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Morning Cup of Jo


Good to hear your thoughts!!


"If you want to earn more - learn more. If you want to get more out of the world you must put more into the world. For, after all, men will get no more out of life than they put into it."

-- William J. H. Boetcker

Market Comment:

Before getting into a technical overview of the market I'd first like to say thanks for all the comments and support over the last year with regard to re-releasing "The Morning Cup of Jo" newsletter. It is deeply humbling to realize how much the newsletter was in demand. Your encouragement provided us with an abundant amount of motivation to pen our thoughts.

In actuality, the last time the 'Jo' was penned in its current format - excluding any Minyanville articles - was back on August 25th 2004. This was just after Hurricane Charlie and just prior to the opening of "The Dellinger Fund." It's hard to believe it was just over a year ago. Time flies, doesn't it?

In any case and as odd as it may seem, new times are calling for a new "potential" market directional shift. Hence, let's not waste any more time bantering and take a look.

First we should look at the intermediate-term (IT) graph (3-year) of the SPX (S&P 500), which in turn will allow us to get a better understanding of what is transpiring in the shorter-term (ST) (1-year). The graph on the following page may look somewhat confusing at first glance. For that reason I'll ask you just bear with me for a moment and follow the color coding. This should help tremendously.

Looking back to the beginning of the graph (September 2002 - May 2003) you'll remember, as much as you don't want too, the bottom of the second worst market debacle in history. You can notice how this bottom formation had a top-line resistance of approximately 960. (Black Horizontal Line) Once the market broke through this level (June 2003) the SPX started its current upward sloping intermediate-trend upward. (Also Black Line)

Before continuing any further discussion about this upward sloping trend-line in place since June of 2003, there are a few important changes that have occurred that we need to cover. First let's turn our attention to the RED arrows. What is pointed out here is a massive IT Stochastic and Volume Divergence. In other words, the market has spent the majority of the last 18-months attempting to attain higher highs - with no avail, which we'll discuss on the ST graph following - while at the same time the accumulation volume (institutional buyers) and upward momentum have decreased. This is the first of many signs the market is showing a high probability of rolling over (changing trend).

There are two more colors to discuss before moving onto the ST graph. First is Blue. Three of the Four last weeks have shown distribution volume (sellers) greater than we've seen in quite some time and it just so happens to coincide with our next color - Green. What does this all mean? Well, lemme put it this way, if the SPX busts this level (the IT upward sloping black support) it could be in for the next dramatic change of trend.

Onto the Short-term (ST) graph...

Once again - stick with looking at the colors separately and you'll follow right along. Over the last year the market has done almost nothing. However, that's not to say it was boring in the least. I would venture to say this has been the longest and most confusing market channel I've seen since the end of 2000. The constant shift in market sectors was enough to give a 300 pound truck driver whiplash. Needless to say, the markets have given us many false positives. One trader I work with put it to me best, "If it looks good technically, to go long or go short, it's too late. It'll shake you out and turn the other way just when you least expect it." This action is indicative of the market forming a top.

Looking at the following graph you will notice a slightly upward sloping ST resistance line above the previous year's highs. (Black) In actuality, if this line was extended back even further it would be more pronounced and coincide with other 2004 highs as well. As you can see, each time the market has approached this level it has failed. Following, in late August the market broke a ST support (Blue), went up in September to retest the Floors & Ceilings (retest of trend break) and has been trending down ever since.

Now, for the Bears in the room, notice the volume over the last week. This is where the rubber meets the road and the SPX must make a stand. Outlined in RED you will see the IT trend - from the previous 3-year graph above - which corresponds to the ST horizontal support at about 1180 (Black). This upward sloping IT trend support has been held over 6-times in the last couple of years Consequently, the longer and more pronounced the support, the more dramatic it is when it breaks.

In all likelihood, with most of the ST momentum indicators being extremely oversold, it is exceedingly possible the market will again attempt to make a stand at this level. However, if and when this IT trend is broken I believe this will change the overall trend to bearish going into and throughout 2006. That being said, this is not to imply the market will head straight down. If 1180 is violated it is highly probable the market will retest the bottom side of the IT trend line in the near future, which should give another opportunity for the longs to get out and reposition themselves for what could be an extremely sloppy and downward trending market. On the other hand if the market holds here and produces a bounce off this level, it's back to the same sloppy trading environment that we've seen throughout 2005.

To sum all this up...

My belief still stands that the probability is for a shift in IT trend - whether it's a break now or after another ST bounce. Whichever transpires in the extremely short term, a longer view of the tape and underlying fundamentals of the economy, in my humble opinion, do not support an advancing market.

Thanks again for the continued support over the last 3 ½ years in reading the 'Jo.' Please remember, I'm always looking for comments, suggestions and questions to assist in your understanding of the markets' technicals. Please feel free to contact me at or through the website

Until next time...


Kevin A. Tuttle
CEO - Tuttle Asset Management
President - Church Street Capital
Certified Portfolio Manager

No positions in stocks mentioned.

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