Posts
Stocks
After further analysis of the wave structure and other factors, I am backing off the more bearish outlook of the previous post even though stocks were weaker then anticipated last week. This week there may be a holiday rally and If the rally tops below last weeks highs, it could be B wave to be followed by a C wave down into early December. If that scenario plays out, early December may be a good time to add to positions.
The reason for the more bullish outlook is the wave structure, the wave count for gold and the seasonally strong period that lasts until early Spring. Gold is in a bullish wave three and still looks like it could go much higher. Since gold and stocks have been well correlated, that indicates stocks could also be in a wave three from the July low and in wave three of three from the November low. This count is shown below on the Dow. The running double three pattern in wave two is very bullish. The wave one of three possibility was first mentioned on 8/17 as an alternate count.
If that is the correct count, it gives rise to the following calculations for wave three. The length of wave three is usually 1.5 to 3.5 times the price movement of Wave one. That gives a price target for wave three in the 11720 to 16602 range. Wave three is usually 1 to 4 times wave one in time. That would give a time target for wave three sometime between 10/10/09 and 7/13/10. The wave count indicates quite a ways to go, so it may be toward the latter part of that range and probably not before February.
Chart: Six month chart of DJIAGold/GLD
Gold was strong again last week finishing near the highs of the week and above the 112.75 target. The wave structure is still very bullish. Next target range is 116 -118.
