critical point coming up

The market is starting to reach the point where it is going to separate the sheep from the goats. The bottom was quite something - it hit a low on a ten year channel and did not really break it - so the question is wide open as to whether we are now in a bull run. Hardly anyone thinks so - which is a good reason for it to be a bull run.

At the same time as it hit the Big Channel the market also hit the bottom of a Little Channel heading downwards (how good can it get for chartists?). Now it is about to hit the top of that channel at about XJO 2980 and we will find out whether this is all a big bull trap. If it is - then we are in a very serious bear market indeed. Otherwise - new highs, or at worst a big bear rally to 3200 or 3300.

The bear case is that the US market is feeding on false hopes and sentiment rather than economic growth, and that the war has worsened their debt and economic position. Soon as reality returns it will be all the way down boys.

The bull case is that excess capacity and lack of markets has been the problem in the US, that blowing up a few hundreds of billions of dollars worth of bombs and redeveloping Iraq is just what the US needs to get production rolling again and to bring the huge amount of institutional money out of hiding.

In the short term, even the Russians think now that the US knows what it is doing in Iraq (www.aeronautics.ru) and this is all a bit of a walkover. This is enough to bring the market up to at least the short-term critical levels. If they break to the upside - we have a ways to go.

Supporting this, I have seen bottoms on a large number of medium cap stocks and have brought most of my capital onto the market during the last week - for the first time in a couple of years. SEV TEN CPU INT TAH. The major bluechips and growth stocks all probable bottoms in late Feb/early Mar. Plenty of other buys.