3.23.07

This was a very interesting week in the market. All five of the major indices were up nicely. The Russell 2000 (R2K) was up +4.36%, the SP500 was up 3.53%, the COMP was up 3.25%, the NDX was up 2.92% and the DOW added 2.86%. As you may recall from last weeks update, we had seen a double bottom combined with a reversal day which is very bullish. As it turned out the market responded as we had thought it would.  We were still in a PPP alert so we only put in a .50 beta. We put on a .25 in the SP500 and a .25 in the NDX. We moved our NDX position into the R2K on Wednesday. We are currently still at a .50 beta but we probably will be removing the PPP on Monday and going to a 1.00 beta.  We of course will send you an e-mail alert if that happens.

            On Wednesday, the volume was so strong that it triggered a rare technical signal that most times is followed by an annualized 22% rise in the SP500 over the next 60 market days. The technical signal is called a “Zweig Double 9-to-1” signal. This occurs when the up volume on the NYSE is equal to or greater than 90% of the total volume for two trading days within a 90 day window. A single 9-1 by itself has no meaning. There was a 9-to-1 that occurred on March 6, and the second came this week on March 21, 2007. Dr. Martin Zwieg is a very famous market tehnician who developed this signal. It was subsequently tested by Professor David Aronson of Baruch College. They used data starting in 1942 thru the fall of 2006. and found that the 60 day periods following a Zweig Double 9-to-1 signal returned an average of 22% annualized when using the SP500 index not including dividends. For all other 60 day periods during that same time frame the annualized.returned in contrast, were only 4.5%. Professor Aronson states that the difference between these two are, “statistically significant”. The last time a Double 9-to-1 was triggered was June 29, 2006. An investor who had bought the SP500 at the close on June 30 and held for 60 trading days would have made 19% annualized, very close to the 22% found going back to 1942.

            Taking into account the “Double Bottom and Reversal Day the previous week and the Double 9-1 volume this week, the market could be setting up for a continuation of the bull run. We may very well use some leverage in the coming weeks. Those of you who are aggressive, now is the time. Dr. Zweig says that every bull market has started in the area of a Double 9-1.

Suggested reading for the above article:

                “Winning on Wall Street”   by Dr Martin Zweig

                “ Evidence-Based Technical Analysis” by Professor David Aronson

                Mark Hulbert, founder Hulbert Financial Digest

Till next week

The MTA Staff

KIP (Knowledge is Power)