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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (334)	6/26/2001 3:11:11 AM
From: craig crawford	Read Replies (1) \| Respond to of 1643

DOW - CRB DIVERGENCE buffalo.pair.com We believe that much of the stock market performance from 1982 to the present can be primarily attributed to interest rates. Study any equity index chart and the slope remains fairly constant until 1994. After 1994, the slope takes on the shape of a parabolic curve. At the same time that stocks were starting their bull market, commodities had just entered what is now the longest bear market in history - approaching 19 years. Preceding this bear market, the CRB-Index had its own parabolic curve peaking in late 1980. Interest rates peaked a year later and the stock market, a year after that, started its historic run. It shouldn't come as a surprise then that interest rates have declined in lock step with commodity prices while the stock market has moved in the opposite direction. In fact if we were to say that stock prices were contracyclical to commodity prices ; it would not be inaccurate. To satisfy yourself of the veracity of this statement, juxtapose a chart of the CRB to any equity index chart of the same time period and frequency. Click here to bring up a monthly chart of the CRB. Notice the divergence that has occurred since 1982 and especially in the last three years. Notice also that parabolic curves upon completion do not move sideways but violently down with an incredible amount of volatility. We believe the following: (1) that commodity and stock prices tend to move in opposite directions (2) both the stock market and commodity market have been in record bull markets and bear markets respectively (3) all bull and bear markets come to an end (4) parabolic curves tend to signal the end of a bull market. What we don't know is who will use this information to benefit from what will certainly be an historic and volatile move in both stock and commodity prices. Let me end by relating this real-life story. I was a stockbroker in the early eighties. I could not give away treasuries yielding 14%, nor sell stocks with double digit yields and single digit P/E's. Today some people ooh and ahh over 6% treasuries and have no fear of stocks with P/E's exceeding 100 yet are fearful of buying commodities at historic lows. In other words, we seem to have come full circle: discarding the under valued in favor of the over valued - the same as in 1980 and 1982. This is classic "follow the herd" mentality. Buy what everyone else is buying. But the successful don't always "follow the herd" and neither should you. Call us, e-mail us, get in touch with us and renew that interest in interval-based position trading while many commodities are near their 20-year lows. John Guy June 2, 1999