______________________________________________________________________________

Issue No. 30 – June13, 2005 Prescott, Arizona Systems@WiserTrader.com

______________________________________________________________________________

1.0 Trading

      The previous rise in the price of gold was attributed to a decline in the US dollar versus other currencies.  Last week, and over the last 30 days, gold prices increased for all five of the major US trading partner currencies tracked in this newsletter.  Take a small position and mind your stops.

1.1 Market View

      The celebrated mystery of the failure of interest rates to rise has been explained in terms of foreign private investors finding higher rates in US treasuries than they can find at home.  Also, central Asian and European bankers see US treasuries as a better investment than anywhere else.  Gold does not pay interest.  Prospects for the Euro zone to get its economic act together have been pushed much farther into the future. 

      The net effect of lower long term rates is to add further liquidity to the economy, giving real estate an extended boost by keeping the cost of mortgage financing low.  Sporadic regional bubbles are now recognized as a reality by the Federal Reserve who remains hesitant to call it a national bubble.  The Fed does not see lower long term rates as a predictor of a weakening economy.

      The seesaw interplay between energy and economic growth continues.  As we move into the summer doldrums, the market drifts lower.  The market historically moves sideways to lower from April to September.  June is historically the second worst month compared to September.  We approach warning season once again.   For the past two weeks small caps have outperformed the rest of the market.   The recent rise in technology is dissipating beginning with biotechnology.  Semiconductors remain steady for now.  But the NASDAQ never goes far without both.  The recent decline in transportation rules out a confirmation for a rise in the DOW.  As long as banking migrates lower, little rise in the S&P500 can be expected.  Sideways to lower movement can be expected in the near term for the major averages.

© 2005 Desert Mountain Systems, LLC. Members of wisertrader.com are neither licensed brokers nor licensed advisors.   Trades discussed represent recommendations made by the editor for the wisertrader.com portfolio.  The newsletter and web site are for information only and should not be considered as personal advice.   While it is believed that the posted information is factual, mistakes can be made in transcription.  Investors should trade stocks only after verifying all information and consulting with a licensed broker or adviser.  Desert Mountain Systems markets third party trading systems but has no other affiliation with trading system companies.

2.0 Market Analysis

      The action this past week was fairly tame.  Positive comments by Greenspan, Texas Instruments and Intel were considered to be already priced into the market.  Earnings warnings may pick up in the next couple of weeks.  That is typically what happens at the end of the calendar quarter.  There are also some big economic reports scheduled next week as well.  PPI is due on Tuesday, and CPI on Wednesday. The core rate on each will be closely watched for inflation trends. A 0.2% gain on each is expected.

      The market may very well continue to languish short term.  There is no strong momentum in either direction.  The S&P 500 index has stabilized in recent weeks, but remains down 1% for the year. 

      Industry leaders in Table 2A rank from highest to lowest.   Relative strength is given in Table 2B and VTO market sentiment in Table 2C.

Table 2A - Market Summary

 Major Indices:
 Dow Jones     +0.5%
 NASDAQ        -0.4%
 S&P500 Index  -0.2%
 Russell 2000  +1.0%
 
 30 Year Bond 4.299%
 10 Year Note 4.047%
 
 Industry Leaders
 For the Past Week:
 Automobiles 
 Automobiles & Parts 
 Consumer Electronics 
 Oil Equipment & Services 
 Oil Equipment, Services & Dis 
 Footwear 
 Apparel Retailers 
 Coal 
 Water 
 Tobacco   
 
 Industry Leaders
 For the Past Month:
 Consumer Electronics 
 Internet 
 Mobile Telecommunications 
 Footwear 
 Home Construction 
 Apparel Retailers 
 Hotels 
 Semiconductors 
 Specialized Consumer Services 
 Home Improvement Retailers   
 
 Crude Oil $53.54
 
 Gold for the past 30 days:
 USD     0.00%
 CAD    +0.22%
 CHF    +5.19%
 GBP    +3.28%
 EUR    +5.61%
 JPY    +2.65%

