction and prices, and the MACD's direction and prices. Down-day volume is up.

The above chart (courtesy of www.stockcharts.com) shows the Ratio of the Dow Jones Industrial Average vs. the 30 Year U.S. Treasury over the past 2 years. This ratio now stands at 93.76x and has traced out a Head & Shoulders Top pattern. The pattern has been confirmed with a break below the neckline, increasing the probability that the downside target will be met. Still, it is working on completing an even more-perfect Right Shoulder - which itself is forming a Head & Shoulders Top, increasing the probability that the minimum downside target will be reached. That minimum downside target is 72x.

Here's the bad news: There is no resolution to this pattern that is positive for the economy. None. This pattern is saying that once it declines below 87x - the neckline - then the downside target is 72x. What does this mean? Well, let's first analyze what are the possible price scenarios for the DJIA and the $USB that would result in a reduction in this ratio to 72x. Scenario A - The DJIA declines faster than Bonds decline. Scenario B - The DJIA declines and Bonds remain flat. Scenario C - The DJIA declines and Bonds rise. Scenario D - The DJIA rises, but slower than Bonds rise.

Scenario D is highly unlikely. Why? Because for Bonds to rise sharply from here would imply an economic slowdown which would virtually assure a sharp drop in equities - equities are not going to rise in a recession. So let's eliminate scenario D. That leaves us with 3 scenarios - all of which require equities to fall. So the next question is, if the DJIA is about to fall, how much of a fall are we talking about to achieve this 72x ratio? There are an infinite number of possibilities, but for the sake of getting us into the ballpark, we'll cover a likely mathematical example for each scenario.

First, lets get to our starting point. At the time this chart is prepared, the DJIA sits at 10,691 and the 30 Year Treasury sits at 113^31.

For Scenario A to fit, if Bonds fell 5 points to 108.97, then to reach a 72x ratio would require the DJIA to decline to 7,846 - a crash of 26 percent! If we put a more aggressive decline on the Bonds, to 100 (basically a collapse in bonds and a painful rise in long-term interest rates), then the DJIA mathematically would have to decline 3,491 points - for a more severe crash of 32 percent!

For Scenario B to fit, where Bonds remain at 113^31, then the DJIA would have to decline 2,486 points to 8,205 - a 23 percent crash!

For Scenario C to fit our downside ratio target of 72x, if Bonds rise 5 points to 118.97, the DJIA would still have to decline to 8,566, a drop of 2,125 points or 20 percent - another crash!

For the DJIA to not decline, and the 72x ratio target be met, Bonds would have to rise to 148. Not going to happen. Again, any sharp rise in Bonds from current levels (to above 120) portends recession or depression, in which case one would have to be delusional on the level of a poached egg to believe equities would rise. Okay, we all know somebody who would argue the point, but...

There is only one saving scenario to avoid a stock market crash over the next 6 months or so, and that is if this $DJIA/$USB ratio Head & Shoulders Top pattern fails. That would require the ratio to rise above 102x, which would require the DJIA to rise to 11,625 while Bonds remained flat (more than likely Bonds would not remain flat, but instead would decline if the DJIA tried to rise there, and ergo, impeding the DJIA's efforts to rise there as rising interest rates stall the economy).

More bad news: The $SPX/$USB Ratio also sports the same Bearish Head & Shoulders Top.

Wal-Mart is Poised to fall as it has Formed a Bearish Head & Shoulders Top!

Dow Jones Industrials component Wal-Mart has formed a Bearish Head & Shoulders Top pattern, with a weak right shoulder, and is close to confirming with a break below the neckline. The minimum downside target is 42, a 17 percent decline from Friday's close. For Wal-Mart to collapse, we must be talking recession. China beware, your U.S. outlet is in trouble.

The Relative Strength Indicator has not fallen to levels seen at previous bottoms and the MACD is negative with momentum down. Volume has been up on down days.

