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Business
Market Radar: War on Free Enterprise
Friday, September 17, 2010
Bill Sarubbi
By Bill Sarubbi
Cyclesresearch.com
Last Thursday's sentiment survey from the American Association of Individual Investors shows about 40% bulls. This is double the percentage of two weeks ago. Too much optimism is bearish for the US stock market, so I remain bearish.
The single biggest factor affecting the market is US governmental policies. The administration continues its war on free enterprise. Professor John B. Taylor writes about the banking bill in a WSJ op-ed entitled the "Dodd-Frank Financial Fiasco." The bill all but guarantees bailouts as far as the eye can see, while failing to address real problems like Fannie Mae and Freddie Mac. The complexity of the 2,319-page Dodd-Frank financial reform bill is certainly a threat to future economic growth.
This quote sums the situation up:
"We have tried spending money. We are spending more than we have ever spent before and it does not work... We have never made good on our promises... I say after 8 years of the Administration we have just as much unemployment as when we started, and an enormous debt to boot!"
-Henry Morgenthau, Secretary of the Treasury during the New Deal, May 1939
The emerging markets are different. Their relative strength versus the S&P is superior. This tells us that the markets think that future economic growth will likely be in Southeast Asia. The following markets are likely to remain leaders despite any market weakness in the West: Thailand, Malaysia, Indonesia, and the Philippines.
I am pleased to tell you that Cycles Research, the service upon which these columns are based, has been ranked Number One in stock market timing for the prior six months by Timer Digest, an independent rating service in Ct., USA.
Oil
The most dominant cycles in the oil market are 21 and 13 days in length. The market has become overbought daily, so it appears that oil will retreat to the $70-$72 area by the end of this month. October is likely to be a volatile month for this market. There have been more highs and lows in the oil price in October than in any other month. The energy stock sector is confirming this view; the stocks have been lagging the S&P 500.
Gold
The last column stated that, "In bull markets, the metal price has risen from the 13th to the last day of the month in 10 out of 10 years. Gold may trade in a range until the 13th, and then move higher over $1250 by month's end. The next pullback, which will likely be minor, is due in October."
On the 14th, gold rose over 420 and broke out over $1250. This breakout points to a price target of $1350, likely by early October. Next month, we are likely to see a retreat in this metal's price.
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