Dear Readers, In May 2014 I predicted here that topping pattern was developing in DOW and Stocks In General.
While, did not suggested immediate selling, the warning was given that DOW may underperform bonds going forward and caution was suggested. That fits into our YBR ( Yellow Brick Road pattern long term pattern predictor). Today we publish another confirming pattern with 9 signals under the belt since 2004, with nice top predictions of various sizes lasting from few weeks to few months.
Stocks
Graph below clearly indicates the patterns developed during the last 9 signals of the nature we discussed above and nice adherence to it by the signal generated last June.
While we are unable to bring longer future view, we do like to warn you that top of lasting duration is likely in November 2014 and that confirms also top of a lasting duration by YBR, which has practically last rising hump in November before heading lower for several weeks, at least.
As suggested the classic valuations (including Buffets own, Stocks Capitalization to GDP ratio) are flashing danger signals. Our Sentiment is predicting the fall in the markets and our technical, cycle and pattern studies are confirming the probability of a sharp drop from November.
The most peculiar feature of such prediction is that it seems to be coming when nobody expects it November to March are one of the best seasonal times and election cycles predict nice move up etc. Well, we shall see. We shall see.
Bonds
Last time we said bonds are better buy than stocks. That has been the case overall and twice (August and October) the DOW was negative on the year, while bonds moved higher consistently. Now we do not like either one of these instruments on a long term bases, but in intermediate term we would chose the out-performance by bonds. Of course we have technical limitations at which we will stop our capital committed to this idea. So nothing is followed blindly.
EURO
Last time we indicated Euro was in danger after colliding with 1.40 level. Indeed it has dropped 10%+ after touching 1.3994!
While we could have few more days of Short Term weakness, over mediate term of 3+ weeks and long we expect spike against Dollar, and decline again.
YEN
May have even better chance and outperform EURO, after few more weeks of short term weakness.
GOLD
Last time around we thought June/July gold could pick up along the seasonal and cyclical up-trends, while that happened the move up was not strong and suggested next cycle lows would be lower than last three standoffs at 1180 or so. We got that and may soon start rebounding, but are likely to see another bout of lows in mid 2015, which could prove more suitable base for stronger / sustained move up
OIL
We liked to short OIL, but refrained from doing so last time, due to geopolitical complications, which we still think will play role for OIL prices. Now, we continue thinking that OIL may have some more weakness before a longer term sustained move shows up and that is also, likely to show up sometime during / after Winter of 2015.
Due to Low Latency + HFT trading Infrastructure + software development commitments we suspended a short term trading advice for close to two years now, We still continue to manage money and provide an intermediate / longer term advice to members though.
Our motto is taken from Shota Rustavely, 12th century great Georgian Poet and Philosopher, who said: "You Find what you give, all else is lost."
