MORE Year-End Signals To Watch!

Larry Edelson

I hope you had a wonderful Thanksgiving holiday and weekend! But now I want to turn our attention back to the markets. Judging by the positive response to last Monday’s column, I want to give you more year-end signals to watch for key markets.

Remember, this is the first time ever that I’ve released such signals. They are based on a proprietary trading model I developed in the early 1980s, and are a unique combination of cyclical and technical analysis.

Each year, as we head into year-end, they are the most important indicators I watch. So you should be aware of them and watching them too!

They are extremely reliable guides to the future of each market. Just as I mentioned last week, I suggest you also print out this week’s column, and keep the printout by your side as we head into the end of the year.

Keep in mind, these figures are applicable only for the last day of trading in 2010, which is December 31. But they must be gauged now, and followed into the end of the year. So let’s get started …

For the S&P 500, as we head into year-end, watch …

S&P 500 Above 1277.50

— Very possible: If the S&P 500 manages to rally into year-end and close 2010 above 1277.50, it will 100% confirm that the March 2009 low in the S&P 500 was a major low — and that the S&P 500 would then be in a new long-term bull market, headed to a new record high by late 2015, early 2016. Naturally, there might still be a pullback in early 2011 if this signal were to be hit at year-end, but it would be a very BULLISH indication for the market.

S&P 500 Between 925.80 – 1277.50

— Probable: Technically, if the S&P 500 closes the year between these two figures, which I deem probable, this would set up a “neutral” momentum and trend indication for the index for 2011.

It would mean that the S&P 500 will experience extreme swings next year, occurring between 804.60 on the low side, worst case, to 1457.00 on the high side. In other words, a near 600-point trading range!

S&P 500 Below 925.80

— Not likely: But if the S&P 500 Index were to crash now and close 2010 below 925.80, it would be a signal that that the March 2009 low would be in danger of being broken, and that the S&P 500 is back in a bear market for 2011. As noted, I rate this as not likely.

For the very important U.S. 30-year bond, watch …

U.S. 30-year Bond Above 134.03125  

— Not likely: If the U.S. 30-year bond manages to stage a year-end rally and prices climb to above 134.03125 (and interest rates decline) it would mean that long-term interest rates are likely headed even lower next year.

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I do not expect this to happen even though the Federal Reserve will be purchasing U.S. long bonds with printed money.

The number of foreign investors getting worried over the U.S. economy, budget deficits and more will likely be aggressive sellers of our long-term bonds, keeping downward pressure on bond prices (and conversely, upward pressure on the long-term U.S. interest rates).

U.S. 30-year Bond Between 116.9375 – 134.0125

— Probable: A year-end closing in the 30-year bond between 116.9375 and 134.0125 would turn the bond market’s long-term trend neutral, indicating 2011 would be a wide ranging affair for bonds, with wild swings in prices and interest rates.

Importantly, this type of year-end closing for bonds would also indicate that the bond market bubble has NOT burst, and will likely NOT burst until the following year, 2012.

U.S. 30-year Bond Below 116.9375

— Not likely: A year-end closing in bonds below this level would indicate that long-term interest rates have bottomed, and bond prices have indeed peaked.

Moreover, it would suggest that the bond market bubble will fully burst in 2011. You would not want to be anywhere near the bond market in 2011 when it collapses.

As you already know, I am expecting the bond bubble to burst. I also have been recommending that you stay away from the long bond market, except for hedged strategies.

I will maintain my view on the bond market even if we do not get the above mentioned outright bearish sell signal — as it’s merely a matter of time before bonds crash and all of my work suggests that long-term interest rates have bottomed.

Now let’s look at a market a lot of people are invested in, silver!

Silver Above $23.75

— Possible: A year-end closing above $23.75 in silver would confirm that silver is back in a long-term bull market, with much higher prices to come.

So far, silver is above that level. But, I am concerned that silver is very overbought — not to mention that it’s a very manipulated market. So I rate this type of bullish year-end closing as possible, but NOT probable. Instead …

Silver Between $15.58 – $23.75

— Probable: A year-end closing in silver between $15.58 an ounce and $23.75 would indicate silver is going to swing wildly in 2011, between extreme technical support at the $11 level, and the recent high near $29.

