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Is This Really a New Bull Market?


The argument for the rise in the stock market that makes the most sense.

In my recent articles, I've discussed technical analysis and headlines. Another prominent headline that I see a lot lately is that this is a new bull market. I always understood bull markets to come during the growth phase of an economic cycle. For example, the '90s was a bull market attributed to the growth phase of a technological revolution and the peak spending years of the baby boomers.

To what do we attribute this "bull market"? The best argument that I've heard for the rise in the stock market is based on too much money being printed that's got to go somewhere.

Since the NASDAQ 100 peaked in 2000, it crashed in five waves, recovered .382%, and turned down for a smaller set of five waves.

In Elliott wave terms (see also, Riding the Elliot Wave), C ended the first eight-wave cycle (1-2-3-4-5-A-B-C), so the move down from C probably represents the start of a new cycle. I interpret the move up from the more recent smaller five-wave set down as a corrective wave (A-B-C) that's having difficulty with the .618 retrace level, the most common Fibonacci retrace for a second wave (see also, Stocks Love Symmetry). Notice that the monthly stochastic is also approaching 100.

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I also want to point out that since 2002 stocks and commodities have marched in tandem (opposite the US Dollar). Incidentally, for those who think that inflation is high risk, the history of stocks and commodities running together has only been when deflation was the greater threat. In any case, if this relationship continues, then stocks are one more domino to fall on a strengthening dollar. Or, if you prefer, stocks are one more thing being propped up by a weak dollar, and are rising for no other reason.

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No positions in stocks mentioned.

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