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Strategies & Market Trends : Natural Resource Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (5657)	12/29/2003 6:15:07 PM
From: Yogizuna	Read Replies (1) \| Respond to of 108561

Dollar commentary after the market talk... December 29, 2003 Stocks are Jingling By David Nichols It was a fine holiday week for stocks, too, as the markets continued to chug higher. Low volume or not, the S&P 500 is holding firmly above its 10-week exponential moving average, with the weekly close coming at 1095, and this important average back down at 1069 (green line on chart). With the "trend-is-your-friend" type market that we have now (they're not always like this), these 10 and 40 week exponential averages take on added significance. The fact that the 10-week average is now above the critical 1060 level on the SPX also should be noted. It will take a breach of that line to even suggest that the mid-term trend has really turned down, and a weekly close beneath it to confirm. In my opinion, something distinctive changed when the SPX crossed that 1060 level. That's where the bear market should have come roaring back, as the upward retracement to that 38.2% level was really nothing out of the ordinary. And there was a pretty good struggle right at that 1060 level too. But when prices popped over 1060, there just wasn't much resistance left to prevent a quick inflation all the way to the 50% retracement line at SPX 1150 -- and that's essentially what we've been seeing. At least so far. The VIX also is showing a more bullish configuration lately, as it's been rising a bit from its multi-year lows while the market moves higher. That's slightly bullish sentiment action, although it's tough to get too excited about the long side with the VIX so low overall, and sentiment so rip-roaringly bullish all around. So the action in stocks is bullish, and showing no signs of faltering. It remains a weird market, where the majority continue to hold sway. Such majority-controlled markets usually end up being labeled bubbles, in retrospect. So we'll see how this one ultimately ends up. Really, the major story -- probably even more important than the equity markets in the long run -- is what is happening to the U.S. dollar. After all, we don't go down to the mall and pay for our new jeans with stocks in the S&P 500. We use dollars. And the relative value of our dollars has been getting hammered. Now that is a trend. It's every bit as strong as the uptrend in stocks, only it's going in the other direction. So go figure. As I've mentioned, there is a historical precedent for asset classes like stocks and real estate to have a value re-rating upwards as the value of the underlying currency is dropping. That's a pretty natural price mechanism, if you think about it. There could be some of this in play right now among asset classes that are on the rise. It's just a relative thing. But at some point, if the dollar keeps falling in relation to the currencies of the rest of the world -- and to gold and silver, as well -- then we'll all be facing a problem. We'll be holding lots of paper that's not going to get us what we thought it would. This dollar/stock divergence could just be the big story of 2004. In 2003, nobody seemed to care too much, but going forward this is going to a period where we have to pay as much attention to the value of a buck as to the value of the stocks you can buy with that buck. There are lots of forces in the world that would like to see the dollar fall from grace as the global reserve currency -- after all, what do you think the Euro is all about, other than that? -- and with the fiscal course we are currently on, such a loss of status for the dollar as the global reserve currency is a distinct possibility. That would be a very big deal, and we'll have to pay attention.

To: Jim Willie CB who wrote (5657)	12/29/2003 6:54:32 PM
From: Mac	Read Replies (1) \| Respond to of 108561

EDV: interesting article stockhouse.ca