The big news of the week, President Bush's economic stimulus package wasn't all that much of a surprise, as it contained many widely anticipated items. Upon it's official release President Bush basically confirmed what was already anticipate by the market.

In last week's newsletter I discussed the effect that regulations had on the market. During the week, comments by Michael Powell, Chairman of the Federal Communications Commission, regarding regulatory changes in the way the Baby Bells are allowed to charge for access to their networks caused strong moves in the telecom sector.

The Market:

The Dow Jones Industrial Average closed Friday at 8,784.89 up 8.71 points. On Monday of last week the Dow reached our initial target of 8,771.01 and encountered resistance as expected. The good news is that the market did not turn lower and retest previous support levels. Currently this week I am expecting the Dow Jones Industrial Average to continue to move higher and test 8,931.68

The S&P 500 closed Friday at 927.57 unchanged on the day. By the end of the week the S&P 500 had reached our initial target of 923.76 I am now expecting the S&P 500 to move higher and test 938.87 If the S&P 500 closes above that level our next upside target will be 962.70

The NASDAQ 100 (NDX) closed Friday 1,087.36 up 11.31 points. Last week the NDX moved through both of our near term upside targets. The trend of the NDX continues to be higher. Our current upside target on the NDX is 1,127.06 If the NDX closes above that level, then our next upside target is 1,149.91 In looking at the chart of the NDX it does appear that there is the potential for the index to move above the 1,300 level. However, NDX gapped lower on April 22, 2002 The "Rule of Thumb" is that a stock or index will always return and "fill the gap". My concern is that the NDX will move to 1,385.01 the point from which it gapped lower, and then turn back lower again.

Also a note of caution on the overall market. We've seen a pretty good rally to start the year, and we may be in for a round of profit taking in the near future.

Trends:

I have noticed over the years that people like to focus on trends. The very vast majority of time they believe that the longer a trend or streak goes on, the more sure it is to continue. This is wrong, and violates statistical probability.

The longer a trend or streak is in place, the greater the odds are that it will come to an end. It works the same for the stock market, hitting streaks, and winning streaks in Las Vegas.

It is this understanding that allows one to have the conviction and courage to buy stocks when they are at a low, and the willingness to sell them when they are trading at new highs.

The Lottery:

When the lottery was won over the Christmas Holiday for that outrageous amount I was in Denver and made the comment to my sister and father that I thought the structure of the the Lotto games needed to be changed. The game itself is basically flawed, the odds are so stacked against the players that it is almost impossible to win. So as a result the states have grouped together in an attempt to get enough players to produce a winner. Even this doesn't work as it should, because there are occurrence where a winner is not produced in one drawing cycle, so the jackpot grows, and the game starts all over again. This produces a single winner of an incredible amount of money.

My thoughts are that it is far better for everyone involved that the Lotto games are adjusted to increase the odds of winning, and therefore produce more winners with smaller jackpots. I simply believe that it is better economically and socially to produce more Lotto winners who will spend and invest the winnings, than to concentrate the winnings into the hands of a single individual

Next Week: Bonds & Interest Rates

A couple of months ago I was speaking to a friend of mine who owns his own business here in Atlanta. He said he was unhappy with the stock market and had shifted into bond mutual funds. When I mentioned that bonds would decline in value when interest rates go back up, he didn't grasp the relationship between interest rates and bonds. Next week I'll discuss this in much greater detail. Something every investor in a bond fund should read!

If you would like to be permanently removed from our databases, please simply click on the link Simply click here to be removed from our database. and we will make every attempt remove your name from our database.