Table 2B

Relative Strength Index

	5 Day RSI	5 Week RSI
DOW	Neutral	Neutral
S&P 500	Neutral	Neutral
NASDAQ	Neutral	Neutral

Table 2C

VTO Report on Market Sentiment Indicators

Sentiment Indicator	Value	Last Week	2 Weeks Ago	Complacent	Cautious
VIX **	11.96	12.15	12.24	< 20	> 50
VXN ***	15.87	15.59	15.00	< 30	> 70
Put/Call Ratio	0.475	0.611	0.574	< 0.6	> 0.7
%Bulls - %Bears	29.7%	22.8%	20.6%	> 29%	< 20%
**   Below 20 day SMA = Buy signal. *** Below 20 day SMA = Buy signal.

      Taking a look from the top down in Table 2D, the major averages continued to pause this week while oil prices rose.  Small caps outpaced large caps, looking at the Russell 2000.

Table 2D

Index Tracking Stocks, Key Industry ETF’s and Sector SPDR’s

	1 month	1 wk ago	2 wks ago	3 wks ago	4 wks ago
SPY (S&P 500)	3.9%	0.0%	-0.1%	0.9%	2.9%
DIA (DOW)	3.4%	0.4%	-0.6%	0.7%	2.9%
QQQQ (NASDAQ)	3.6%	-1.4%	-0.3%	1.5%	3.9%
IWM (Russell 2000)	7.5%	1.1%	0.5%	1.4%	4.3%
GLD, GOLD	1.6%	1.1%	0.7%	0.6%	-0.7%
IYT, Transportation	3.8%	-2.8%	0.3%	0.1%	6.3%
SMH, Semiconductors	5.4%	-0.6%	0.8%	2.0%	3.1%
BBH, Biotechnology	3.7%	-0.6%	-0.3%	2.6%	2.0%
RKH, Banking	1.7%	-0.6%	-0.4%	-0.8%	3.6%
IYR, Real Estate	6.4%	2.3%	1.5%	-2.1%	4.7%
OIH, Oil	15.5%	4.1%	2.2%	6.1%	2.4%
XLE, Energy	12.5%	2.4%	1.5%	5.9%	2.2%
XLB, Materials	4.1%	0.1%	0.2%	0.5%	3.3%
XLU, Utilities	5.3%	0.8%	1.5%	0.6%	2.4%
XLI, Industrial	3.4%	-0.2%	-0.4%	0.2%	3.7%
XLK, Technology	4.2%	-0.4%	-0.3%	1.4%	3.5%
XLV, Healthcare	0.1%	-0.4%	-0.4%	-0.3%	1.3%
XLF, Financials	4.0%	0.2%	-0.2%	0.3%	3.6%
XLP, Consumer Staples	2.3%	0.1%	-0.2%	-0.6%	2.9%
XLY, Consumer Discretionary	5.5%	0.3%	-0.2%	0.7%	4.6%

      Figure 1 compares index tracking stocks for the major averages with Sector SPDR’s. With the exception of energy, all sectors remained flat for the past 2 weeks.

      Figure 2 compares index tracking stocks with key industry ETF’s and the five leading ETF’s for the week.  Key industry ETF’s are Biotech and Semiconductors which confirm the NASDAQ.  Transportation confirms the Dow Jones Industrial Average according to Dow Theory.   Banking and Financials are confirming indicators for the S&P 500.  Gold and Real Estate are important indicators of the health of the currency and the economy in general, respectively.

      Leading ETF’s were Oil, energy and real estate.  The five worst performing were BDH Broadband HOLDRs Tr Dep Receip (-2.2%), HHH Internet HOLDRs Trust (-2.6%), IYT iShares Dow Jones Transportation (2.8%), IIH Internet InfrastructHOLDR's (-3.1%) and EWZ iShares MSCI-Brazil (-5.3%).

