US Stocks for March 2017

We anticipate US stocks have entered a consolidation phase lasting a minimum of  several months.

Stocks have performed strongly off the back of the Presidential election. This has served to clarify where things are heading. Any short term ambiguity has now been cleared away. The recent top and pullback also coincides with the topping phase of the eight year stock market cycle that has continued for over 50 years. Note while March 2017 is the month time window for the peak, cycles of this length can take 1-2 years to complete their cycle top. Take the stock market top in 2000. While the highs occurred by March 2000. This was well before the 8 year cycle high of 2001. The then markets chopped around for another year close to the all time highs before pealing way into their 2003 lows.

The next 8 year cycle low will occur some time in 2025 and by that time stock market will be equal to, or lower than 2009 stock market lows. A lot  will have changed by then – politically, economically and socially.

We note the growing political, social and economic cross-currents that have been building over the last 2 decades. This is typical of major tops and is reflected by the difficulty investors and business people have in making business and investment decisions.

So anticipate US stocks pulling back between now and May to August of this year. into the  consolidation lows. The pullback should be quite steep and volatile with potential targets of DJIA 19500 – 19900, SP500 2000 – 2100. We note US money supply growth is declining rapidly which underpins the softening stock market.

Following the pullback we will see, once again, markets rise to new highs. The nature of the rise we foresee being accompanied by extremely bullish news. Typically, major corporate tax cuts would fit with this picture,  rising money supply growth and a rising, extremely bullish euphoria. This coming run should take the DJIA above 23000 to 25000.

We believe this is the last gasp of The End of the Long Game 2009-2018 and there is a high probability that it is ending in a 1929 style stock market blow off. Ironically the same factors that caused the 1929-1933 Great Depression are also causing the current bull market rally. This will be the peak in a 230 year cycle of human endeavor. We are witnessing history, a history that will stand for generations to come.

 

US Stocks Update 25/11/2016

We have reached an interesting juncture with this US stocks update. In the next few trading days – maybe as early as Monday 28/11, we anticipate stocks to open higher and then reverse to the downside. Failure to follow through with new highs within 5 trading days would indicate a major top has been made and a quick test of DJIA 15370 (SP500 1810) is due.

djia-3rd-qtr-2012-to-present

DJIA 3rd QTR 2012 to Present

It may be that the so called Trump rally is part of a larger consolidation phase and an even bigger rally is due to get underway after a sharp down move to shake out complacent longs.

Sentiment has become extremely bullish despite gathering storm clouds on the horizon (interest rate normalization, EU bank health, Trumponomics, US economic health). Stocks in the short term have become overbought so we anticipate corrections as a normal part of the process.

Quite likely we will see a low in gold and a high in the US dollar occurring near to this time. The Euro should take out its 1.04 -1.05 lows and gold should complete a low in line with our previous post around US$1180. Again, whether this is just a breather or something more substantial we shall have to wait for further clarification.

Political Prediction Results 2016

We called the US Presidential election (27/07/2016 & 29/10/2016) saying Trump would win. We called the Australian federal election and while we didn’t quite get what we thought would happen, we got second best with the Australian people being the winners (16/06/2016, 28/06/2016 & 24/07/2016).

Expect further political upsets in 2017 with elections falling due in France and Germany.

US Presidential Election Prediction

Its clear we are in a cycle of increasing political chaos and uncertainty. This is continuing to escalate. Its happening in liberal democratic countries. National elections are due in these countries (Germandonald-trumpy, France 2017), UK (2018). We can anticipate major upheavals along with the US. We are seeing the death throes of the liberal democratic tradition. Worsening economic inequality, the self interest of political elites, political coverups, politicians unable to deliver on their promises, vote rigging, dodgy economics, disenfranchised voters, unaccountable rogue police are just some of the issues to be seen in newspapers and television. Democracy, a human system, like all systems before, is failing.

