Let’s address the China factor. In 1921,
the U.S. and British stock markets registered
important corrective lows. The U.S.
market made an eight year hyperbolic run
into the 1929 blow off while Britain only
managed to reach its previous high (posted
in 1900) as the industrial baton was being
passed to the U.S.
Similarly, as the U.S.
passes the industrial baton to China, it
is more likely that if any stock market
extends hyperbolically into the 9th or 10th
year of the decade, it will be China. The
“new economy” index as represented by the
Nasdaq, probably at best may double top.
The S&P as of April, 2007 is approaching its
old highs, but may struggle to move much
beyond, if this British comparison holds up.
The Dow industrials have been leading the
market higher for good reason. Emerging
market growth, especially China is pushing
to build its infra-structure and has been
demanding the capital goods of our industrial
companies. This is pulling our markets
higher. It’s not about the U.S. anymore
By Jim Forte, CMT