When studying the patterns in the indices, it is important to do some micro analysis and look at the underlying component company patterns to see if similar market direction is evident. Other Dow component stocks showing topping patterns include AIG (possible Head & Shoulders), CAT (a completed five-wave impulse up), Citicorp (Head & Shoulders), JPM (Head & Shoulders), PG (Broadening Top "Megaphone"), and DIS (a completed five waves up). These patterns are clearest on a three year chart.

The Economy:

Retail Sales blipped up 0.1 percent in November, according to the Commerce Department. This was down from October's 0.8 percent increase. The American Machine Tool Distributors' Association and the Association for Manufacturing Technology announced Tool Demand fell 38.9 percent in October from September, according to a Reuters story reported at www.cnnmoney.com. Housing Starts saw their sharpest drop in eleven years in November 2004, according to the Commerce Department. They fell 13.2 percent. Building Permits were also down.

The U.S. Current Account Deficit (a measure of U.S. trade with the rest of the world including investment flows) widened to another new record, according to the Commerce Department. U.S. foreign aid shrank, helping the number be less-worse than it could have been. The U.S. Trade Deficit also hit another record, widening by a whopping 9 percent in the month of October, and pushing the ten month accumulated total for 2004 to $500.5 billion. This puts us on target to hit a $600 billion deficit for 2004.

According to the government's Bureau of Economic Analysis, Corporate Profits decreased 27.6 billion (2.4 percent) in the third quarter 2004. Bet you didn't hear this number reported anywhere in the mainstream financial press.

According to Thomson Financial, as reported in an AP article Tuesday, Rampant Insider Selling Raises Red Flags, by Rachael Beck, "Some $6.6 billion in insider stock sales took place last month (November 2004), the highest level since the $7.7 billion in sales tallied in August 2000, according to Thomson. Contrast that with the $144 million worth of stock that was bought by insiders last month." Our comment: Advice to the innocent: Follow these "in-the-know" investors' actions, not their words.

Consumer Prices rose 0.2 percent in November, vs. 0.6 percent in October according to the Labor Department. "Core" CPI was also reported as 0.2 percent. Bonds will tell us whether this is the truth or not. The Federal Reserve raised short-term interest rates another quarter to 2.25 percent, reloading its ammo for the next recession and leg of the Bear. The discount rate (the rate that commercial banks borrow directly from the Fed) now stands at 3.25 percent. Everybody's monthly home equity line of credit bill just went up.

First time Jobless Claims were reported to be down to 317,000 for the week ended December 11th, according to the Labor Department. Hope the figure's right.

Money Supply, the Dollar, & Gold:

M-3 remains 13.7 billion below its level two months ago, showing that both the velocity of money and the Fed's open market operations are keeping a lid on liquidity. Our research shows that whenever M-3 plateaus or declines for two or more months, equities subsequently decline. The latest money supply figures support our forecast for a major intermediate-term top in equities.

The trade-weighted U.S. Dollar started its minor degree wave 4 up correction that we've been expecting. Minuette degree waves a and b appear to be over, with c left to complete. Proportionality suggests this wave c of 4 has perhaps another two weeks to finish before the final minor degree wave 5 takes the U.S. Dollar to a bottom for a while. That low would also be intermediate degree wave 5 down of primary degree wave (1) down - the culmination of a multi-year long-term decline. A major reversal should then unfold - an A-B-C corrective primary degree wave (2) up that could take the better part of 2005 to complete. That rally should retrace a Fibonacci percentage of the wave (1) decline. Following that would come a calamitous decline - primary degree wave (3) that should take the U.S. Dollar to new all-time lows and push Gold to all-time highs.

The RSI has rebounded from deep oversold levels and the MACD has turned up. We'll be watching for completion of a minuette degree a-b-c correction to indicate that minor degree wave 4 is over and minor 5 is about to begin. Wave 4's usually don't retrace as much as wave 2's so it is possible that this rally will stop at the 38.2 or 50 percent retrace of minor degree 3 - around 84.50 to 85.75.

