weekend warblings, page-6

Voltaire you are right about one thing. We must be getting very close to a fork in the road. My take is based both on TC, fundamentals and psychology. Charts usually are ambiguous, especially if you use Elliot Wave analysis. This time it’s no different. At the moment the DOW has been struggling above the important 10,000 level for a long time now, just like it was above the 1,000 in the 70’s before taking off. So, it could be ultra bullish (DOW 100,000? – well let’s not get carried away just yet). The Dow Transports Average is almost at it’s all time high. One could say it would be ultra bearish if it made a new high without the DOW following suite, then broking down. Time will tell which fork in the road it will take. Meanwhile, the fundamentals for commodities is a screaming bull thanks to China and India; some say for the next 25 years but I think that’s stretching it too far. History shows that a supply-side glut, not a demand-side collapse is how a commodity boom often comes to an end. Right now and for the foreseeable future the supply side is weak so this commodity boom has a lot more left in it. A study of past super cycles in metals by John Cuddington and Daniel Jerrett1 has shown the current one started in 1999 and could go on until 2014. As for psychology, I don’t see the commodity boom fever as yet so it’s hardly a bubble. Commodity stocks are testament to that. In summary no one really knows for sure of course but I feel if the commodity boom can continue for a long time to come. This can only be bullish for our markets as we possibly shift focus from financial and retails stocks to resource ones. Whether it will, time will tell.