13 September 2005 (written 10 Sept)

The Underperforming Wilshire 5000 and the Second 28 day Decay Fractal

While the all-inclusive Wilshire 5000 remains under its 3 August 2005 top,
the Amex and NYSE surged to new multi-yearly highs with characteristic large
minutely exhaustion gaps shortly after the opening on Friday 9 September
2005. Those not cognizant of the technical meaning of exhaustion gaps near
the expected end of an ideal fractal pattern are forced to pay the top over
valuated price under the influence of extreme psychological euphoric
optimism that always accompanies these top valuations.

Interestingly, after the opening hours' exhaustion gaps on Friday,the large
indices from 1200 to the end of the trading day, showed a very flat,
narrow, and characteristic 'saturated' trading range.

The primary equity group that balanced the AMEX and NYSE and prevented the
Wilshire from exceeding its 3 August top was the transports. Not only do the
transports include the dying airlines and junk bond American automobile
manufacturers, they more importantly contain the massive shipping components
that transfer foreign manufactured goods. Transports and foreign
manufactured goods are the two interrelated entities which have provided the
credit boom for the global economy. It is precisely new American debt
purchasing foreign goods that has expanded global credit. Ninety percent of
this new credit has been recycled into US government debt, providing
adequate money supply to maintain low long term US interest rates and
provide ample kindling for the now saturated US housing bubble.

The US consumer is at the break point with respect to the composite elements
of wages, debt service, forwardly consumed items, and daily living expenses
so very dependent on energy prices. Profits in the transport equity indices
are likewise at a critical point as importers attempt to negotiate the best
transport price to eke out some sort of small profit margin in the present
business setting of higher raw material costs and the increasingly
financially squeezed US consumer. Add to this the transports increased
energy cost which are are obviously connected in the transoceanic shipping
of foreign goods and an understanding may be gained that the US transports
are the leading equity component indicator of future global economic

For the Wilshire, the current identified second decay fractal pattern is 24
of 28 days. If this pattern is correct, there will be quite a declining turn
over the next four trading days. The impact of the largest natural disaster
in US history on the equities valuation pattern has been remarkably
unremarkable and supports the hypothesis of a completely mechanistic
process of non-stochastic saturation macroeconomics.

Gary Lammert