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HAVING TROUBLE PRINTING?
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Will The "January Effect" Affect 2005?

Stocks drifted lower again Friday, despite favorable earnings
from Microsoft (NASDAQ:MSFT) and news of a mega-merger
between blue-chip stalwarts Procter & Gamble (NYSE:PG) and
Gillette (NYSE:G). The Dow Jones industrial average fell 40
points to 10,427, while the NASDAQ lost 11 points to 2,035,
and the broader Standard & Poor's 500 index slid 3 points to
1,171. Concerns over the upcoming election in Iraq, as well
as weak GDP numbers, were the major catalysts for today's
selling pressure. The upcoming Federal Reserve meeting
(Tues/Wed) and the monthly jobs report (Friday) also weighed
heavily on investors.

In spite of the bearish activity, the major equity averages ended
the week higher, however the recent selling pressure has left
little hope for a positive resolution to the "January Effect." As
most investors know, the month of January is generally favorable
for share values as new cash pours into equity-based retirement
plans and mutual funds. But this year has seen far less capital
devoted to stocks and the result has been a sharp decline in the
popular market indices. Worries about mediocre earnings growth,
higher interest rates, and inflation, not to mention the tenuous
geopolitical situation in the Middle East, have simply conspired
to keep buyers on the sidelines.

Considering the historical implications of the January barometer,
what can we reasonably expect in the coming months? Jeffrey
Hirsch, editor of the Stock Trader's Almanac, says that every down
January on the S&P since 1950 preceded a new or extended bear
market or a flat market. In addition, year-over-year profits for the
S&P 500 are expected to decline substantially and economic growth
may have already begun to wane based on data suggesting the last
quarter of 2004 was the most sluggish since the beginning of 2003.

Obviously, these statistics don't bode well for share values in the
near-term, so the positions in the OW portfolio will remain very
conservative with a primary focus on high-quality stocks and issues
with compelling chart patterns (technical strength and momentum).
In addition, we will continue to recommend aggressive position
management, closing or adjusting unfavorable plays early to limit
capital draw-downs and prevent catastrophic losses. In this manner,
we should be able to negotiate the current market cycle with minimal
difficulty and reduce the negative affects of any future bearish trends
on our portfolio.

Trade Wisely!


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