Gregory Spear and his team, from The Spear Report Professional Edition newsletter

Gregory Spear and his team, from The Spear Report Professional Edition newsletter, provide their view on and technical analysis of recent market moves. Discover what these experts have to say about Thursday’s market volume and the selling that took place in the energy patch. Then receive updates on a subprime lender and an avian flu stock. COMMENTARY Yesterday Gregory Spear and his team noted the powerful “scouting party” buy program that hit the market mid-day on Wednesday. That was a test for what happened on Thursday, when we got the real thing. Thursday’s rally was a textbook large-cap affair with the highest volume of the week. This is one more confirmation of the validity of this rally. Spear and his team’s technical read of the market internals is equally supportive. On Thursday the selling in the energy patch was rather severe, as oil fell into the $57 range. The crude oil market trades in a very technical manner, if you know the formula. Once a recognized support level has been breached, then the market falls to the next support in the pattern. The next support level is the $55 target Spear and his team have been forecasting for the last month. They do not expect crude to immediately recover, which has bullish economic implications and is one important justification for the current market rally. In the weekly edition, Spear and his team profile New Century Financial (NYSE: NEW), the subprime lender they have in their trading portfolio at this time. In September, New Century cut earnings guidance due to shrinking margins, which caused a nasty gap down in the stock. The real estate investment trust said it now expects full-year earnings per share of $7.25 to $7.75, down from its prior target of $8.25 to $9. That knocked shares down from $38 to $30. Nevertheless, NEW maintained dividend guidance of $6.50 for 2005 and $7.30 for 2006. NEW is a REIT and distributes its earnings as cash. At a $34 share price, that is a 21% dividend return over the next 12 months. Spear and his team are also profiling an “avian flu stock,” but the company, Cepheid (NASDAQ: CPHD), is really much more than that. This is the company whose technology is used by the US Postal Service to check for anthrax. While most AI stocks are currently losing altitude, CPHD has gone up every day in the last week. This article highlights the commentary of Gregory Spear for the Zacks.com audience. Gregory Spear provides insightful analysis, market commentary, and favorite recommendations on a timely basis in "The Spear Report Professional Edition" newsletter. Try it free for 30 days and see if you can improve your investment performance. Learn more about "The Spear Report Professional Edition" and 30-Day Free Trial. And get immediate access to current issues and special reports. Click here now. --> Here’s How You Can Profit from the Pros Find out what other leading experts are saying about the market. And what stocks they are recommending. For free. Just sign up for our free email newsletter, Profit from the Pros, where we’ll give you the commentary, advice, and insight from those rare few experts who consistently beat the market year in, year out. Click here now.

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Jack Schannep, editor of the Schannep Timing Indicator newsletter

