A time in history

摘要

We are at a time in our history when prognostications for the stock market and the economy may be more difficult than ever before. Debt, deficits, indictments, war, terrorism, changing of the Fed chairman, real estate bubble, hurricanes, oil prices, the U.S. dollar, China and India, interest rates, the U.S. consumer, lack of savings in the United States, world politics, the derivatives time bomb, the trillion dollar hedge fund industry, etc., provide a mix of confidence challenging stimuli to the economy. Figuring out each of these problems requires a novel for each, so let's look at the basics. Markets move from one extreme to the other and the economy follows that lead. We had an overbought extreme in 2000. To move to the point of culmination of the next extreme (oversold), the markets must reach a point of capitulation. That was accomplished with an 83% correction in the Nasdaq 100 in October 2002. However, none of the other major indices have experienced capitulation. In fact, we are in the 156th consecutive week where there is a plurality of bulls over bears. This is helpful informa- tion because it allows us to determine where we are in the cycle. We are in the latter stages of a cyclical bull market within a secular bear market.