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[TTHQ Staff]

Todd Market Forecast Stock Market Update for the close on Friday 08/05/05

www.toddmarketforecast.com

Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.

DOW - 52 on 1800 net declines
NASDAQ COMP. - 13 on 1000 net declines
STOCK MARKET ANALYSIS:

When analyzing the stock market, I try to maintain a detached coolness, but there are times when the sheer stupidity of it all is just infuriating. On Friday, we find that more people than expected have jobs and even more horrifying, their average wage rose slightly. The elites of Wall Street don't like it when the folks on Main Street experience a bit of prosperity. Never mind that more jobs and higher wages mean more buying and better corporate profits.

The theory is that good economic times cause inflation and the Fed will have to raise rates to stop it. This is plain rubbish and I can prove it to anyone who will listen. Past periods when the economy was good also had low inflation. Look at the 1920s, the 1950s and the 1990s. On the other hand, periods of weakness had severe inflation. Look at the 1970s for example. And even if they are correct, which they are not, raising rates makes inflation worse, not better, by increasing the cost of doing business. Raising rates also tends to lead to a recession.

Back in the 1950s, doctors told heart patients to be very sedentary and to even stay in bed, but they learned since then that it is better to exercise and be physically active. The medical profession learned from its errors and changed, but the economic "profession" still clings to the same old tired theories that have made them so wrong for decades.

Now that I've gotten that off my chest, the market looks to be reaching a short term bottom and Monday will probably be an up day. During the 1990s, a strong employment report would frequently cause a sharp down move, sometimes as much as 30 S&P points, but it was normally a one day phenomenon and the market would then come to its senses. We might also add that the put call ratio is currently very high and that should be a positive going forward.


NEWS AND FUNDAMENTALS:

The non farm payrolls number for July came in at 206k. The expectation was for a rise of 180k. June's number was revised upward to 166k from 146k. Hourly earnings rose 0.4%. The expectation was for a rise of 0.2%.

On the stock front, Goodyear, Pixar and Unova reported better than expected earnings and rose 6%, 9% and 13%. Asyst Technology had a smaller than expected loss and gained 6%.

On the negative side, Midway Games, Univision and Washington Post came up short on earnings and lost 2%, 8% and 7%. Plato Learning warned and sank 13% and Network Appliances guided lower and gave up 4%.


BOTTOM LINE:

Our S&P and NASDAQ intermediate term systems are back on a buy signal as of the close on April 21, 2005. Mutual fund investors are 100% invested in a growth fund or S&P 500 Index fund of their choice.

SPY and QQQQ traders are on the sidelines. On Monday, buy at the opening for both. Place a stop at 121.50 for the SPY and at 38.50 for the QQQQ.

For new subscribers, the QQQQ and SPY are exchange traded funds or Spiders.

The former mimics the Nasdaq 100 and the latter mimics the S&P 500. ---- Additionally, an m.i.t. order means "market if touched" It means that your order becomes a market order if the price is touched.

OTHER MARKETS

We are on a sell signal for bonds since July 21, 2005.

We are on a buy for the Euro and a sell for the dollar since August 3, 2005.

We are on a buy signal for gold as of August 3, 2005.

We remain long term positive on all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.

STEVE TODD

A SHORT BIOGRAPHY


Editor and publisher of the Todd Market Forecast, a monthly stock market newsletter with an included nightly hotline. Steve Todd has a degree in history with a minor in mathematics. This should be a good combination for stock market analysis.

Steve has published articles on the economy and stock market in the following publications: Barron’s, Stock Market Magazine, Futures Magazine, The National Educator, and others.

His stock market commentary is heard on the following stations: CNBC, Bloomberg, CNNfn, Associated Press Radio, Business Radio Network, CKNW in Vancouver, British Columbia, KFWB, Los Angeles and ROBTV in Toronto, Ontario.

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