Waiting for the big Kahuna Message Board

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Strategies & Market Trends : Waiting for the big Kahuna

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To: Real Man who wrote (73248)	5/31/2006 8:39:42 AM
From: Rarebird	Read Replies (1) of 94695

>>My opinion is that it's the Fed that held this market together for now 4 years<< There are other factors that mask what is going on beneath the surface. >>Bottoms always need to be retested and I wouldn't be surprised to see the market pull back to retest the recent lows before really taking off to the upside again.<< Message 22489575 The market, as I expected it would, retested last week's lows on Tuesday. This is the kind of market action which helps build a base for the next rally as traders who were correctly short get one last chance to buy to cover their positions and take profits. It also gives the strong hands a chance to buy for the big surge back toward the old highs. One factor which will help push stocks up the hill will be the US Dollar, which resumed its major trend down. As the US Dollar loses value, it helps make US exports, including stocks, cheaper and thus more attractive to foreign investors. This decline in the dollar has been a big cushion which has masked the drop in value of the US stock market in recent months. Had it not been for this decline in the currency, the market would already have lost a lot more of its value. If the currency continues declining -- as the Bush Administration appears to have decided is the best weapon in rebalancing the country's current account deficit -- the bear market here is likely to represent only a minor 10% correction in stocks. There are massive inflationary forces building up which are well hidden by the "official" inflation figures. This is the reason why the 25-year bull market in bonds has ended and bonds are plunging in value: inflation eats away at bond returns.

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