Financial Markets Timing Signals You Must Watch!
Stock-Markets / Financial Markets May 24, 2007 - 11:07 AM GMT
Larry Edelson writes: A couple times a year I like to give you my roadmaps of the markets. They are based on actual signals from my computer models. I watch these signals very closely because they tell me when a fork … speed bump … or U-turn is coming in the markets.
They are critical signals, and they should not be ignored. They're not always right. But after 30 years of developing and fine-tuning my system, I can safely say that the economic models they are based on are right far more often than they are wrong.
Case in point: My last two roadmaps for the markets, which I gave you in June and August of last year. In both instances, the signals I gave you in those issues helped keep you on the right side of the major trends.
For Real Wealth Report subscribers, the results were even more amazing. In my flash alert of March 6, I used my signals to raise protective stops for nearly all recommended positions.
I said in no uncertain terms that if those stops held, natural resources would soon be off to the races again. And that if they didn't, the stops would help subscribers preserve gains on winning positions and cut losses on losers.
Sure enough, virtually every one of the stops I gave my subscribers held. And natural resources took off to the moon again. Real Wealth's open position gains (losers included) now total over $41,000 as I write this.
It's Critical You Pay Attention To The Roadmap I'm Giving You Today …
Let me start with a couple of main points I want to make about the markets right now, then I'll give you the actual signals to watch.
First , another big correction in the natural resource markets is coming. It may be tomorrow, next week, or next month. I don't know for sure when it will come, but it's coming. It might be as ugly as the correction we saw back in February, or it could even be steeper.
Longer term, however, the natural resource bull markets are very much intact, and have much more to go on the upside.
Right now, I just want you to be prepared for a possible correction. The actual signals, which I'll give you in a few minutes, will help you do that.
Second , overseas markets — especially those in Asia — are deeply intertwined with the bull market in natural resources. Hence, foreign markets are also vulnerable to a sharp sell off at any moment.
Plus, plain and simple, they've gone up too far, too fast. Heck, China's stock market performance has been literally out of this world — up 130.57% in 2006 and another 52.9% so far this year!
You can see why some of these markets need to blow off some excess speculation, and humble some investors and traders, before prices can head much higher. China will probably lead the pack down again, just like it did in February.
But again, don't overly worry: The long-term uptrend in overseas economies and stock markets — and their capacity to outperform the U.S. — remains very much intact from a long-term perspective.
Heck, figures released this week by the Treasury Department showed that Americans spent a net $40.3 billion on overseas securities in March, the second-heaviest month of overseas securities purchasing ever.
I will continue to closely monitor the action in foreign markets, and I'll keep you updated.
Now, let's get right to the signals I want you to watch right now …
Gold: Short-term, gold must regain its previous rally and close above the $674.40 level to stay on track for new highs.
On the flip side, if gold closes below $653.30, be on the lookout for a decline back to $610 — and possibly even as low as $564 — before the next leg up begins.
Between $653 and $674, gold is essentially neutral short-term. So watch those two pivot points!
Oil: Oil is still very much in a long-term uptrend, with higher prices yet to come. But short-term, it's in a very wide trading range defined by $55.76 on the lower end and $69.69 per barrel on the upper side.
A close above $69.69 a barrel, and I have absolutely no doubt we will see $100 oil. On the other hand, a close below $55.76 would indicate that oil could fall further, to as low as $44 before the next explosive move up.
Because oil has a $14-a-barrel short-term trading range, it can be very volatile, swinging back and forth, yet still be capable of blasting off to the upside.
The same holds true for oil and energy shares: They are likely to remain in a choppy trading range until oil makes its next move based on the signals I just gave you.
Copper: This is a key metal to watch because it's very sensitive to economic conditions. Copper is often a leading indicator for the economy — anticipating a recession when it falls, or pointing to a resumption of growth when it breaks out to the upside.
Copper is currently trading at about $3.32 a pound. The two signals you want to watch …
$3.60 on the upside,
$3.01 on the downside.
In between, copper is neutral short-term. If it closes above $3.60, the metal is off to the races … to new record highs … and all is well with the global economy (except inflation!).
Conversely, if copper closes below $3.01 a pound, it will likely fall much lower, back to about $.23 a pound. And it will be a sign that the global economy is heading into a mini-recession/correction.
The Dow Jones Industrials: In my last report on the Dow I said that a close above 11,410 would mean new highs were coming. Subsequently, I stated that I thought the Dow could get up to 13,500, but that would be about it.
That's precisely what's happened. With the Dow now at 13,500 and change, I strongly recommend that investors in U.S. stocks (other than natural resource shares) be very careful. While the Dow could move higher, the risk squarely lies on the downside here.
The points to watch on the downside: 13,363 and 13,297. If the Dow closes below those two levels, the trend has changed back to the downside, at least on a short-term basis, and the index could easily fall back to 11,000 before stabilizing.
So stay tuned and watch these signals!
Best wishes,
By Larry Edelson
P.S. If you're a Real Wealth Report subscriber, I'll be watching these signals for you. And naturally, if any of my signals are hit, I will send you a flash alert telling you precisely what to do next!
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