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Oct 2, 2006 - Issue #026

Deal or No Deal?

Dow score card for the week ending 9/29/06.

DJ-30: 11679.07 +170.97 +1.49%.

UP: 27 (+13), Down: 3 (-13).

Trends (weekly): This is the subjective part.

Rising 18 (+3):

AIG, +*AXP, DIS, +*GE, +*GM, HON, HPQ, INTC, JNJ, JPM, KO, MCD, (?)MO, +*MRK, PFE, +*PG, T, VZ.

Consolidating 9 (-3):

C, +*CAT, DD, HD, -*IBM, MMM, UTX, -*WMT, XOM.

Declining 3 (nc):


* denotes change of category.

+/- denotes change of direction.

First, a comment on (?)MO above.

The stock fell 5.77 points (-7.01%), the biggest decline of all the Dow components. So why is it still in the rising trend category?

The answer: The range between the most recent "significant" high and low is unusually wide currently and it is still above the low point. I'm considering the current price action a "pull-back" within this large range. Allowing the stock to "tell its' own story", as new significant price points reveal themselves, the classification will change accordingly.

On the daily chart, MO is in a declining trend. On the weekly chart, it's a pull-back within a rising trend (still a higher high and higher low) of a large range.

As all eyes are transfixed on the Dow, the burning question has to be: Deal or No Deal?

The answer: Does it really matter? And why or why not?

I say the only thing that matters is: Are you winning or losing?

The Dow-Jones Industrial Average is a smoke screen for what's really going on. Examine the individual components for divergences for clues to indicate where the action is heading.

When an interesting situation reveals itself, examine its' industry group to determine whether it is stock-specific or industry wide. You might discover an even more interesting situation. Your objective is to keep your capital positioned in the most promising candidates, long or short, that you can find regardless of the averages (See Market Timing/ Trade Selection).

One component to keenly observe: GM.

Is GM going to partner up with Rennault/Nissan?

Market commentators are warming up to GM, now that it's up 70%+ since June. The big money/ smart money (read Kirk Kerkorian) has indicated he "may" increase his holdings up to 9.9%.

I have the utmost respect for Mr. Kerkorian. His prowess as an astute businessman/investor is unequalled. Does such an experienced man-of-affairs "telegraph" his intentions? Did he tell all the world it was he that was buying when everyone else was selling? I must have missed that. What I'm saying is: Watch for signs of liquidation. Review Market Psychology/ Contrary Opinion and check out the MarketClub "Big Footsteps" video.

DELL: Did you notice the big upsurge in volume and price action? It not only put in a significant uptrend on the daily chart it also penetrated the downward resistance trend line on the weekly chart. Not much news. Time to buy?

Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!

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