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Dow near all-time highs
The market put in an excellent week's performance last week and with the Dow Jones Industrial Average nearing all time record highs, talk of how soon new records may be broken is becoming more commonplace. One possibility that could drive stocks higher, might the anticipation of the FOMC meeting outcome this week and the possibility that no action by the Fed or positive comments could also result in a surge in stock prices. Following such a powerful week last week, the strong likelihood of an extension to last weeks action is highly probable and although there is also the chance that the market could put in some kind of reversal this week: There is a tendency by many to point out that a top will be put in place in the Dow that to all intents and purposes would be a major double top of significance and while that possibility exists, it is by no means a laid down mesaire and even if we do get some kind of pullback, there is still a chance that the markets could advance to higher highs down the road. Most investors have completely misread this most recent rally in stocks, but we did announce some months ago, the increasing probability that the lows might well have been seen for the year and even though there was a last minute fakeout move ahead around 9/11, our Advanced Market Reconnaissance in MODAR jumped in big and set records all last week in terms of daily activity and trading performance: So we really were able to capture the upswing almost in its entirety, although again by Friday, the edge came off the rally some, with reversals in many issues showing up late and it is how this week will play out that'll show the way into month's end. Still, it is important to keep things in perspective... The fundamentals from an inflation standpoint have improved significantly and the prospect of the Fed having completed its rate hike campaign is increasingly likely: However, there is also increasing evidence that the economy is still stronger than most assess, because US Treasury's have been under some pressure last week and could increase this week, which might actually be a boost to markets and there is some potential for these markets to play out along a similar scenario as what happened in 1999... If that is the case, it could actually cause the Fed to change neutral policy going into the new year.
The prospect of markets continuing to make multi-year highs or all time highs cannot be discounted. The NYSE Composite index has also been very strong representing some 2,100 of the largest US corporations and as we noted recently, they appear to be unfazed by the Fed's actions over the past 2 years, as has been the NYSE Utilities Index, which also set a new all time record highs on September 01 and may actually be weakening a bit based upon the unfolding behavior of US Treasuries which actually could be very bullish for US Equities and the Precious Metals markets also. Last week in our Trillion Dollar Killing revisited, we outlined the possibility that the Treasury Secretary's calls for China to strengthen its Yuan against the US Dollar, could actually put pressure on US Treasury's and should they fall precipitously, that could cause a Trillion Dollar withdrawal of US Dollar Denominated Assets, as they would essentially be a double loser for foreign investors. Still, in spite of all this, US Equities have rebounded impressively since our "New Bull Market in the Making" call back in early August, and it should be borne in mind that back in 1906 and 1956 Equity Markets were setting multiple new all time record highs fairly consistently and regularly and given the Tech Boom we foresee ahead, plus the likelihood of a very strong 2007 juxtaposed against a unique background of a still very vibrant record setting economy and the most innovative and transformational economy ever it might be a mistake to rule out some very significant upside for equities in the coming years, as we enter what we believe will be a Grand Super Cycle Elliot 5th Wave advance... Gold and Silver rebounded towards week's end and we believe that the groundwork is being laid for significant lows to be made in all of the metals markets, because after all, logically, if Equities are advancing this strongly, they are predicting a very strong or recovering economy for 2007 through 2008 and that in of itself should be exceedingly bullish for Base and Precious Metals going well into the end of the decade. Trade Well From the Desk of Savant (published 09/18/06)
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