We just released the FPF forecasts for 2012.
A bit later than normal, but this year it includes 67 pages of charts for many markets around the world, forex and commodities. So it took us longer to prepare.

This year we include not only the Chinese cycles we normally use in combination with trend lines, but you also get to see our proprietary indicators, which help to spot changes in trends quite early.

In short summary, all the methods I use point to an up year for most stock markets.
To learn more just download the PDF file (it is too long to include here).
You can read it directly on your computer, or make a high quality print out.
Here is the link:
http://fourpillars.net/finance/pdf/year2012.pdf

It is an over 8MB file, so please be patient.
If too many people download at the same time, then it may get slow. In that case just try again later.

Danny.

You can find our old 2011 forecasts here:
http://fourpillarsfinance.wordpress.com/2011/01/03/prognosis-for-2011/

While most investors experienced 2011 as a very difficult year, it is fair to say that most of our cycles have worked exceptionally well.
Let’s have a look.

Hit:
Our expected pattern for the Nasdaq Index was right on the mark with bottoms in spring and in September.
And the year ended flat to down for most stock markets.

Hit:
Gold and gold stocks did experience a serious correction in 2011.
The gold stocks (XAU) reached their lowest level since 2010 in October.

Hit:
The Euro has been in the news all year. Our prediction was neutral, calling for Euro strength in summer, followed by weakness.
That’s exactly what happened.
From 1.30 vs US$ the Euro rose to the 1.46 area, where it stayed all summer, only to give back all these gains and end the year down at 1.30 again.

So-so:
Oil prices did actually go above $100, satisfying our forecast, but it was also back down to $80 by mid-year and rose up to $100 again by December.
The prediction was not wrong, but could have been better.

Hit:
Most grains and soft commodities did make a downward correction in 2011.
So if you waited to buy you avoided losses.

Miss:
Our prediction for bond prices (interest rates) was wrong.
The US long term interest rates have continued to go down.

So we have four hits and one miss, which always makes for a good year.
It will not be easy to match this, but we will try.
So stay tuned for our new prognosis for 2012.

Happy New Year.

Danny

We are now on Twitter where we will occasionally post quick comments , updated charts and so on.
Our comments will be based on the Four Pillars Finance and on the LunaticTrader.

The latest tweets also appear in the left sidebar here on the blog.

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All the best, Danny

Here is our New Year prediction for 2011.
You can also download it in PDF format by clicking here: Year2011.pdf
Easy for printing or passing on to friends.

The New Chinese Year of the Yin Metal Rabbit will start next February 4.
But as always, we give our preview in early January.

First a brief look at the predictions we made last year, our hits and our misses.
They were posted here on the FPF blog in 2 parts:

http://fourpillarsfinance.wordpress.com/2010/01/05/2010-outlook-for-stock-markets/
http://fourpillarsfinance.wordpress.com/2010/01/15/2010-outlook-for-gold-and-other-markets/

Hit:
Our predicted pattern for the Nasdaq stock market panned out nicely.
We did get a difficult first half of the year, next a market recovery in the later months.
And the ‘noticeable downside action’ for April-May came right on target.

Miss:
Our prediction for gold stocks was not good.
We did get a peak in June, but the gold and gold stocks kept going up in the second half of the year.

Hit:
For the Euro – US$ currency rate our prognosis was right on the mark.
The dollar went up till June, and next the Euro recovered.

Hit:
We did get rising oil prices, with a barrel of crude ending the year above $90.

Miss:
Our prediction for most grains and other commodities to be under downward pressure was obviously wrong.

Hit:
Our prognosis for bonds and interest rates worked well.
Bonds went up till September, then declined quite fast.

Overall, four hits and two misses.
That’s not a bad year in this line of work.

Predictions for 2011

Stock Markets

Here is our Nasdaq prediction chart for 2011:

(Predictive chart made with FPF 1.1 software, available at http://www.fourpillars.net/finance/fpf.php)

As we mentioned in last year’s prognosis, the first two years of a new decade typically bring some great buying opportunities for long term investors (more on this in a future issue of our newsletter).

2010 was expected to give us a bottom around mid-year, and the people who bought last summer are now up about 20% already.

