At times, Money to Zero Maturity (MZM) has been a fairly reliable precursor of stock market direction (bullish or bearish) since the Federal Reserve started lowering interest rates several times in 2001. In mid 2001, MZM was at approximately plus 9%. Within two to three months, it shot up to about plus 39%. Then, over the next nine months, it tumbled to around plus 4%. During much of that time, it was very difficult to find bullish stocks.

For most of 2002, my portfolio was up a mere 4%-6%. Finally, by the end of 2002, the portfolio jumped up to 15.66%. Beginning in 2003, MZM was slightly over zero. Six months later, it moved up to 19%. Then it started to fall. By late October 2003, MZM was about a minus 8%. From that time on, the stock market started to back and fill, which is a strong indecision pattern. The market has been doing that ever since. Currently, MZM has moved a bit to over plus 10%. Even so, the Dow has remained in a trading range between a low 10000 to a high 10700.

Much of the past year has been the exception of MZM's ability to portend market bullishness or bearishness. The market held up during MZM's huge plunge from June 2003 to mid-October 2003. However, the market has refused to move above its trading range as MZM moved from a minus 5% to a plus 19%. The reason the Dow held up during a decline in MZM was the fall in dollar value throughout much of 2003. Conversely, the reason for the Dow's recent weakness has been the strength of the dollar over the past two months.

The expectation for the dollar over the next several months is for it to peak and resume its fall in value. Once the dollar moves lower, MZM should continue to move higher, which should portend a bullish trend for the stock market. During the coming months, all these factors should provide positive signals: a higher MZM, lower dollar value, and a rising stock market. The bad news is interest rates will have peaked.

For the short-term, watch your silver stocks. Silver Standard Resources (SSRI) is within 50 cents of a sell point. If Pan American Silver (PAAS) falls another 5%, sell it. Most gold stocks are within 10% to 15% of hitting a sell signal.

Right now, I still like the potential of small cap stocks such as Golden Patriot (GPTC)and eFoodSafety.com (EFSF). Both are holding up well duringf this down market.

I will report on MZM growth and dollar value in the May issue of Kenneth Coleman's Investment Tracker newsletter. I will also update MZM growth and dollar value during my radio show on www.gemradio.net (Mondays and Fridays, 11:00 am Pacific Time). I will also be discussing a company that provides digital homeland security and is all alone in its field!