Next US President

Given the increasing political chaos we anticipate Donald Trump will be elected as the 45th US President of the United States of America. Between now and November we should see a marked swing towards Trump. Viewing the US situation through the lens of cycles analysis we step beyond the character and reputation of US Presidential nominees to see the fabric of a society and economy being eroded through self interest.This process has been underway for over 5 decades.TruHillary Clinton imagesmp’s election should be seen as the response to a disenfranchised electorate. That’s both within the parties and without. Its an  increasingly angry social mood. Voters are angry and one of their few options is to respond at the ballot. Electoral horror at the status quo has emerged with a dual society – the haves and have nots, cronyism, hidden interests, corporatism, the endless wars, spurious economics, indebtedness………..

Like Brexit and many of the problems we are witnessing nightly in the news (EU refugee crisis, police and citizen shootings, etc), many crises have been manufactured by governments themselves.

We witness the unfolding political, social and economic drama of the USA and by extension the global stage since the US ascended to become the global hegemon after WWII. Most people acknowledge things have gone terribly wrong over the last 20 years but nobody knows what to do. There is little or no confidence in the political class, or their technocrat advisors, government institutions, the economy and society at large. We anticipate the continuing breakdown of the status quo an Trump’s election to the presidency is merely a reflection of the zeitgeist of our time. Yet this is perfectly understandable when you step back from the noise of daily media and observe the cycles of history evolving before our eyes.

History Repeating

An historical example of a time when a large scale breakdown of society occurred on this scale was during the phase 1740-1792 leading to the French Revolution. This time however, with globalization, it spans over many countries. At that time we saw increasing political instability with its attendant corruption, economic decay and the polarization of the people against the political elites (king and government). It’s happened many times before as any student of history will testify, is happening now and will happen again as humans consistently fail to learn from their past.

Understanding Cyclic History

We are witnessing in our lifetime the completion of large scale cycles of human endeavor and activity with the attendant dislocation and reallocation of social, economic and political activity and resources. An understanding of the broad brush strokes economically, socially and politically may serve to enhance your perspective on what emerges next. The scale of forces at work in liberal and democratic societies and economies is so huge that the current drama is taking decades to unfold.

This is the topping and completion process of an economic cycle that has been going on for around 224 years. By the time this top and the ensuing drama is finished, it may well have spanned generations of people. On a historical note, we are witnessing the completion of the growth phase of the industrial revolution cycle that began around 1783-5.

And so what does Trump have to do with economic cycles?

The current political chaos will continue to intensify and this will give way eventually into economic chaos. The impending signs  for that economic chaos are clearly to be seen and once again it centers on the incapacity of central planners and bureaucrats to perceive the unintended consequences of their mischief. Trump has nothing to do with these economic cycles. He merely reflects the zeitgeist of the times. Like someone surfing a wave, they ride the wave for a period of time then disappear into the footnotes of history. Trump has often appeared at major tops of economic cycles in the last 30 years in US history. Its not surprising then he has reappeared surfing the zeitgeist wave as the US completes the topping phase of this huge cycle of human endeavor.

Trump’s ability to ride the social mood of the time we believe will help him to take the presidency. Whether he will have the power to change the status quo, like Obama who promised major change yet found himself caught in the entrenched self interest of Congress, Wall Street, Big Pharma and the military. Trump may well ride the last vestiges of prosperity in this cycle. Given the growing political and economic storm Trump may well find himself the target of assassination attempts in the next four years. He will be remembered as the President that reigned at the time the US and world peaked in economic activity for many decades to come.

Whether we have a few more months or years of twilight before the downside comes home to roost, suffice to say, from now on we can expect increasingly tough times punctuated by phases of optimism. The current political chaos will continue to intensify and this will give way into economic chaos. The impending signs  for that economic chaos are already clearly seen and once again it the focus centers on the incapacity of central planners and bureaucrats to perceive the unintended consequences of their mischief. Will people in future times learn from our mistakes and mistakes of the past? We think not.

Contrary Opinion and Australian Elections

As political risk increases in all liberal democratic countries we can expect to see the contrary opinion factor playing a greater role in evaluating risk in elections and other important events.