FIGURE 1

FIGURE 2

3.0 Procedure

      The following watch lists contain stock candidates for consideration.  They are not necessarily recommended trades.  The “Reference” is the date that a stock passed the indicated filter and was added to or returned to the list.  The “% Change” is how the price has changed since a stock first passed the filter.  Stocks that are down 10% or more after being listed are removed. 

      The “% from Max” is the percentage the price has declined from the maximum price reached after a stock first passed the filter.  Stocks that are down 8% from their highs after being listed are flagged in yellow.  Stocks that are down 15% from their highs after being listed are removed.  More information on filters is available on the web site.  Send an email if you need more details.

Key

Passed Recent Filter & Optionable

      Companies that have experienced net insider buying within the past 6 months of 5% or more of issued stock are listed in Table 3A.  These stocks should also appear in one of the Master Trader screens or meet additional screening criteria before being given serious consideration.  AGCC was removed as it declined more than 15% from its high.

Table 3A

Net Insider Buying Check List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max
ACAD	04/29/05	14.1%	ACADIA Pharmaceuticals Inc.	Health Care	Biotechnology & Drugs	-7.0%
AFT	05/20/05	-4.9%	Axesstel, Inc.	Technology	Communications Equipment	-8.7%
ASPV	05/27/05	2.7%	Aspreva Pharmaceuticals Corporation	Health Care	Biotechnology & Drugs	0.0%
FTD	04/08/05	-3.4%	FTD Group, Inc.	Services	Retail (Catalog & Mail Order)	-3.6%
FVRL	04/22/05	3.1%	Favrille, Inc.	Health Care	Biotechnology & Drugs	-4.1%
INHX	04/08/05	-4.5%	Inhibitex, Inc.	Health Care	Biotechnology & Drugs	-9.8%
IPSU	05/20/05	3.5%	Imperial Sugar Company	Consumer Non-Cyclical	Food Processing	-0.4%
IPXLE	04/29/05	5.5%	Impax Laboratories Inc.	Health Care	Biotechnology & Drugs	-0.2%
IRN	05/20/05	-2.3%	Rewards Network Inc.	Services	Business Services	-4.4%
ITMN	04/08/05	7.0%	InterMune, Inc.	Health Care	Biotechnology & Drugs	-5.4%
KIRK	05/27/05	4.7%	Kirkland's, Inc.	Services	Retail (Specialty Non-Apparel)	0.0%
MERCS	05/20/05	-2.5%	Mercer International Inc.	Basic Materials	Paper & Paper Products	-2.5%
MWY	05/20/05	11.1%	Midway Games Inc.	Technology	Software & Programming	0.0%
ONXS	05/20/05	19.4%	Onyx Software Corporation	Technology	Software & Programming	-1.0%
OSHC	04/08/05	4.4%	Ocean Shore Holding Co.	Financial	S&Ls/Savings Banks	-2.3%
TAGS	05/27/05	39.5%	Tarrant Apparel Group	Consumer Cyclical	Apparel/Accessories	-7.2%
THLD	05/06/05	6.5%	Threshold Pharmaceuticals, Inc.	Health Care	Biotechnology & Drugs	-1.8%
TRCA	04/29/05	10.1%	Tercica, Inc.	Health Care	Biotechnology & Drugs	-13.5%
VSTA	05/20/05	12.8%	VistaCare, Inc.	Health Care	Healthcare Facilities	-2.4%
ZHNE	05/06/05	8.9%	Zhone Technologies, Inc.	Technology	Communications Equipment	-6.9%

      Companies with net cash positions that comprise at least 40% of their share price are listed in Table 3B.   These stocks should also appear in one of the Master Trader screens or meet additional screening criteria before being given serious consideration.   ADZA was removed as it declined more than 15% from its high.

Table 3B

Capital Rich Companies Check List

Stock	Reference	% Chg	Company	Sector	Industry	% from Max
ACP	04/08/05	3.0%	American Real Estate Partners, L.P.	Services	Casinos & Gaming