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0920 EST Thursday March 23 2006

Good Morning: Our feeling that Equity Indices could again rebound yesterday, was authoritatively manifested as the Dow Transportations index soared to and closed at yet another new all time record high, dragging several other indices along with it, including the Banking and S&P 600 Index and the Dow Jones Industrials closing at a new 6 year high. Improving action that has been particularly impressive of late.

The Dow Jones Composite also closed at a new all time record high level yesterday of almost 3,850 and so with this Troika of the largest and strongest indices setting new all time highs and 6 year highs, it doesn't get much better and it in actuality is amplifying the power of the Dow Theory Buy Signal of which famed analyst Richard Russell is a strong proponent, who after being a mega bear for years, issued a very strong buy signal last year based on the way these indices were shaping up and with the action of recent days and very particular leadership described, continues the compelling case for Equities, somewhat climbing a wall of ranging from worry to disbelief and it is in general situations like this which are the hallmarks of strong bull market runs. If you think about it, the Transportations have been climbing a wall of worry ever since 9/11, as has Boeing BA and the Transports have more than doubled. Actually, it has risen by 140.61% since '02.

Given the dynamics of these current moves, one can surmise that new all time record highs lie just around the corner for the Dow Jones Industrials, but even though it may look like a slam dunk, it could still be a bumpy ride. Much depends on how we close out the month of March and obviously a very strong close could set the stage for new all time highs to be set in early April or at a stretch next week and yet there is always the potential for the strong uptrend to be temporarily derailed due to bad news from former Yellow Roadway and the like...

A few days ago, we cautioned that the US Dollar which had been hit hard last week, could rebound just as sharply as it has periodically done in the past, implying that we could not count the Dollar out just yet. In fact it was negative comments uttered by Warren Buffet that set the rally in motion as is often the case, as the market has often moved contrary to his excellency's expectations... Still the US Dollar were it to break down from these levels again, would definitely turn us more negative as structurally it would begin to become unraveled. It was also revealed that Buffet still owns a ton of Silver and is reputed to be baying more as Silver nears new 23 year highs this morning. In 1987 and 1993, Gold and Silver staged very strong rallies that unfolded in earnest in early April and given the emerging strength we have seen so far something similar looks increasingly likely this year that could potentially carry Silver prices up towards the $15 level or higher.
As former Commerce Secretary Don Evans recounted this morning on how Globalization is driving these bull markets, the World has gone from 25 free trading economies 60 years ago to 135 to date and new major economic engines of India, China et all are accelerating growth.

Trade Well
From the Desk of Savant

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