Almanac Investor Alert 10/13/5

Almanac Investor Alert: Weekly Update - 10/13/2005
*** Batten Down the Hatches ***

Weekly Changes
DOW 10216.59 -70.51 -0.69%
S&P500 1176.84 -14.65 -1.23%
NASDAQ 2047.22 -36.86 -1.77%

The foul weather in the northeast is nothing compared to the storm brewing on the street. In the October issue of the Almanac Investor we warned that the markets appeared to be teetering atop a proverbial “Wall of Worry”. Since then the Dow has shed over 300 points while the NASDAQ and S&P have fared far worse. Moreover, a disturbing pattern of late session sell-offs has become commonplace the last two weeks. Teetering no more, the market seems to be fully entrenched in a significant downdraft.

There is no good news to report and recapping the bad is akin to beating a dead horse. Hopefully by now you heeded our advice and have battened down the hatches. Almanac Investors have been warned for months that the troika of Oil, Housing, and Energy will soon impact the CPI and PPI. Months ago we begged the question how far these key metrics lag. Tomorrow we may have an answer to that question when the CPI is released. Consensus estimates are calling for a relatively tame increase of 0.5%. We think that the number (and the PPI released on Tuesday) could be significantly higher causing much pain for those long this market.

And now for the good news! We feel that there will be a good buying opportunity after the impending shake-out that will ensue. The MACD Buy signal is still on hold and will be until the markets settle down and move laterally for awhile. When the Buy signal triggers we will enter the market with our seasonal trades in broad market ETFs. In addition, we will loosen our buy limits across our entire portfolio.

We feel that if this buying situation materializes it will be a short lived run-up. The next major buying opportunity should occur when we log our mid-term election year low. For the time being, we urge caution and prudence with any new buying. There are opportunities to make money on the street during even the most vicious of bears.

Something to Ponder

Speaking of a bear market, according to the parameters advocated by our friends at Ned Davis research, we will not officially be in a bear market until the Dow hits 9518.28 (a 13% decline in the Dow after 145 Calendar days). Makes you wonder how low the mid-term election year bottom will be.


Stock & ETF Updates

Pharmaceutical HOLDRS (PPH) traded below the Buy Limit of 69.00 on 10/6/2005 and has been added to the ETF Portfolio.

iShares D J Healthcare (IYH) traded below the Buy Limit of 60.50 on 10/11/2005 and has been added to the ETF Portfolio.

iShares Semiconductor (IGW) traded below the Buy Limit of 54.58 on 10/12/2005 and has been added to the ETF Portfolio.

STANDARD TRADING GUIDELINES!


BUY LIMITS ARE GOOD TILL CANCELLED.
ALL STOPS EFFECTIVE ONLY WHEN THE STOCK CLOSES BELOW THE STOP PRICE.
ALWAYS SELL HALF ON A DOUBLE.

Please trade carefully.
Those who study market history are bound to profit from it.

Sincerely,
Jeffrey A. Hirsch, Editor & Publisher
J. Taylor Brown, Vice President
The next issue will be available after the close on October 20th, 2005.