FEATURED EXPERT: Jack Schannep11-NOV-05 Jack Schannep, editor of the Schannep Timing Indicator newsletter, discusses three different kinds of tops that could lead to a bear market. Discover what this expert has to say about volume, consumer confidence, and the yield curve. Then find out why investors currently have at least 2 ½ reasons to worry. Afterward, read Schannep’s bottom line on the 2002-2005 bull market. When the market moves up the Bulls start to snort, when it starts down the bears begin to growl, and then when it stalls out and stays in its long time trading range all are left with a collective groan. The bullish case is built on a growing economy, which continues to grow even through the hurricanes it has had to contend with. The future may in fact be brighter because of the stretching out of this economic recovery due to the interruption with sales and investment pushed back into 2006 and beyond. The bearish case includes concerns over inflation and the price of oil, terrorism, more natural disasters, politics in general, you name it. Fortunately we have some guideposts to help us determine the probable outlook for the economy and the stock market, particularly if it is going to change. In the August, 1998 - January, 2000 bull market, volume reached a record for that bull market in December, 1999 – one month before the January, 2000 top for the Dow Jones Industrial Average. A newer high for volume occurred in March, 2000 just as the Standard & Poor’s 500 made its high that same month. From the Special Report “Volume Speaks Volumes”, you know that volume usually (23 times out of the last 25 bull markets) tops ahead of, or coincident with, the market index topping. In the recent October, 2002 - March, 2005 (?) bull market, volume appears to have topped out in March, 2005 (April, 2005 had the highest average daily volume). As with the 2000 bull market top, in 2005 the S&P500 topped later than the Dow Industrials, and, as before, the New York Stock Exchange Composite was even later to top out in September of both years, to date. The lead time from volume tops to market tops and the beginning of bear markets over the past century has averaged 5 months. Oh, by the way, should the bull market continue it is likely that yet higher volume will occur in the months or years ahead. The second ‘top’ which typically precedes market tops is consumer confidence. In 2000 it had a double top in January and May. This year it topped out in June (to date), although the peak is not ‘official’ yet as described in the Special Report “Consumer Confidence”. If and when that happens a bear market typically begins 5 months later, AND a recession follows a year later. Since 1967 both have always followed the 6 bona fide confidence peaks. And, yes, consumer confidence can still come back up to yet higher levels with a continuing bull market. And the third top from “Three Tops and a Tumble” is the yield curve. The yield on the 3 month Treasury Bill has risen along with the Federal Funds rate over this last year to the point that it is approaching the yield on the 10 year Treasury Note. Over the last year the 3 month yield has risen over 2 full percentage points from 1.8% to 3.9% while the 10 year only rose ½ of a percentage from 4% to 4.5%. Clearly, IF that pattern persists as the Federal Reserve continues to raise the Fed Funds target rate, a crossing over by the short rate of the long rate will occur. If such an inverted yield curve occurs, typically a bear market follows on average within 6 months and a recession is pre-ordained some 13 months later on average. This scenario is not, however, preordained. Until and unless the yield curve goes from ‘flattening’ to ‘inverted’ it is only one-half of a top, and thus far not reached a third top. So there you have at least 2 ½ reasons to worry. The question then is whether we need all 3 tops in place, if in fact two are already in place, or if only two and a half are enough to point the way to a bear market about to begin. Jack Schannep doesn’t know the answer, yet, but it should become obvious shortly. BOTTOM LINE The first sentence of the three Special Reports that make up “Three Tops and a Tumble” admits that “Foretelling stock market tops is the hardest part of market timing”. It is not written that all market tops will be the same, or even similar, or that all three “tops” will occur at the end of every bull market. But when two of the three appear to be in place Schannep takes it as a warning sign to be on alert. Unfortunately he does not have an “Irrational Exuberance” Indicator that would pinpoint market tops, better Schannep would hope than Chairman Greenspan’s effort at 6,437.10 in December, 1996 three years before the market’s top at 11,722.98 in January, 2000. Schannep, who deals in Spiders (AMEX: SPY) and Diamonds (AMEX: DIA), DOES have a “Capitulation” Indicator that DOES pinpoint market bottoms, but there is no inverse to capitulation at tops, so we have to zero in on other indicators that have worked in the past. Historically, in terms of gain, this bull market failed to get out of the 1st quartile, up only 50%, whereas half of all bull markets have risen over 75%. This bull market has reached the 3rd quartile in terms of longevity being in the 2 year to 4 year length. It would seem to imply that the 2002-5 (?) bull market could either proceed further, or… the March 3rd high of 10,940.55 could be “it”. Schannep expects his indicators will tell us which before it gets too far along in either direction. This article highlights the commentary of Jack Schannep for the Zacks.com audience. Jack Schannep provides insightful analysis, market commentary, and favorite recommendations on a timely basis in "Schannep Timing Indicator & theDowTheory" newsletter. Try it free for 30 days and see if you can improve your investment performance. Learn more about "Schannep Timing Indicator & theDowTheory" and 30-Day Free Trial. And get immediate access to current issues and special reports. Click here now. --> Here’s How You Can Profit from the Pros Find out what other leading experts are saying about the market. And what stocks they are recommending. For free. Just sign up for our free email newsletter, Profit from the Pros, where we’ll give you the commentary, advice, and insight from those rare few experts who consistently beat the market year in, year out. Click here now. Featured Expert Archives

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