One example is of course Brexit, while a close call, consensus opinion was that the UK would remain. Similarly, the Australian election consensus has continuously been that the Liberal Party of Australia would prevail. However, as previously posted (16/06/16), the Australian electorate is deeply cynical of its politicians and none of the contenders for the 2016 federal election are offering a way forward.

Economic, social  and political reform is needed to set Australia on course for the next phase of its 100 year odd history. Its clear that the electorate is exhausted by the constant personality bicker of politicians and their inability to tackle the big issues. The consistent message for over a decade is that political self interest is more important than the people. Accordingly many believe the economic and social decline experienced by many Australians is set to continue.

Little has been said by politicians that offers any resonance with voters. So with this dissonance there is room for the Law of Contrary Opinion to operate. The law suggests “if everybody thinks one thing then bet the other way.” This law works well at times of extremity. For example, consensus thinking at elections, stock market highs and lows, etc, etc. Traders of financial markets use this tool when market sentiment is strongly biased.

Based on contrary opinion then, expect an upset on July 2nd with either a hung parliament or an outright win to the Australian Labor Party.

Brexit Impact 2016

Should the “leave” vote win the coming UK referendum you can expect the impact to have global consequences. It will challenge the survivability of the EU. At the same time it will create massive flights of capital around the world as investors seek refuge for their money. Anticipate the USD being strongly bid. This will have a huge impact on US stock markets at the expense of peripheral markets and their currencies. The nature of global economics has been apparent for some time, though not obvious.  Brexit will cause this to accelerate.

What is clear is the counter-intuitive nature of the Brexit situation. The narrative being promoted by the “in” vote is not what it seems. Democratic processes to do with EU politics have earned a reputation for not being so straight forward with several countries having the “will of the people” overturned in the last decade or so.

Should the UK decide to remain in the EU, we anticipate this will only serve to delay the inevitably. Namely the demise of the EU itself. A reading of history itself should remind that all political systems fail and a political system built on faulty premises to begin with, fail sooner. Thus, human nature expresses itself in a cyclical manner again and again.

Australian Political Elections 2016

It seems Australian voters want another “hung parliament”. The main parties are both doing their best to lose winning government. Little they say offers any resonance with voters.

The Australian electorate is deeply cynical of its politicians and none of the contenders for the 2016 federal election are offering anything offering a way forward. Economic, social  and political reform is needed to set Australia on course for the next phase of its 100 year odd history. Its clear that the electorate is exhausted by the constant personality bicker of politicians and their inability to tackle the big issues. The consistent message for over a decade is that political self interest is more important than the Australian people. Accordingly many believe the economic and social decline experienced by many Australians is set to continue.

Confirming this, we see a lethargic economy and a growing sense of unease many Australians feel about their prospects. This reflects a deteriorating social mood. It won’t be long before this translates into a declining economy. Indeed, capital flows into and out of Australia indicate the tide is definitely running out and despite the best attempts of the RBA, we may soon see the downside of the business cycle in full flight. A good barometer highlighting this is the Australian stock market which remains stalled around the 5300 level ( ASX/SP 200) whilst US stock markets hover relatively near their all time highs.

 

Gold Update 18122015

Gold is in the final phases of completing its downward run from its 2012 highs at US$1923. The three year unwind has created many false starts for the next bull market. The coming recovery will prove to be another of those events. It will however be larger in nature than the attempted recoveries we have seen over the last 2 years.

We anticipate gold, once it has completed its low, will advance rapidly to above the US$1307-$1350 level before continuing a more moderate climb towards the US$1500 mark. Lows often occur in metals, stock markets and currencies at the end of the year. When we have confirmed the low is in we can look more closely to the recovery levels. Of course this also implies some sort of political/economic crisis to drive the metal higher.

PS: Watch bitcoin perform in this coming phase. It should also peak long before gold does and begin to decline. It has performed as a useful barometer for gold over the last few years.

