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● The Dow suffers a decline greater than 15% once every 27 months (avg).
● There is only an 11% chance of completing 2006 without a 15% correction.
A 15% decline would take at least 1746 points off of the Dow.
The 5/12/06 issue of Investment Tips proposed that the Dow was "due for a setback".  Here's the evidence
for that opinion.

It has been a long time since the stock market has taken a substantial hit.  Since 1900, the Dow has suffered
a decline greater than 15% once every 27 months (avg). The Dow has now gone 38 months without a 15%
decline. If the Dow can make it to year-end without a 15 % correction, it will have been 44 months. It is rare
for more than 44 months to pass without a 15% decline in the DJIA.

There have been 46 declines of 15% or more since 1900. Only
5 of 46 times was the Dow able to rise for a
longer period than 44 months before encountering a decline of 15% or more. Therefore, the odds of getting
through 2006 without such a correction are only 11% (5/46).
Current Analysis:
On 5/10/06, the Dow closed at a six year high of 11,642. The steep losses that have occurred since that high
may be the beginning of the expected decline. If so, then the market will continue to fall until it has lost at least
1,746 points (11,642 x 15%). That decline will take the Dow down to 9,896 or lower before rising above
11,642 again. On the other hand, the market may turn up and rise above 11,642 before having recorded a
15% decline. In that case, a 15% decline is likely to occur from that new high (and occur before year end).

So, a four digit Dow is a realistic possibility in 2006. The 15% decline could be brief... merely a correction in
a continuing bull market. It also could be the beginning of a bear market with deeper declines to come.
How can I use this information?
1) Don't add new funds to the market until the Dow sustains a decline of 15% or more.
2) Be financially and emotionally prepared for some turbulence.  SignalTrend's unemotional computer timing
system is still bullish but may change its buy / sell signal in the near future. If that happens, SignalTrend will
send you an email alert. Be sure to check your email on Saturdays. Remember, SignalTrend's stock market
timing system was backtested 100 years with excellent results!
In the next issue of Investment Tips:
Which index had the best 20 year performance, the Dow, S&P 500 or the NASDAQ? SignalTrend will show
you the 20 year record.
Look below to send us feedback or to see previous issues of Investment Tips.
Link to Previous Issue of Investment Tips
Can This Bull Market Continue?
Rising interest rates can really hurt stock returns!
Click the above link to see the 90 year record.
Stocks are due for a setback
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