September 06 Market Timing Update

My Guru  says that we are in the middle of a text book midyear off-presidential election market correction.
There have been 15 buying opportunities below S&P  1250

In the absence of any further market weakness, dollar cost average into the market.

He expects to see substantial additional gains which should carry the
market to new recovery highs in the mid 1300's for the S&P.


Economic Cycle 

    GDP in a range of 2.5% - 3.5% going forward.
    The first quarter had an annualized growth rate of 5.6% - post Katrina recovery activity.
    The first quarter had an annualized growth rate of 2.9% - consumer spending pressured by high oil prices.
    
Monetary Policy

    Expects the fed to hold short term interest rates at 5.25%
    Further economic weakness may cause the fed to reduce rates.

Reasons for avoiding any further short term rate hikes:

    1)  Economic slowdown in the second quarter to only 2.9%
    2)  Sharp declines in new and existing home sales with declining YOY price trends adjusted for inflation.
    3)  Pain at the pump, curtailing other consumer spending.

Inflation

    Inflation rates of 2.5 - 3 %  despite the fact that interest rates have risen over 20%.
    Expects bond investors to earn their coupon in a relatively benign bond market.
   
Sentiment

    The contrary indicator, the 60-Day Put/Call ratio is at extraordinarily high readings.
    These high readings should contain the stock market bottom at levels we have already seen this year.

Summary

  Although he has no reason to exclude gains beyond S&P 1350 - 1400 in late 2007, it would be premature
  to speculate out that far.
 
  Remain fully invested in the market, buying on weakness below S&P 1250.
  Expects to see gains  within S&P 1350-1400 in the last quarter 2006 and mid 2007.  

Other

    No portfolio changes were called for.  My Guru is still a happy camper