Mutual Funds

Our previous forecast of January, 1995, for the Dow Jones Average (which was at 4000) to reach a Dow 5000 provided an aggressive long position for mutual fund investors.

We also recommended using a 5% trailing-stop strategy, which kept us fully invested until May, 1996.

We then forecast a sideways market during the 3-month cycle (May- June-July, 1996), with corrective lows expected during this cycle. The lows did occur in July, and in our August 2nd newsletter we recommended "buying the market with a stop-loss at the July lows." As forecast, the market did work higher. In our November, 1996 and our January, 1997 newsletters we continued to forecast even higher prices until mid-February, 1997.

In both our January and February 1997 newsletters we forecast a major top to occur mid-February, ideally on February 14, 1997. We recommended taking profits on all mutual funds and all stock positions on February 14th. Since that date we have been standing aside.

Those who followed our recommendations took profits within 1 trading day before the February high on the S&P 500. Since the February 14th sell recommendation, the S&P 500 has dropped 10% into our April 11th high energy/turning point date, which turned out to be the closing lows before the powerful recovery rally.

In our March and April 1997 newsletters we continued to recommend for intermediate-term and long-term investors to stand aside. We stated that the 10% correction was the first we have had in years, and that buyers could again enter the market if the April lows were not taken out.

We had expected a retest or wash-out lows to occur in early May. However, our April 11th high energy turning point date ended up being the low.

While the market continues to make marginally higher highs, we have not provided another long-term buy signal. While we missed the 4% rally above the February highs, we did avoid the 10% correction. We are now entering a 3-month cycle (June-July-August), which often provides sideways to negative action, thus, we believe that the market can be bought at lower levels during these next three months. Therefore, we will continue to hold off giving another long-term buy signal.

Turning Point Dates And Short-Term Trading Strategy

The best turning point dates or high energy dates for short-term traders occur on June 10th, 17th, 20th, 27th; July 11th, and July 21st.

Ideally, June 10th will be a turning point low, as we have positive Harmonics occurring on the 12th and 13th.

The following week could also be positive if the CPI report on the 17th is not inflationary. Expect something unusual regarding this report, which should generate a strong directional high energy move in the S&P and the Dow Jones on this date. The trend should continue into the option expiration date of June 20th, ideal for trading the leveraged June options. Since an increase in volatility is expected, option traders can use various strategies to profit on this increase in volatility by being positioned on June 16th.

With the full moon on Friday the 20th, and the Summer Solstice early Saturday, a significant change in trend would normally be expected to start on June 20th.

However, the following week portends to be very volatile and/or a strong continuation move into June 27th. Thus, either June 20th, or June 27th should time a significant change in trend, probably a market high.

From June 30th to July 3rd we have negative harmonics, thus, the positive pre-holiday seasonality may not occur this week. Thus, we don't expect much to happen unless the FOMC meeting scheduled for July 2nd generates an unexpected announcement regarding interest rates.

From July 7th to July 11th our indicators are mixed. However, July 11th should generate a high energy move, or it may be a turning point date. This sets the stage for a strong directional move going into the option expiration date of July 18th, which is the next turning point date. More on this time-frame in our next newsletter.

June 4, 1997
Market Systems Newsletter
4433 Moorpark Way,
Toluca Lake, California

Relocated 06-13-97
Last updated on 06-13-97

Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com

wmeubank@ocp.kcmo.com