The chart on the next page (courtesy of www.stockcharts.com) shows an Elliott Wave count for Gold over the past three years. The sharp decline the past two weeks comes off the Rising Bearish Wedge pattern we've been showing for several issues now, so is not unexpected. Proportionality argues that once Gold is oversold, a minor degree wave 4 will be finished and one final push up to a final top in Gold for a while will be in place - minor degree 5 of intermediate degree wave 5 of primary degree wave (1).

An Ascending Triangle is still in play, and is one of the reasons we feel it is a bit early for a final primary degree wave (1) top at this time. The Ascending Triangle projects an upside target of 500 before any significant correction. That target is arrived at by taking the distance of the widest part of the triangle and adding it to the spot of the breakout. Maybe we get to 500 or maybe we don't before primary degree wave (2) starts, however prices still remain solidly inside their long-term rising trendchannel and one more meaningful thrust higher over the next month or two would not surprise us. A decline below 375 would negate the Ascending Triangle pattern and indicate that primary degree wave (2) is well underway. This correction could take the form of a zigzag and push prices sharply lower, or it could take the form of a "flat" sideways consolidation - perhaps even a symmetrical triangle - meaning the correction could be milder and not push Gold down more than 38.2 percent of the primary degree wave (1) rise, to about the 375 area.

The Gold Bugs Index ($HUI) charted on the next page has followed the path we expected from its mid-November top as outlined back in issue no. 97, November 5th, 2004, declining 40.41 points (16.2 percent) from its 248.18 high on November 17th to December 8th's micro degree wave 3 intraday low of 207.77. The HUI is in the last leg of an Elliott Wave minor degree consolidation - wave C that should take prices down below 180 over the next several months before turning back up in earnest. So far the HUI is finishing up a minuette degree wave i of v down. The RSI has predictably plummeted from a rare Head & Shoulders top formation to oversold levels, the place where minuette degree wave ii up can grab the baton for the next short-term path. The MACD also fell sharply from a Head & Shoulders top formation and momentum is now clearly down. Neither the RSI nor the MACD are anywhere near the levels seen at the last significant bottom, back in May 2004.

Silver has formed a Bearish Flag pattern (upside down from a Bullish Flag pattern) with a minimum downside target of 5.20, arrived at by measuring the height of the flagpole subtracted from the likely breakout point from the flag. What is happening here is that after the Bears have taken sizable profits from the recent plummet, those long who stayed in are battling with new sellers to see if the market can reverse - ergo the upward sloping small trend back and forth volatility (the Flag). Once buyers realize that the trend will not reverse, they will give up, panic selling will take hold and the downtrend will resume. No guarantees, but this pattern is one of the more reliable ones in technical analysis.

U.S. Treasury Bonds did a another whipsaw U-turn this week, declining after rallying back hard, after breaking below the neckline of a small Head & Shoulders pattern (not shown) last week. The expectation was for Bonds to continue south on an impulse wave that would eventually take interest rates up to double digits and Bonds toward 80. That may still happen, but the near-term picture must clear first. The small Head & Shoulders pattern remains valid - so we wait. The RSI has formed a Bearish Rounded Top pattern implying falling prices in the near term. The MACD has also formed a Bearish Rounded Top pattern but may have thrown a Bear Hook in for good measure to lure in the longs before declining further. A massive three year Head & Shoulders Top remains in force - unconfirmed - looking to draw prices to the neckline around 101, and then to its minimum downside target of 81.

Whether Bonds rally or decline sharply from here, both scenarios are bad for equities. Rising Bonds portends deflation and likely recession. Declining Bonds means rising interest rates.

Bottom Line: As we slowly approach a major top, the holiday season and post election euphoria anesthetizes the investment community, and threatens the innocent. A decline can begin at any time, however the sharpest slope downward will likely occur in early 2005. Caution remains warranted.

