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Business
MARKET RADAR: Stocks Attractive, Oil in Uptrend and Gold Faces Correction
Friday, March 4, 2011
By Bill Sarubbi
New York - (PanOrient News) The TOPIX and the Chinese markets continue to appear attractive, a sustained uptrend will resume in May for oil, and there are cross currents for Gold.
STOCKS
Short-term, I do not think that the correction that began on February 22nd is concluded. As outlined in the turning point section, another decline is likely in March that will carry to the 1260-1265 area for the S&P. The summary of the 1, 4, and 10-year cycles does show a dip in March, so this drop is likely what the cycles were detecting. The market is likely to sell off again next week.
Longer-term, the market is supported by the rising 1, 4, and 10-year cycles plus the rising mid-term election cycle. The second graph is that of the NASDAQ 100 monthly. It has broken above its prior 2007 high at the 38.2% retracement level of the prior decline. Typically, the market internal signals such as breadth and new highs/new lows top out well before any serious market tops. This is not occurring now, so it does not appear that a serious decline is in the offing.
The TOPIX and the Chinese markets continue to appear attractive. These uptrends are likely to resume soon.
Since IBM was first recommended back in the autumn, the stock has risen from $135 to $164, a 22% rise. The stock will likely move to $190 before the stock pulls back.
OIL
Reliance upon the oil cycle alone would lead one to expect a downtrend in price. The unexpected spike up in price led to a breakout form the old rectangle formation that I had outlined in past reports. The weekly graph depicts a breakout from an ascending triangle that points to much higher prices in the $140-$150 area. What will be the resolution of these contradictory signals? My projection is that oil will settle back into a trading range in the $85-$95 area. The monthly graph shows that oil has now retraced 61.8% of its prior decline. A sustained uptrend will resume in May.
GOLD
Gold did hit a new high, following silver’s lead. There are cross currents that make a projection difficult. First, gold has been recovering in what is a seasonally weak period for the metal. The fact that gold has been swimming upstream against the cycles appears to be bullish. However, some very reputable wave counters have written that this gold rally is a very clear 5-wave uptrend. Gold appears to be headed for a 5th wave to a new high, to be followed by a significant correction. Gold is likely to $1450-$1460 before it pulls back. A significant high at this time of the year has been rare historically, but we must recall that March 18th will be the 3rd anniversary of the 2008 high that led to a correction into October. From the 18th to the 23rd, there are numerous turning-point projections. This is therefore the most likely time period in which to expect a high.
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.
PanOrient News
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