Monday, 25 October 2004

US stock markets at a critical juncture

The Dow Jones Industrial Average hit a new low for the year of 9,757.81 on Friday as NYMEX light sweet crude oil rose above US$55 a barrel. Both the broader S&P 500 and the technology-laden Nasdaq, though, remain substantially above their year-lows, so we cannot conclusively say that the market has turned bearish.

But this looks like a critical juncture in the US stock markets. Many commentators have suggested that the markets are poised to rise after the uncertainty of the presidential election is over.

Although markets have been on a downtrend since peaking in the first quarter of the year, falls have not been large. A strong rise after the election could easily bring markets above their earlier peaks, and confirm a resumption of the rally.

However, a failure to break those earlier peaks would indicate that the market has made a major turn. In other words, we are in a bear market.

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