THEME: STOCK MARKET TELLS
Along with Thomas McManus, Paul Desmond is the other guru that got the whole bear market pretty much dead on. Desmond has been hesitant to turn bearish but is recently changing his tune to a stronger bearish stance. McManus is not really bearish, but more bearish than I've seen since the heart of the bear.

My view is that the market is beginning to recognize that Kerry is not only electable, but may well trounce Bush. The tell of the market was how it responded to the June 30 quarterback sneak Iraq handover: it sold off! Bush carefully engineered a Cisco style lower expectations and then beat by a penny in the sneak hand-off. The market was unimpressed. Its clear that the very bullish stock pundits believed that a quiet hand-off a major hurdle that the market needed to clear for a rally. Well, they were wrong.

Even though there haven't been any major terrorist attacks since then, the market is still not rewarding Bush with the victory.

Remember Hom's Law of the Stock Market:
1. stocks up = people happy = bear market
2. stocks up = people un-happy = bull market

People are long again, and the market has not yet cleared.

Paul Desmond, head honcho at the institutional research firm Lowry's Reports in Florida, says that this sort of complexity probably has always existed in the market but statistical measures were not set up to capture it. Today, the market is sliced and diced a million different ways via a variety of indexes that let us understand micro-climates within the big market ecosystem. He believes that big-cap Nasdaq stocks may be headed back to their 2002 lows while relatively cheap makers of steel, oil and gas drillers, coal miners and munitions makers gun to new highs.

Indeed, he notes that if investors would stop fixating on the Nasdaq or market-cap weighted S&P 500 Index and look at a broader range of stocks, they’d feel a lot more comfortable. He says his firm’s unweighted index of New York Stock Exchange domestic “operating” companies -- that is, the NYSE Composite minus closed-end funds, preferred shares and foreign companies -- hit a new high in late June and is only slightly off that level now. “On the Big Board you have the majority of stocks still going up,” he said.