With the critical mid-term elections tomorrow weighing in the balance, it seems that most investors are standing on the sidelines, waiting for something big to happen.
But in my opinion, they’re going to be sorely disappointed. Other than perhaps some short-term market gyrations, the trends you’ve been witnessing over the past few months will remain in place, only their momentum will likely increase in the weeks and months ahead.
And no matter what the Federal Reserve announces on Wednesday regarding its money printing operations, don’t you be fooled by that either: The Fed, no matter how much money printing it will announce, will always have the ability to print more money. It also has a lot more ammo up its sleeves.
Having said that, I think today is a great time to give you an objective update of my market roadmaps for the Dow, gold and oil. They are cyclical charts based on actual signals from my computer models.
I watch these signals very closely because they tell me when a fork … speed bump … an acceleration of recent trends … or even a U-turn is coming in the markets. They are critical indicators, and they should not be ignored.
They are based on 32 years of research and development, and I can confidently say that the economic models they are based on are right far more often than they are wrong. They are my main forecasting tools.
My Latest Market Roadmaps
I’ll start with what’s on most investors’ minds: The broad stock markets. I’ll give you the big picture, then my proprietary signals to watch.
The big picture: All of my indicators continue to strongly suggest that the March 2009 low at 6,469 in the Dow and 667 in the S&P 500 were major lows — and that the broad stock markets are now back in long-term bull markets, headed to new record highs by late 2015, early 2016.
That should not surprise you, as I’ve often said here in my columns, that the markets bottomed in 2009.
My models caught the entire rally out of the March ’09 lows, predicting a move up in the Dow to at least Dow 10,000 … and more recently refining the target to Dow 11,256 — which is almost the exact high for the Dow hit last Monday at 11,247, just nine points shy of my target.
That’s not to say there won’t be any pullbacks in stocks going forward. There will be. In the short term, I continue to believe the Dow will move down to the 9,000 level heading into a low in April 2011.
But that’s about it. For the next four years, the Dow and S&P 500 will swing up and down in a very wide trading range, then blast off to new highs in late 2015. You can see the projected pattern in this monthly S&P 500 cycle chart.
Some key signals to watch:
In the Dow Industrials …
11,256: A closing above that level will lead to a rally to 11,887.19
Barring that, support going into April of next year will be found at 9,034. In between those two points ― 11,256 and 9,034 ― the Dow is essentially neutral in trend on a long-term basis. A close above 11,887.19 is an all-out buy signal.
In the S&P 500, the two key levels to watch are …
1,292.90 on the upside. And 1,007.40 on the downside.
In between those two points, the S&P will swing wildly, and is effectively neutral in trend. I expect a test of the 1,000 level going into April of next year, but any close above 1,292.90 is an all-out buy signal.
Now, gold: Short term, gold is topping and likely headed into a cycle low due in August of next year.
Yes, I know that sounds a bit frightening. But there are a few things you should know about cycles …
A. Cycles give you timing windows for important trend changes. Not price levels per se. In other words, a low in August of next year could simply mean that gold trades sideways for several months, with the sideways trend ending in August, and then gold blasts off again.
Given the Fed’s massive money printing, which is likely to continue,
I don’t think gold has that much downside. More on that in a minute.
B. Cycles can “invert” — meaning when they project a low, a high comes instead, and conversely — a projected high becomes a low.
This is precisely what happened to gold in September 2008. The cycle projected a turning point high. We got a low instead. But nevertheless, it was a turning point.
My main point: Even though gold cycles are projecting a move down into August of next year — the price action could simply be a sideways affair — or, if the Fed gets really aggressive in its money printing, the August 2011 turning point could prove to be a high instead of a low.
So how does one tell if cycles are on track, or, if they are going to invert?
That’s where my reversal system comes into play, a proprietary model I developed in the early 1980s.
If gold closes below $1,246 — the cycles are correct, and we will likely see a move down to the $1,126 level heading into August 2011. But that’s about it for the downside in gold. Even in the worst of cases, I do not see gold moving lower than that.
Which brings me to a very important point: Even though gold could have topped on a short- and intermediate-term basis — do not, I repeat DO NOT, let go of any core gold holdings. Instead, use any upcoming weakness to add more gold to your portfolio!
On the flip side, if gold closes above its recent record high of $1,388.10 (basis the December gold futures contract) at any time — the gold cycles are likely inverting again, and gold will blast off and trend sharply higher into August of next year.
So right now, in between $1,246 on the downside and gold’s current trading levels — gold is effectively neutral, neither in danger of falling sharply, or taking off to the upside.
Now let’s look at crude oil: Oil bottomed in late 2008, after a steep plunge from its July 2008 record high of $147.
And oil is still very much in a long-term uptrend. I expect it to reach an intermediate-term high next September, somewhere north of $125 a barrel.
And then, after a decline into 2012 — I expect new record highs in oil in November 2013.
Short term, for the next few months, the price of oil is likely to continue to trade in a very wide range defined by $84.55 on the upper end and $69.15 per barrel on the lower end.
A weekly close above $84.55 and I have absolutely no doubt we will then see $125 oil next year.
Food for thought: Back in 1999, my cycle work in oil showed a major turning point due in black gold in September 2001.
The cycles now show the next major turning point for oil in September 2011. Could we be facing another 911 (9/11/11) then?
I am not the superstitious kind. But cycles do have an uncanny way of shedding light on the future. In more ways than most would like to believe.
Keep the above signals and turning points on your radar — even print this article out and keep it by your computer … and most of all, stay tuned!
P.S. If you’re a Real Wealth Report member, naturally I monitor all these signals and more for you. And of course, you get all my recommendations. If you’re not a Real Wealth member, it’s simple to join. To find out how, click here now.