The bias however, would be to the downside, shaking out a lot of weak silver long positions. I will keep you fully posted here as silver would be very problematic for a lot of investors in 2011.

Silver Below $15.58

— Not likely: A year-end closing in silver below $15.58 would indicate that silver’s bull market is over, for now, and that silver could crash all the way back to below $9 an ounce before recovering.

I repeat, keep the above year-end numbers by your side as we head into the end of 2010. I will be referring to them often!

Best wishes,

Larry

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.

Your thoughts on “MORE Year-End Signals To Watch!”

  1. I’m curious if silver is expected to decline and is the beta of gold (just more volatile), wouldn’t you expect the same of gold? However,within the last week in currency trading, multiple institutional-level buys of gold skyrocketed its price while conversely multiple institutional-level sells were made of the dollar.

    How do these events translate into lower gold and silver? and what events will trigger any sell off of gold and silver?

  2. I believe that the silver story is just beginning. Now that silver is pushing $30.00 an ounce, I find it hard to even consider a major drop to $23 or so in the next couple of weeks. I suggest you include a silver analysis with your weekly cart evaluations.

  3. Larry,

    Your RW portfolio currently posts impressive gains, much of which would be erased temporarily by a pullback in gold to 1200/oz combined with a drop in the general market, the latter of which would influence mining stocks. Given last week’s dramatic spike upward in the Dow and Gold together, I’m worried about an equally dramatic reversal. In this case, setting low stop losses would only serve to lock in poor returns given that the dip in Gold at least is expected to be transient.

    Thanks,

    Brian

  4. Here’s what another well known stock markert service posted recently (Nov 29th):

    “Gold is the worst investment around. Anyone buying it now is doing so at their own risk, near the end of a bull run that’s apt to end badly.
    A major clue gold’s time is up: institutions and hedge funds are starting to get out.
    In October, for example, these big players reduced their long gold futures by -9%. Meanwhile, small investors added +5% to their long gold positions. It’s a familiar pattern in which large investors exit the market of an overheated asset in a timely fashion, leaving the little guy to drive the final run-up to the big pop.
    I give gold up to another year, maybe two, before it peaks. From there, it’s all downhill.”

    “I give gold up to another year, maybe two, before it peaks.” – this is hilarious. Get out now, there’s “only” 1 or 2 years left before it peaks. All I can say is, I hope they are right, 1-2 years of gains would be a gift.

  5. Your comments on Gold are of the most intrest, and have certainly made a big difference to my portfolio.
    Thank you, and have a marvelous Christmas

  6. Having followed Larry Edelson , and Martin Weiss, for some time I have complete competence in their selection of analyst they have surrounded themselve’s with and their ability of the surrounding enviorment that faces this world economy. I don’t hate to say this but I’ve relied on thier expertise often.

    Jay Andersen

  7. I found this analysis to be an utter outrage. He makes his projection based on 20-30% swing of S & P 500 in just about three weeks timeframe. His low and his high range may not materialize. Additionally for S&P to go down 22% from where it is now in three week period, it will take a major economic or geopolitical development with a devastating consequences.
    This analysis is all based on a number rather than economic principles. The fact to be acknowledged is that the US and EU economy is in a doldrums, and should the Stock Market follow economy, then it should dive. However, if hype prevails and Stock Market bobbles, then that will be a harbinger of yet worse of our economy.

  8. I see no rational evidence for your suggestion that silver might correct down to $9 an oz! You just make the assertion with no idea mentioned to justify it. In my post above I give a number of fundamental factors which support the contention that silver will continue to rise. You give no indication that you are even aware of any of the factors I mention. I find it hard to believe that you are just making your prediction based on charts with no regard to fundamentals. But what else am I to infer.
    If you were aware of the fundamentals, especially the CFTC investigation of the naked short selling which has manipulated the silver market for years now, you would certainly give more positive advise to your readers.
    Believe me I wish silver would find its way down so I could load up at nine or ten dollars an oz. Not a chance given what is going on.
    You rarely mention silver nor do you show its chart the way you follow gold, the dollar and the DOW. I suggest you do some homework and read James Cook and Ted Butler at investment rarities.com including their archived articles over the years.
    Enjoy!

