Friday, October 26, 2007

Commodity bull: Second phase

I know many of you are familiar with my 5th year correction scenario. For any who are new to the site. All that means is that typically secular bull markets will have a serious counter trend decline somewhere around the 5th year of the bull market. The 87 crash is a great example. Last summer I think we saw that decline in the commodity markets. During the first phase energy and base metals outperformed precious metals and agriculture. During the second phase I fully expect PM and Ag to outperform. Notice how the correction in PM during this time was also milder than what took place in energy. During this next phase I think PM and ag is where an investor will outperform. These second phases can be rather long. The second phase in the stock market lasted from 87 to 98. During this time corrections should be bought not feared. Remember a correction is just the market doing something stupid. Your job is to take advantage of this stupidity.