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Some weeks ago we alluded to the similarities between the current unfoldingly exceptionally bullish market situation and that of 1999, pointing out when we were several hundred Dow points and 60 S&P points lower, the similarities between the April 2005 lows with October 2005 and how that very difficult to call bottom back in April produced a 100 point rally in both the S&P and Russell 2000 indices. We also reminded investors, that few foresaw the huge tech rally coming in late '99 and that nobody "Rang a Bell" signaling that event, but we did stick our necks out a bit and boldly proclaimed that we were ringing all the bells we could, to alert investors to the possibility of an unfolding mega-rally ahead and that nothing would stop it. While the market volatility tested our nerve a few times as the bottoming process was unfolding, we again reminded readers how similar volatile tried to thwart the bulls back in April. Not even rising interest rates, again pointing out to investors, that in 1999, interest rates too were rising along with the market and that rising rates can be bullish for stocks on occasion, especially when economic growth is as strong as was recently reported with a 3.8% increase and with the new Fed appointee in the form of Dr Bernanke, christened this: 'Bernanke's Bull Market'.

Just as in 1999, while Bonds were falling, stocks were rising and periodically stocks can falter, just as happened on Wednesday: But what can really set stocks into high gear during these larger developing downward trends in Bonds, can be unexpectedly strong Bond market rallies, that can often really set stocks on fire. The developing power of this kind of bond inspired mega-rally was visibly demonstrated yesterday as the DJ Transportation Index surged to new all time record highs and curiously puts the Dow Jones Industrials at almost exactly the same levels to the very date, back in 1999. Does this mean we are setting up for a run through 11,000 and a surge to new all time highs? That was our prediction a week or so ago, when we outlined, not only new all time record highs and the surpassing of the 4,000 barrier for the Dow Jones Transportation Index, but in our explanation of the rather exceptional internal strength of the market as evidenced by the outstanding broadness of the advance and underlying market and entire advance and in particular, the proximity to new all time record highs of the S&P 400 MidCap, the S&P 600 IJS and the Russell 2000, suggested that in due course the Dow itself could also register new all time record highs, sometime soon. Another bullish feature has been the positive divergence between the Nasdaq 100 composite index trading at a bullish premium to the composite implying strong leadership of the major leading issues that comprise this index, that yesterday broke out to new multi-year highs at 1650.43.

With this kind of power being displayed going into week's end and ignoring negative overseas events, the potential for another post London event rally such as took place in July ~ August cannot be ruled out, as adding additional upside impetus. Add to this the fact that corporations are in significantly better shape than they were in 1999, one might surmise as we have already suggested, that the Bernanke Bull Market could run several quarters hence, more especially now, that the market has displayed its awesome strength...

Platinum remains at new 25 year highs and Copper surges to new all time record highs again this morning on economic strength.

Trade Well
From The Desk of Savant

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