Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Current Outlook for Stocks, Commodities and the US Dollar 

Stock-Markets / Financial Markets 2011 Mar 28, 2011 - 06:53 AM GMT

By: John_Hampson


Best Financial Markets Analysis ArticleSince my analysis of March 17th, "Stock Market Buying Opportunity", US and European stock indices have risen 5-8%. Indices have broken through key resistance, key moving averages and made positive MACD crosses, plus small caps have outperformed, which is typically bullish. On the bearish side, volume has made a negative divergence, as shown below, and we do not see a typical positive Nymo divergence which would usually require another corrective leg down.

Source: AfraidToTrade

Leading indicators continue to be largely positive and strong (as covered in my analysis of March 24th) and cyclical bull topping indicators continue to be absent (as covered in my analysis of March 17th). Cyclical bull time forecasting predicts a stocks bull to continue into 2012.

The key headwinds now are the oil price and historical stocks returns in this period.

I cover crude oil below, but in short I expect a battle between stocks and crude if oil continues to rise above $105 (see my March 24th analysis), as historically strong crude rises have dragged down stocks. It is unlikely that both can continue to rise simultaneously, at current crude price levels and above.

Regarding historical stock returns, this quartile of the cyclical stocks bull coupled with its internal strength to date gave us a rough target range of 1280 to 1350 S&P by June (March 17th analysis). Considering cyclical bulls within secular bears have lasted on average 129 weeks and made 104% gains and we have currently made 98% gains on the S&P from the March 2009 low, some digestion of gains would be appropriate if the bull is to continue into next year.

QE/Pomo remains supportive until April 27th, at which meeting the Fed will signal to what extent this programme is to continue. If the Fed signals no QE3 then the markets could stage a pullback as of late April, despite QE2 continuing through to June. On the other hand, some form of programme continuation would be bullish. It remains an unknown. April is a seasonally strong month for stocks and US earnings season begins on April 11th.

Given all the above, I have taken partial profits on stock indices longs in place since March 17, and retain the remainder. I have no stock indices shorts.


Gold and Silver

I have previously reasoned (March 7th, February 1st) for a parabolic secular conclusion for precious metals, with a rough price target of $2000 for gold and a time target of 2011-2013. My strategy is simply to continue to hold gold and silver until enough time measures and indicators line up to suggest we are seeing that conclusion.

I am slightly overweight gold compared to silver because gold hit a long term buy signal in February whereas silver did not, silver doubled in a steep move the last 6 months whereas gold has been building out an inverse head and shoulders or cup and handle formation which typically precedes a big move up. Nevertheless, the gold:silver ratio is close to the historic average, suggesting silver was just playing catch up following underperformance around the recession and that its recent doubling was not excessive.


Agricultural Commodities

In my analysis of March 16th, I reasoned for continuing to hold a basket of softs whilst global inventories remain low and trends in natural phemonena, monetary condition and the oil price remain supportive, but for not adding to the position due to Spring climate forecasts and seasonality. Agricultural commodities have generally risen around 5% since then.

That remains my stance, with the latest forecasts suggest La Nina will be gone by June, giving rise to more normal conditions, although it is producing some floods and droughts before it wanes.

Looking further out, early forecasts suggest a more-active-than-usual US hurricane season from June to November this year. Agricultural commodities in the firing line for land-hitting storms are orange juice, cotton, grains and sugar.

For now, I continue to hold a broad basket of agricultural commodities and will not be adding. I have no short positions.


Natural Gas

In my analysis of February 28th, I reasoned for being long Natural Gas for the month of March, based on inventories, seasonality, weather forecasts, and extreme historic cheapness to rising oil prices. Natural Gas rose 10% in the month.

Whilst some abnormally cold weather did materialise, demand was not sufficiently high to draw down on inventories and gas stock levels have moved back into the middle of the historic range.

Source: EIA

On the other hand, the Japanese disaster has made Natural Gas relatively more attractive to nuclear fuel, and early forecasts suggest a more-active-than-usual US hurricane season from June to November this year. With the Gulf coast accounting for more than 40% of natural gas production, such a season would likely translate into rising prices, if only fear spikes.

With March positive seasonality done, and inventories back in mid-range, I have taken partial profits on Natural Gas and retain the remainder longer term, based on continued historical extreme cheapness to oil, the anticpated hurricane season, and political favour due to Japan's nuclear issues.


Crude Oil

In my analysis of February 28th, I reasoned for staying long crude oil, due to positive seasonality from March to September, troubles in the Middle East and North Africa likely lasting all the way through to new elections, strong global growth forecasts and global demand back at all time highs. Crude oil has risen around 7% since then. There is some premium, maybe up to 10%, to the current oil price based on the real supply reduction from Libya and the geopolitical uncertainty of that wider region. Positive developments in this part of the world could make for a near term price pullback, but I maintain that the uncertainty will remain generally supportive for some time. Crude oil inventories still remain historically high, due to a buildup during the recession, but we are into the seasonally strong time where stocks are drawn down.

Source: Bespoke Investment

As mentioned above in the stock market analysis, crude oil prices above $105 are likely to battle with stock indices for further gains, the two being incompatible. I expect some digestion of gains for crude, but longer term see crude oil going to at least $150, as per my analysis of March 7th.

I continue to stay long crude oil, but not adding to the position near term.


US Dollar

In my analysis of March 21st I contrasted a technically weak US dollar with a level of sentiment against the dollar that historically implied a bounce, and did not want to take a position either way until that was resolved. The US dollar has since bounced and the question now is whether it is backtesting the breakdown before dropping further (first chart below) or whether a more sustained bounce is to materialise along with a pullback in most other assets (second chart below).

Source Both: Chris Kimble

I continue to have no positions long or short in the US dollar, whilst this becomes clear. For reasons noted above, some digestion of gains for both stocks and oil and softs would be appropriate, which would fit well with either a sustained dollar bounce or sideways range action. Longer term I still expect a US dollar breakdown to accompany a secular commodities bull conclusion.

John Hampson

John Hampson, UK / Self-taught full-time trading at the global macro level / Future Studies / Forecasting By Amalgamation / Site launch 1st Feb 2011

© 2011 Copyright John Hampson - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules