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Business
MARKET RADAR: Gold Remains in a Longer-Term Bull Market
Thursday, February 3, 2011
By Bill Sarubbi
Vienna- (PanOrient News) Stocks are projected to have a weaker market in the first part of February. A mid-month low will be a buying opportunity. Oil is expected to move in a trading range of $83-$95. Gold, meanwhile, remains in a longer-term bull market.
STOCKS
When I became interested in investments, I found that there was a great lack of work on investment timing. I studied technical analysis after learning the fundamentals at university. Technical work was lacking in that it did not fully utilize quantitative analysis, nor did it include cycles. Detractors claimed that cycles were not valid either because there was not enough price history or that there had to be some solid reason behind the cycles. My projection for 2010 took about an hour to formulate and was accurate for 10 months of the year.
In 2011:
• If the first 5 trading days of January are up, then the probability is that the entire month will be up. In fact, since 1933, this period has been up 49 times.
• If the month of January is up, then the odds are that the year will be up. Of those 49 periods, the market has risen 40 times.
• The third year of a president cycle is the pre-election year, and the last 17 pre-election years have been rising years.
• From the mid-term election year lows, the market has risen about 45% to 50%. The corresponding low for 2010 was in July.
• Longer-term, the 24 and the 40-month cycle versus the S&P have been found to be two of the most accurate rhythms over the long-term. These cycles point to higher prices in 2011.
Many will ignore these statistics, but I have found them useful over the years. The sum of the intermediate cycles successfully projected a higher market in January. It now points to a weaker market in the first part of February. A mid-month low will be a buying opportunity.
OIL
The cycle bottoms on February 6th. So this market is likely to accelerate from that date. The cycle then moves in a narrow saw-tooth pattern until May when it begins to rise again. Thus, we may see an oil trading range into May. This implies very little downside risk. Weekly oil broke out of a triangle formation with higher lows in momentum, a positive technical condition. In summary, it appears that oil will move higher in Q2, but that an $83-$95 trading range is likely until then.
GOLD
Gold remains in a longer-term bull market. The sentiment measures show that gold bulls have fallen to 60% from over 90%, but gold bulls can fall to 50% at lows. The price could fall to 1240 before the bull market resumes. The 8th, 14th, and 25th are likely turning points.
Readers likely recall past columns cautioned that most gold highs occur in the month of December, and the last high was on December 7th. Most gold lows are in February and in March. The gold cycle’s next low in on March 14th. The probability of any advance to new highs appears to be remote over the next 6 weeks.
* Bill Sarubbi, a strategist and portfolio manager currently operates his own business from Europe. He spends most of his time in Vienna, London, Tokyo, and Abu Dhabi.
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