Recent Activity and Volatility

Volatility continues at an elevated level. This is always the case during major changes in market direction. Even though it is expected, the volatility this time has surpassed even our most exaggerated expectations. It is truly mind-boggling!

Volatility can, and is presently confusing both the bulls and the bears. Some who are still bullish, view negative days as a buying opportunity. Those that are bearish, view positive days as an opportunity to sell before the market drops any further.

The changes to underlying factors are seen well in advance and taken into account by the Model. And this is the only reliable manner in which we may actually predict market direction. The underlying economic factors in the market always overtake the “noise of news events of the day in the end”. In fact the news is practically always the opposite of the facts when it comes to the market. To react to “news events” is to court disaster. Using only technical work is often wrong at major market turning points also.

"In his book Love Against Hate, Dr. Carl Menninger states 'The most difficult task for human beings is to raise children and to trade the markets.' Dr Menninger wrote these words in 1934 - little did he know how true this statement was. ...Your 'critical mass' message is one of the best things that can happen to a trader ...In short (after a long letter) I would like to thank you for a very valuable service ...
·G Feuer Queens, NY Feb, 2000

In Jim’s April 2000 update to our clients he made two observations on the subject of inflation. His ongoing calculations had been showing that inflation was more a problem than most believed and was a real danger to the markets. Two of the key gauges that measure inflation are the Consumer Price Index (CPI) and Producer Price Index (PPI). When these numbers were presented by government agencies they were seasonally adjusted and reported a month-to month reading that made the headlines in the media. However Jims’ calculations were correctly done on a year-over-year basis, which is less prone to error and gives a truer picture of the inflationary climate. Real inflation when calculated and presented properly has been running at a rate of close to 4% annually. In October 2000, the government released a statement that the CPI figures had been “botched” and the CPI number was actually much higher that they had previously been reporting, which of course is what Jim had been saying for months.

Past Performance Does Not Guarantee Future Results

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