Saturday, June 18, 2011

Fibonacci for bulls now, sunspots cycle for bears later: sizing up Year 2011 forecast for stocks

Time for a mid-year review; let's start with Fibonacci time cycles. First, June may be a buying-time low because the stock market has dropped close to the 200-day moving averages plus the prior swing low marked by 1249/1250 in the $SPX. And because July marks the 1.618 time extension of the 17-month drop from October 2007 into the March 2009 low, it's valid to look for a move up into a swing high in early or mid-July. The 1.318 time extension was February and that provided a significant market movement, a drop into the March lows (hmm, 2-year anniversary). So I think these Fibonacci time extensions are working. I believe the 1.382 and 1.618 have the most force, although the 1.786 may work too (September). This alone has me looking for a significant tradable low in June, and ideally we'd see it coming up next week at the 1249-ish area for $SPX.

I think we've seen a form of ending diagonal triangle (EDT - an Elliott Wave pattern) across many markets, including many in which its final 5th wave appears truncated. That means that I've shiften to a more bearish point of view overall, candidly. That, despite seeing the market oversold by the 200-day moving average (discussed in my post here Thursday evening) going into the week including the 25th/26th of the month (typically a dip to buy) before the traditionally bullish end-of-June "window dressing" time, I'm not convinced we'll see new stock market highs. An Elliott Wave "B" wave, if in a "flat", often goes to 1.382 of the "A" wave's length in terms of price. What if there's a similar relationship in time? And an EDT typically completes a wave movement of a significant level. Still, I don't know that we can conclusively say that a true EDT put the finishing touch on the rally from March 2009. I do know that after an EDT, the initial price target is where the EDT began. For the $SPX, that's 1249, so it's why I've referred to that target often in the past couple of weeks. And now we're almost there.

The next move after testing this level is a rally. If it goes to higher highs, whether July or October, great! Some have also said that cycles point to early next year for a significant top. Well, doubling is also a Fibonacci number, and 2 times 17 months = 34 months, which from the March 2009 low points to January 2012. Maybe it'll be a higher low, or just a lower low, but either way, it's very likely to have much more bearish consequences.

And that brings us to sunspots. I posted about the sunspots cycle a few days ago here. I'm showing more information today, emphasizing that the current Cycle 24 is now expected to end earlier than initially projected. And after that, scientists now foresee a "minimum" period without sunspots for a long time. Some may think the result will be lower stock prices but higher commodity prices. It's likely to surprise market participants, no matter what.

Below is a beautiful NASA photo of the sun, and then I'm quoting some material from a recent article explaining more about the sunspots cycles and new forecasts. You know, Kondratieff's long-wave cycles probably originate in solar geocosmic cycles, and the cycles of other lengths may be harmonically related too!

The sunspots cycle (or "solar cycle") averages 11 years and is based on the changing energies within the sun itself. You can certainly learn more about it from the NASA websites and various scientific and educational sites. This particular quoted material below, is only a portion of an article posted yesterday at one lively site called "Watts Up With That?, and can be found in its full version at In this article, Professor Easterbrook is showing why he disagrees with the IPCC-projected warming forecast (in red on his chart below), and sees cooling ahead instead:


Don J. Easterbrook, Professor of Geology, Western Washington University, Bellingham, WA


In 1999, the year after the high temperatures of the 1998 El Nino, I became convinced that geologic data of recurring climatic cycles (ice core isotopes, glacial advances and retreats, and sun spot minima) showed conclusively that we were headed for several decades of global cooling and presented a paper to that effect (Fig. 5). ....

Figure 5. Projected temperature changes to 2040 AD. Three possible scenarios are shown: (1) cooling similar to the 1945-1977 cooling, cooling similar to the 1880-1915 cooling, and cooling similar to the Dalton Minimum 1790-1820. Cooling similar to the Maunder Minimum would be an extension of the Dalton curve off the graph.

So far, my cooling prediction seems to be coming to pass, with no global warming above the 1998 temperatures and a gradually deepening cooling since then. However, until now, I have suggested that it was too early to tell which of these possible cooling scenarios were most likely. If we are indeed headed toward a disappearance of sunspots similar to the Maunder Minimum during the Little Ice Age then perhaps my most dire prediction may come to pass. As I have said many times over the past 10 years, time will tell whether my prediction is correct or not. The announcement that sun spots may disappear totally for several decades is very disturbing because it could mean that we are headed for another Little Ice Age during a time when world population is predicted to increase by 50% with sharply increasing demands for energy, food production, and other human needs. Hardest hit will be poor countries that already have low food production, but everyone would feel the effect of such cooling. The clock is ticking. Time will tell!

Depending on just what effects we experience - and how well (or poorly) we adapt, including technology use - commodities markets may be most affected (higher prices possible especially in agricultural), while stock markets could suffer except for any sectors that might come to the fore (specialized buildings, infrastructure?).

For now it's food for thought and a reason to think beyond the myopically conventional assumptions about what the next decades will bring. Compare Easterbook's projections (which contrast greatly to the IPCC projections already proven erroneous) with long-term market projections of Raymond Merriman (including his dollar bull market, discussed in last night's post here), Andre Gratian's long-cycles mention. Terry Laundry's T Theory (Tm), the Kress long-wave cycles Clif Droke wrote about (cited in my sunspots post a few days ago here), and even Manfred Zimmel's dire predictions for coming years, and you may find it very intriguing. It won't keep us from buying long the markets when they rally or uptrend. But it'll keep us wary.

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