Four Pillars Finance

Chinese astrology cycles for market timing

Archive for January, 2010

2010 outlook for gold and other markets

Posted by Danny on January 15, 2010

In part 2 of our prognosis for 2010 we look at gold stocks and other.

For gold stocks (XAU index) our cycles point to another flat to down year. We look for a peak around June, with bottoms around March and in September-October.

Euro – US$: Look for a stronger US dollar in the first half of the year, next an appreciating Euro after July.

Oil prices: Chinese cycles indicate rising oil prices for this year and also next. So we want to keep a good portion of investments in oil and related stocks.

Other commodities: Cycles for most other commodities like grains and metals point to downward pressure on prices this year.

Bonds and interest rates: Look for some recovery in bond prices , then another decline in the second half of the year. Interest rates should end the year flat to higher.

Bottom line: keep a good portion in energy related investments, and keep enough cash to take advantage of great buying opportunities we are likely to see within the next two years.

***

The first two years of a new decade (which are always Metal years) typically generate some great buying opportunities that last for the entire decade. Computers and internet dominated the 90s, and during the last decade metals and commodities have done extremely well.

For this decade I expect the best performance to come from certain new technologies again. Main candidates: biotech, nanotech, robotics, and space travel and exploration. So that’s what I want to buy when the market falls in a pessimistic mood this year or next.

Will gradually become defunct in the longer term, so better avoid:  newspapers, banks, insurance, manufacturing sector, large “dinosaur” companies.

Cheers,  Danny

Posted in Market Commentary | Tagged: , , | Leave a Comment »

2010 outlook for stock markets

Posted by Danny on January 5, 2010

Today we start giving our outlook for the new year,  and first we will take a look at the general picture for stock markets.

In last month’s analysis for Nasdaq we mentioned a possible jump to the 2300 level, and that’s where we are there right now. So, what next?

Here is our FPF prediction chart for Nasdaq in 2010:

Nas2010

(prediction chart made with Four Pillars Finance software)

As you can see the chart is mostly red, so we can expect to get renewed downside action this year. January is still slightly positive, but next February we will enter the year of Yang Metal Tiger.

Tiger is considered Wood, so the main elements this year will be Metal and Wood. This is very much a mixed bag, as Metal is usually negative for stocks while Wood has a positive influence. Metal controls and wounds Wood, so the growth(Wood) will be subdued, it is like a wounded Tiger, or say wounded growth.

Looking at the monthly variations: after an OK start in January new clouds will appear on the economic sky and investors will realize that things are not nearly as rosy as we have been told to believe recently. At best markets will (try to) hold up till March, because the FPF index stays close to neutral till March, but April-May I will be looking for some noticeable downside action. July-August and December offer the best chances to produce rallies this year. Expect the moves to be of the fast-and-unexpected variety (Tiger style), sudden shocks. Thus more volatile, contrary to the more steady moves we got in Ox year.

Given the zigzag nature of the expected pattern it is more difficult to say where the Nasdaq is likely to end the year. A breakeven year is possible, but I think it is more likely we will get another down year with the Nasdaq Composite Index ending somewhere below 2000 .

So for the moment I would stay out of most stocks and just wait for better entry levels later this year. Metal years have rarely been easy sailing.

Potential major investment themes for 2010:

  • look for important news and rare breakthroughs in science, technology and medicine, also in next year 2011 – Metal Rabbit.
  • a new wave of protectionism, trade wars, and more economic controls as politicians continue to increase their grip on the economy (which will fail as it always has).
  • a sudden currency or bond market panic.
  • major changes for Cuba, could be the lifting of the US embargo or the passing away of Fidel Castro.
  • the green movement and green stocks plagued by scandals.
  • separation movements become more vigorous.
  • actions or violence by single individuals make the news.
  • expect the unexpected, aka white tiger events…

Check back for our prognosis for gold and other markets in the coming days.

Danny

Posted in Market Commentary | 5 Comments »

2009 wrap up

Posted by Danny on January 2, 2010

Today we look back on the predictions we made last year, and within the next couple of days we will present our prognosis for 2010.

Here is the link to our last year’s predictions

For the stock market our cycles called for an up year, with economies stabilizing and volatility in the markets decreasing. We put a target of at least 2000 and possibly 2300-2400 for the Nasdaq index.
This worked out very nicely as the Nasdaq just ended the year at 2269. Remember that Nasdaq started the year at 1600 and economies looked very bleak, so a 40% rise was not so obvious.
The VIX volatility index reached its lowest level since the financial crisis started more than a year ago.
While our cycles did not indicate the stock market bottom in March, they were correct in showing a strong up year.

For gold stocks and Euro-US$ rate our prediction was not on the mark.
Gold stocks did quite a bit better than we expected and the XAU index ended well above the range we indicated.
The dollar kept weakening throughout the year and only started showing some strength in the last months.

Our commodity picks were coffee, wheat and silver.
Coffee prices rose gradually throughout the year and ended up about 30%.
Wheat prices stayed largely flat.
Silver went up strongly: from $11/ounce at the beginning of the year silver went as high as $19 and ended the year near $17, up more than 60%.

We also recommended to use price weakness to buy crude oil and sugar for the long term.
Crude oil traded as low as $40/barrel till late February, then went up and now sells near $80.
Sugar could be bought at $12 till April, then went up and ended the year at $27 , that’s a gain of  125%.

Overall most of our predictions did well and it will not be easy to match this for 2010.
But of course we will try.
So check back for our 2010 prognosis in the next few days.

Happy New Year,  Danny

Posted in Market Commentary | Tagged: , , , , | 1 Comment »

 
%d bloggers like this: