The Economy Page
D.H.Lingerfelt Technical Advisors

Quote of the Week: "There cannot be too much of a correct theory." Ludwig von Mises, Epistemological Problems of Economics.

This Week's Statistics: (as of 24 Sept 2002)

This past week the Dow Jones Industrial Average dropped 326.67 pts. to close at 7986.02 (-3.93%), while the Nasdaq declined 5.44% to 1221.09, and the S&P 500 dropped 4.99% to 845.39. While I think we are definately still in the bear market, It is my opinion that we should see a rally this week, finding support at upside resistance at around 8600 for the Dow.

Inflation is still not showing it's effects and the indicators show little price inflation, while the currency inflation is still growing rapidly. My proprietary inflation indicator is showing a fairly constant inflation rate of about 5% (which is just above the normal rate of 4.75%). I should note that this last month there was a downtick in the rate to -2.3%. We should see this in the indexes as a general rally through the next two years or so if all goes well. However, according to the theory, there comes a time when business will not react to inflation in the normal way, and a recession will hit regardless. This happens when the economy needs to correct itself from the malinvestment it made during the boom. The Fed still has it's foot on the gas full tilt, even though we saw a decline in the weekly inflation number. It was a huge mistake not to raise rates when it would have done some good without too much pain, but they didn't. The Yield Curve dropped some to 2.410 and real interest rates are down slightly to 1.36%. I expect yields to decline short term from here. There is still a lot of pressure to lower rates in the market.

The Heine model is Bullish (note: the Heine is a bond model). The Vega (stocks) turned bearish 4 weeks ago after a while in positive territory. This confirms my bearish stance at this time. We are showing some good numbers, however without a doubt, we are still in a Bear based on the chart.

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