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Year End Technical Thoughts


The Morning Cup of Jo...


"America, in the eyes of the world, typifies above all else this quality of INITIATIVE. The greatest successes are nearly all the fruit of initiative. Why do we hold in such high esteem the achievements of the Wright Brothers? Because they were illustrious examples of initiative and tenacity. And ideas are born of initiative, the children of men and women of initiative. Advancement is applied initiative. Don't imitate. Initiate"

(B. C. Forbes)

Key Points:

  • The S&P continues to test intermediate term resistance at 1270
  • Monday's action confirmed a stochastic divergence adding additional evidence the market could continue its malaise
  • Volume should be light into year end which could induce increased volatility
  • Tuttle Asset Management prepares for key initiatives ahead of 2006

Good Morning and salutations from the last 'Jo' of 2005 - which by coincidence is our 100th penned issue and contains an extraordinary grand announcement. As some may remember, the first issue of "The Morning Cup of Jo" came out on February 25th, 2002 - three days after my son Dellinger's 2nd birthday. It's hard to believe it's nearly been 4-years. Much has changed since those days (apart from the price of the market). In the beginning of that year (2002) the markets' valuation looked like this:

  • Dow Jones Industrial Average (DJIA) ~ 10,700
  • Standard & Poor's 500 (SPX) ~ 1,175
  • NASDAQ Composite (COMP) ~ 2,100

Assuming the markets close 2005 relatively close to where they are today here are the approximate returns the markets provided over the last 3 years (excluding the effect of dividends, taxes and inflation).

  • Dow Jones Industrial Average (DJIA) ~ 10,800
  • Standard & Poor's 500 (SPX) ~ 1,250
  • NASDAQ (COMP) ~ 2,200

Total / Annualized Returns

  • Dow Jones Industrial Average (DJIA) ~ 0.93% / 0.31%
  • Standard & Poor's 500 (SPX) ~ 6.38% / 2.08%
  • NASDAQ Composite (COMP) ~ 4.76% / 1.56%

Shocked? Don't be. Considering the market was coming off the worst market debacle since the great depression it was to be expected. Conversely, I'm actually more concerned about the markets' current technical condition. As we've been discussing in the last few 'Jo's, the SPX has been bangin' against its intermediate-term resistance trend like a screen door during a hurricane. So, again we wonder if Santa has put the sleigh back in the barn and whether all the presents have been delivered to Broad & Wall? As we've always said, "A trend continues to be valid until broken."

An important note to point out before our all-important announcement for 2006 - not only would something drastic have to change, technically and fundamentally, for the markets to push through this trend, but we have also just been given one more piece to the puzzle. Monday's market action gave us continued collaboration for our downward weight of evidence - a confirmed stochastic divergence.

As history tells us - starting on Thursday afternoon the markets will start to see declining volume throughout the remainder of the year. This could lead to a greater increase in market volatility as large institutions do some year-end window dressing. Hence, careful where you step - the road is paved with ice!

Until next year!!


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No positions in stocks mentioned.

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