Memorial Day

Memorial Day

I hope everyone in America has enjoyed and honored the Memorial Day
celebration.

This week, the market will be focused the upcoming Fed meeting. The
Fed is expected raise rates at least a quarter of a point. I have
said before, the Fed is always behind the curve when raising rates or
lowering them. They have excluded food and energy from their
calculations forecasting inflation. Since oil hit it's high of
$42.00, causing high gasoline prices for everyone. If you have done
any traveling over the last two weeks, you know how sticker shock has
affected your buying and driving habits. The U.S. economy is 100%
dependant on transportation industry. The real effects of inflation
will be felt next month when suppliers begin paying shipping fuel sir
charges. The cost of the transporting goods from California to the
mid-west has doubled in price on commodities. I expect inflation to
sweep through California's economy and move eastward across the U.S.
Meanwhile, Opec is trying to relieve fears of the 73' gas shortages,
but the sad fact is that over the last 20 years there are no new oil
refineries being built. If we could import all the oil we need, we
still cannot refine enough of it to lower prices. I am sure that
once some of the refineries begin producing heating oil in the fall,
we will see a big spike in prices again. Just in time for the
presidential election, along with the Fed raising rates, trying to
control inflation, but exacerbating inflation even more. The
cheerleaders are talking about how great the economy is; however,
they have always said that the market is a predictor of the economy 6-
9 months out. The market is declining after failing to make any new
highs and is predicting a slowing economy 6-9 months in the future.
For traders, there will be many opportunities to make money, only if
trading volume stays consistent. For long-term investors, they may
be watching paper profits disappearing once again. The next
quarter failed earnings report will be blamed on inflation and the
Fed for raising rates. The presidential cycle predicts next year to
be one of the worse for the current president if he wins the
election. Expect mixed signals over the summer months of trading,
while long-term investors have ignoring the market signals over the
last 5 years. Reality may begin to reach long-term investors as the
housing market begins to slow down with rising interest rates and
higher mortgage defaults. The housing bubble has been very
difficult to call, since the capital gains rules have change on
homes. If you live in home 2 out 5 years, all capital gains are not
taxed, and this has fueled many be first time homebuyers, all hoping
to make 50-100% increases when they sell their first home. As with
all bubbles, things appear normal, until mounting pressure causes a
panic. The baby boomers will have the most to loose, and will have
the greatest impact on the housing bubble collapsing prices. If you
have all your eggs in two baskets, the housing market and the stock
market, loosing both could be catastrophic, leading to more
government spending and bailouts. The government is deficit
spending, expecting the economy to rebound like in the 80's, not like
the 70's. The similarities now and the 70's are shockingly the same
with the economy, deficits, inflation, and geo-political events.
History does repeat its self and we have unfortunately have not learn
the lessons that she is trying to teach.


If this post sounds too negative, it is better to be prepared for the
worse, and hope for the best. If you are prepared for the worse, you
may be able to preserve or create more wealth while most are loosing
theirs.

I have posted some charts in a zip folder for you to look at, showing
my signal lines and how the market trades on a daily pattern,
mimicking the intra day patterns. The more you see the signal lines
work, the easier it will be for you to trade with them.


Thanks

God Bless All

Doc