"But whoever has the world's goods, and beholds
his brother in need and closes his heart against him,
how does the love of God abide in him?
Little children, let us not love with word or with tongue,
but in deed and truth. And this is the commandment,
that we believe in the name of His Son Jesus Christ,
and love one another, just as He commanded us."

I John 3:17, 18, 23

Coming Soon: In early 2005, we will be introducing a new feature for those who are interested in trading. Trader's Corner will document options trades only available on our website at www.technicalindicatorindex.com. Subscribers can contemporaneously follow our purchases and sales based upon what we believe to be high probability trading opportunities in the markets.

Special Note: Be sure to register under the subscribers' section at www.technicalindicatorindex.com for e-mail notifications and password access of our mid-week market analysis, usually available on Wednesdays or Thursdays. These midweek updates are only available via password access when posted on the web.

Key Economic Statistics
Date VIX Dec. U.S. $ Euro CRB Gold Silver Crude Oil 1 Week Avg. M-3
6/18/04 14.95 89.41 121.17 267.75 395.7 5.98 39.00 9305.7 b
6/25/04 15.19 89.22 121.41 270.75 403.2 6.12 37.55 9296.2 b
7/02/04 15.15 88.18 123.09 265.50 398.7 6.01 38.39 9327.7 b
7/09/04 15.78 87.41 124.10 269.00 407.0 6.46 39.96 9273.9 b
7/16/04 14.43 87.12 124.36 271.50 406.8 6.72 41.25 9238.8 b
7/23/04 16.50 89.23 120.88 269.50 390.5 6.33 41.71 9259.9 b
7/30/04 15.27 90.12 120.10 267.00 391.7 6.56 43.80 9272.3 b
8/06/04 19.34 88.45 122.69 268.25 399.8 6.77 43.95 9267.9 b
8/13/04 17.98 87.97 123.68 269.19 401.2 6.62 46.58 9250.2 b
8/20/04 16.00 88.22 123.03 279.50 415.5 6.87 46.72 9261.9 b
8/27/04 14.74 89.80 120.20 275.00 405.4 6.58 43.18 9298.6 b
9/03/04 14.28 89.56 120.66 275.25 402.5 6.59 43.99 9288.7 b
9/10/04 13.75 88.60 122.61 272.50 403.8 6.16 42.81 9281.1 b
9/17/04 14.03 88.10 121.76 275.75 407.6 6.28 45.59 9305.8 b
9/24/04 14.28 88.59 122.57 278.50 409.7 6.42 48.08 9351.3 b
10/01/04 12.75 87.77 124.07 284.75 421.2 6.94 50.12 9367.8 b
10/08/04 15.08 87.55 124.13 287.60 424.5 7.29 53.31 9327.9 b
10/15/04 15.04 87.20 124.73 286.45 420.1 7.11 54.93 9292.6 b
10/22/04 15.28 85.97 126.46 287.00 425.6 7.33 55.17 9314.3 b
10/29/04 16.27 84.98 128.85 284.75 429.4 7.30 51.76 9331.6 b
11/05/04 13.84 83.89 129.46 283.00 434.3 7.50 49.61 9336.3 b
11/12/04 13.33 83.71 129.85 283.50 438.8 7.62 47.32 9334.2 b
11/19/04 13.50 83.32 130.13 287.25 447.0 7.60 48.44 9325.1 b
11/26/04 12.78 81.81 132.93 288.75 449.5 7.59 49.44 9339.3 b
12/03/04 12.96 80.98 134.53 284.75 456.0 7.99 42.54 9355.1 b
12/10/04 12.66 82.59 132.36 276.25 435.4 6.74 40.71 9354.1 b
12/17/04 11.95 82.20 132.90 285.25 442.9 6.80 46.28 -

Note: Lowest VIX in six years, CRB jumps, Gold back up, Oil up sharply


 

Robert McHugh

Author: Robert McHugh

Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

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