Wednesday, October 7, 2009


Not that I'm at all interested in trading or investing in the stock market but I thought it might be interesting to compare the recent cyclical bull with the last one.

Both bulls are and were fundamentally based on the same thing...massive liquidity creation.

Both bulls started with a powerful initial thrust out of the bottom.

Both then consolidated for a couple of months before reigniting the rally.

In 03 we got 3 tests of the 50 DMA as market participants weren't really sure this was the real thing and refused to push new highs very far before taking profits back to the 50 again.

Finally the market became comfortable with the idea of a new bull and euphoria set in. At that point we got the final burst to big new highs into early 04.

This bull has now tested the 50 DMA just like 03. The question is will we crawl cautiously upward for a few months like we did in 03 or does the market already "believe" and we are on the verge of another big push higher?

Of course there's always the possibility that this cyclical bull will be short lived and we are ready to roll over and resume the secular bear. I have my doubts on that one as I think any significant weakness is going to be met by Ben and his printing press.

I really don't expect Ben to reverse this policy until it's too late and the inflation demon is already out of the bag. When it comes down to it, inflation is the final control on central bankers penchant for uncontrollable printing.

As I always say there is no free lunch. I'm afraid this lunch that we are enjoying right now is going to taste mighty sour when we get the final bill.