The Chinese cycles now show us two potential buying opportunities for the Nasdaq in 2011.
The first one in February-March, but that could stretch into May or even June.
The second one in August-September.

This doesn’t mean we are guaranteed to get declines and bottoms in these months, just be ready to buy if an opportunity presents within these timeframes.
Metal Rabbit is a mixture of Wood and Metal element, conflicting elements, so look for another bumpy ride this year.
If losses are not too big by September, then we will end the year in the plus, but the odds are for a down to flat year.

We will discuss the ongoing evolution here and in the FPF newsletter.

And I also give some weekly comments on the LunaticTrader blog.

Gold and Euro/US$:

Gold stocks:
According to our cycles, 2011 will be a bottom year for gold and gold stocks.
Expected bottoms around June – July, or in October.
If we do not get any meaningful corrections in these timeframes, then look for gold to sour much higher in 2012 and 2013.

Euro/US dollar:
The outlook is rather neutral for Euro/US$ this year.
Probably up and down around current levels.
Look for some Euro strength this summer, next weaker again.
If the Euro is going to fail it will be in 2012.

Oil Prices

2011 should see further rising oil prices, with the price going above $100 per barrel again.

Commodity picks for 2011:

All grains and soft commodities are good buys when they make a downward correction in 2011 (which is likely according to Chinese cycles).
They will go up in 2012 and 2013, when inflation will become a real problem.

Bond prices

Bonds prices will continue to go down into their next expected major bottom in 2012 or 2013.

Rising interest rates will continue to be bad news for people, companies and governments with debts.
But for those with savings it becomes extra income.

And that is forgotten all too often: lowering interest rates doesn’t stimulate the economy at all.
At the most it encourages some people to borrow and spend, which boosts consumption and retail sales today.
But then that new debt will weigh down their consumption and spending tomorrow.
And for those with money in the bank, lower interests only mean less income.
How is that helping the economy?
As long as that is not understood, don’t look for any lasting solution to the current economic malaise.

Enjoy the year.

Danny VdB

Here is the most recent update on the markets we cover.

Now in PDF format, easy to read, print or forward to a friend

Here is the updated prognosis chart (click for full size image):

As for gold stocks, the price of gold and silver has been doing better than we expected.
But the XAU index is still lagging and not making new highs.
That makes me cautious for this market.
Our longer term cycles point to a bottom for gold markets next year, so that’s when I will be looking for a possible buying opportunity.

Good luck, Danny

Nasdaq

Current level: 2288

The Nasdaq is unchanged since we last gave a more detailed outlook for it.
But quite a bit has been going on in the meantime.
The market turned down, as expected, and found support near 2050, one of the resistance levels we had indicated. Next prices have rebounded swiftly, and now we are right back where we were in the end of June.

Going forward our Chinese cycles point to a downward bias for September and October, probably followed by a year end rally.
I see two possible scenarios.
1) A mild decline that stays above the early July lows. This would probably see us end the year slightly in the plus.
2) A more sharp drop in which the July lows are broken. Then we are likely to get to 1700-1800 area before stabilizing and rebound into next year.

Currently I would give about 75% probability for the mild scenario 1.

Here is our updated prognosis chart (click for larger image):

Gold Stocks (XAU)

Gold stocks have remained weak. I would continue to stay out.

Euro – US$

Current level : 1.32

Euro has rebounded nicely, as we indicated in our last post.
We have already reached our 1.32 upside target.
While it may go to 1.35 short term, I would take the profits here.
It would not surprise me if the expected weakness for stocks in the coming months comes with renewed weakness in the Euro as well.
The further direction of this market is highly uncertain for the moment.

Oil Prices (USO)

Has started to go up as indicated by our cycles.
Hold on for longer term.

US 20 year Treasury Bonds (TLT)

Current level: 100

Has reached a summer high as our cycles indicated. Could jump to 105 if there is any panic in the stock market. But wouldn’t bank on it.

One day people will feel stupid holding these bonds that give them a 4% return for the next 10-20 years. And where will the buyers come from when they want to sell?

Get out of bonds.

Good Luck,  Danny