  9. My impression on silver is a little different but who knows I think with the turmoil in Europe and the Euro falling might give a temporary boost to the dollar and downpressure any market even gold but who knows I wil put my bets in small amounts to control risk on any correction on precious metal and commodities and short the Euro.

  10. Grahame Lock:

    I’m sorry but I don’t understand your question to Larry. His most optimistic estimate says ABOVE $1071 for gold. Why do you think he means it must come down to $1071?

  11. My understanding regarding silver is based largely on the expertise of Ted Butler who has been instrumental in bringing the naked short silver futures by a handful of big banks such as JP Morgan to the attention of the Commodity Futures Treading Commission and its new head Mr. Gensler. If it is true that those institutions which have been holding down the silver price for years have finally decided to allow the market to operate without their manipulations then silver is just beginning to rise and has a long way to go.
    Read the articles and links on the home page of http://www.investmentrarities.com where James Cook and Ted Butler have been making the case for silver. There are many factors at work including the fact that there are few pure silver mines and that most of the mined silver each year comes as a by product of the mining of gold, lead, copper and zinc. An increase in silver price would not lead to an increase in the amount of silver coming out of the ground, at least not for a long time.
    Silver production amounts to about 600M oz a year which includes a small amount of scrap. Given the increasing industrial uses of silver in many sectors: photography, electronics, jewelry, medicine, etc, about 900M oz are required each year which has relied on a draw down of government silver reserves which are now virtually non existent, having been used up over the last dozen years.
    Most industries rely on ontime delivery of the silver they need to keep their assembly lines goind. Given recent shortages some industries will increase their supplies which will drive up the price and create further shortages for other users.
    I didn’t mention silvers use as an inflation hedge along with gold. Investors are also stocking up on silver in anticipation of future inflation given the fanatical printing by the Federal Reserve Chairman whose idea of a solution of the deflation problem is to try to create inflation. He has been called a variety of names by prominent people around the world since his announcement of his intent to buy 100B Treasury Bonds a month for the next six months, to begin with.
    SInce banks are holding onto the money, in reserve, it is not finding its way into the market. He will certainly continue to engage in quantitative easing, his euphemism for inflating the currency.
    One of the best books to read on the subject of the secret creation of the Federal Reserve System in 1913 is G. Edward Griffin’s The Creature From Jekyll Island which also tells the history of central banking in America.
    Perhaps if enough people read that book they will develop a healthier skepticism regarding the Federal government. In that regard Tom Wood’s Nullification and Meltdown are also enlightening, not to mention Ayn Rand’s Atlas Shrugged.

    Enjoy.

  12. Larry,
    Without wishing to be personal, it looks to me that the photograph shown with your feature of November 29th looks at least 10 years older than that of one week earlier. Surely the strain of your work does not have such a dramatic effect on your appearance.
    To business, I have followed your comments on precious metals, particularly gold, for about two years. I was absolutely amazed when I first read your forecast that with the eventual devaluation of the dollar and its replacement as a reserve currency that gold, in your judgement, could rise to $5,000 an ounce. Even by the end of next year, you have said the price could reach $2,300.
    With gold currently at $1,360, it would appear to me to be a very dramatic fall of over 20% in one month to reach your most optimistc year end close of $1,071.70.
    You now seem to base your gold predictions on the basis of your study of cycles rather than movements dictated by various world events. I would be interested to hear your views on this comment.

  13. What happened to all the “doom and gloom” that everyone was advocating in early Fall of this year. As a new Member I thought the sky was falling!

  14. I am very impresed by Larry’s recomendations on Gold, I hope to read someday his book on cycles of war, I hope I keep getting his recomendations on Gold, he seems extremely intellegent, when it comes to precious metals. I voted for Marco Arubio, and I hope we may still have a free Country after 2012. Our future is very grim at the present, but with part of our portfolio in Gold, we have a slight chance to make it through, the Greatest Depresion. I believe Larry and Martin to be the two brightest people I have listen too in years, my father taught me about cycles since I was a child. He learned in WW II. He was the highest security clearance you could recieve and they sent him to many schools, one was on cycles, he was stationed in the Carrabean, sub partol, he sank several German subs.
    We hope you keep telling us what the future will bring, in my two years of watching and reading, you have been 95% on the money. THANKS’

    Respectfully Yours

    Tom Swearingen

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