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As a technician I usually don't look at fundamentals other then to know
where I am historically and what the current conditions are. It is
raining out so I thought that I would pontificate for a moment. In
looking back in history, I see that the 1968 to 1974 time frame with
conditions similar to what we currently have. The late 90s look a lot
like the end of the 60's. Low inflation, low commodity prices and low
interest rates. Also the nifty fifty were on a rampage, not unlike
today's internet stocks.
Today we are looking at commodities at historical lows, adjusted for
inflation. Many commodities are trading below production costs. We have
a recession throughout most of the world and currencies being devalued
right and left. Interest rates are at or near their lows. It appears
to me that the only thing that can happen is a reversal of the trend.
If Asia and other parts of the world enter a recovery and the demand for
commodities increases, so will their prices. Also with increasing
economic stability and growth their currencies will rally against the
dollar. If these two things happen and this upward push occurs, bond
prices will fall and interest rates will rally. Under these conditions
the market can not sustain its upward momentum and the 13 to 15 stocks
in the S&P 500 that have created its rise and the few generals in the
dow that sustain its upward momentum will falter. With rising oil
prices causing a rise in the Dow oil stocks a few more points may be in
the offing.
In the late 60's the target was 1000 on the Dow, today it is 10,000. It
took 10 years to break through that 1000 barrier, can the same thing
happen again. We don't have a Nixon with price controls, but there is
always something to take its place.
Just some things to think about. I won't stand in the way of this
moving train, but I will be a lot more cautious of the type of positions
I put on. Good trading, Ira
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