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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (25814)	2/3/2005 2:09:34 PM
From: ild	Respond to of 110194

Date: Thu Feb 03 2005 12:59 trotsky (pm stocks) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved clearly they've been in a cyclical bear market since early '04. it is probably within the context of a secular bull market, but unfortunately there's no indication as of yet regarding the likely end of the cyclical bear ( i.e., when and at what level it will bottom out ) . there was one major cyclical bear market nested between two cyclical bulls during the 70's - that one lasted about 1 3/4 years , and similarly to the current one took down junior gold stocks by between 60 - 90% from their highs and the majors between 40 - 60% ( obviously, this hasn't yet played out in full here, and it's not certain that it will ) . we SHOULD have seen at least a short term bounce by now, in view of sentiment and positioning as well as money flow data. the fact that it hasn't happened is a further indication of the market's bear character. of course there WILL be a bounce at some point - it may even be starting from today's lows. how the above mentioned data sets behave during the bounce will further clarify likely future ( medium term ) direction. judging from yesterday's FOMC statement, the Fed is bent on compressing the yield spread further ( note that their rate hikes can not force an end to the rally in long dated debt, on the contrary ) . and this remains the sector's major problem. in fact, all the markets that have benefited from the reflation trade are likely to come under pressure if this keeps up - i.e., real estate, stocks and commodities primarily. the economic recovery has been so weak ( the economy has structural problems that can not be solved via monetary and fiscal stimulus ) that the chance remains good that the rate hike cycle will reverse relatively soon. and that seems to be the sine qua non for ending this bear market.