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The Major Trend Index is still positive but giving ground rapidly, and our Early Warning work still indicates a 7%-10% correction should begin soon. Perhaps after an early October rally. Longer-term we remain convinced by a still positive trend. Short to intermediate term we continue cautious and defensive.

A large trading range has developed which is likely to be unbroken for a while. Tactically, we would continue to use the 10.20%-10.40% zone (long T-bonds) for profit taking.

Examining five of our Early Warning inflation analytical tools, we currently find little if any indications of an inflation resurgence. In a strong economy, inflation could run to 7% next year, but the serious inflation danger lies down the road.

The Major Trend Index still looks bullishly healthy, but our Early Warning work indicates a 7%-10% correction might be expected soon. Perhaps after a September rally.

For a number of months this publication has been discussing the possibility of a crisis in dollar confidence on an international basis. It appears the risks of a waterfall panic dollar decline are again increasing. Widespread currency speculation combined with growing foreign holdings of dollars and Treasury securities are increasing dollar vulnerability.

The cyclical bull market may still live, but the best of the move is behind us. 9% T-bond yields may be realized in the next year or so, but in coming months not much upside action is expected from current levels.

New Jersey’s recent legislation requiring state pension fund divestiture of South African connected stocks may be a landmark. We have compiled a list of 73 stocks that may well be the primary targets for additional divestiture selling by other funds, our Divestiture Hit List.

Prudent investors should include gold in their long-term portfolio asset mix considerations. Most don’t, but they should. However, our intermediate term outlook for the price of gold is not all that optimistic. Nevertheless, we think the aggressive investor is currently being presented with an attractive capital gains opportunity in South African gold shares.

The budget compromise was hardly satisfactory, but still far better than nothing. While the world currency markets are still fragile, from a psychological standpoint the dollar seems significantly less vulnerable today than last month or last week. We can sleep a little more soundly for a while.

There have been a number of requests for more information on companies doing business with and investing in South Africa. We have spent considerable time over the past month on this investment morality play. Public pension funds are under increasing pressure, but I am coming to believe the ultimate course will be a boycott against buying offending companies, not divestiture.

The Major Trend Index continues to look bullishly healthy and, shorter-term, more upside is expected this summer. The Early Warning work remains positive.

The cyclical bull market still lives, but the best of the move is behind us. 9% T-bond yields may be realized in the next year or so, but shorter-term not much upside action is expected from current levels with a 10.40%-11.40% range expected to prevail for a few months.

South African Divestiture: The campaign against investing in companies doing business with South Africa is rapidly building momentum…TV Tulips: Recent prices paid for commercial TV properties may be tulip bulb prices… Will It Take a Crisis?: I am just about convinced that only a crisis can bring meaningful fiscal reform.

It didn’t seem like much, but June turned out to be all right. Net gains for the averages were in the 1-2% range, but our model gained close to 3%. Annualized, that’s not bad.

Drug stocks and Regional Banks helped us to a 21% gain in the first half of 1985, but are now being reduced. In the last half, our major bets are on technology, and selected cash cows, with perhaps a boost from consumer glamour growth stocks. Some consideration is also being given to an S&L play.

Jim Floyd has just completed a quarterly update on four stock selection screens. Some clients find this to be the most valuable work in our publications. Herein, you will find the new additions and deletions for our Undervalued & Unloved, Consumer High Growth, Growth Bargain Basket and Bank Double Plays.

The cyclical bull market still lives, but the best of the move is behind us. 9% T-bond yields should be realized in the next year or so, but shorter term not much upside action is expected from current levels. Actually, a correction seems more likely, maybe to 11.3%-11.5%.

May was a surprisingly good month. After flashing an intermediate term caution warning in March, the Early Warning work moved back to the positive side May 13. The Major Trend Index improved this month and I think stocks could move up further than most think.

While blue chip growth stocks look cheap relative to low P/E stocks, they don’t look so cheap compared to recent earnings growth rates.

A large and fast-growing amount of money is now flowing back and forth between money market funds and equity mutual funds. Billions of dollars are now involved each month. Are these timers right? The evidence is mixed. We do know these waves of cash are making things increasingly difficult for mutual fund portfolio managers.