US Dollar to strengthen further

Our research shows the USD has further to strengthen. We are still targeting 0.98 to 1.04 for the Euro/USD, Aud/USD between 0.65-0.675 cents and US$/Yen above 125. This would place the US$ Index around the 103 level for a major top followed by a major pull back. We anticipate this happening in the first 6 months of 2016. We at Emerging Events believe selling US dollars above 103 basis the US$ Index represents good selling.

October, October

An interesting month ahead for October should see a spike down in US stock markets. Potentially this will be the low of the sell off since the highs this year (DJIA 183350.46, SP500 2132.02). The nature of the rally from the lows will reflect on the the longer term trend and we will advise accordingly. If the move proves to be larger (breaching DJIA 11258.01, SP500 1219.80), it will indicate a major change of trend.

At the same time we anticipate gold will also spike up above US$1225 and further. These events may well be precipitated by some flash news. Rumors abound at present of European bank failures and the shock of this would certainly impact global financial markets.

We are currently updating our big picture The End of the Long Game 2009-2018 and will show how this juncture represents a pivotal time for global economies and financial markets.

Financial Markets On Schedule 22/08/2015

US stock markets have fallen strongly over the last week completing the topping process that has lasted for many long months. Stock markets are expected to move down to the 15855 level basis DJIA (S&P500 1820) and lower. Our predictions while slow to come to fruition are right on track. It is important to understand that time and prices do not move in a linear mutual fashion.

Stocks, once bottomed below 15855 (1820) will begin a counter rally. The nature of the counter rally is important and will determine the direction of stock markets and economic activity in general for many years to come.

Should US stocks fail to make a new high over the next 3-9 months will confirm a major downturn and a long term bear market. (More on that later). If it does however make new high it has the potential to run on as asset inflation leads stocks and other asset classes into a final frenzy of asset buying. The amount of money printing over the last years could force an exponential rise in asset classes if we see stock markets recover well. History repeats itself and Gold in 1980, the Tulip Craze of 1636-1637 and the South Sea Bubble of 1720.

We at Emerging Events consider that path to be a lower probability. The potential for stock markets to rebound and rollover to begin a new downward move is very high. We hold this view is supported by long term Austrian Business Cycle Theory, and the fact that the world is not producing enough income to service the amount of debt that exists (both public and private).

However we are not paid to make guesses and so now we wait and watch carefully. We will update and advise as soon as the picture clarifies.

The Great Sovereign Debt Crisis Coming Soon

Starting in Europe and reaching public consciousness when Japan implodes before engulfing the USA and remaining Liberal-Democratic nations.

The Great Sovereign Debt Crisis of the 21st Century is steadily gaining momentum. The forces of deflation have been steadily building since 2000 and the stage is set over the next 6-12 months where the reality of public plundering of the means of production comes home to roost. The weight of public and private debt, government regulation and leverage, fraudulent economics and fallacious political thinking that assumes that if you keep taking and spending other people’s money you will never ever run out!

Yet this is exactly what is happening. The politicians have borrowed to deliver on promises they were never going to be around to see delivered. They’ve debased the their currency and now we have reached the problem that there is so much debt in the world that the world does not have enough income to service that debt.

Historically its happened many times before of course and yet we never seem to learn. Empires grow and prosper, politicians make promises, governments and people borrow and everyone takes for granted the wealth that has been achieved until finally, it all collapses. History records the rise and fall of civilizations on exactly this premise. It’s always government and the self-seeking of leaders that cause civilizations to self-destruct.

While we observe the rise and fall of empires due to reasons of currency debasement or war, we can also observe that these are merely the mechanisms that cause the problems. Behind them lies the cyclic nature of humanity. Deep in the limbic system of the human brain reside deep impulses that play out at individual and aggregate levels.

We might look back at the Tulip Mania Bubble of the Dutch Golden Age (1634-1637) and wonder how people might have been so crazy as to invest in tulips. The Tulip Mania occurred on the back of a Europe-wide debasement of coins (1619-1622) used to finance war. Yet they did and future historians will look back at early 21st century share, commodity, real estate prices and wonder “how could they have been so blind?”TulipPricesDebasement of the currency has occurred this time by closing the link between gold and paper money and the massive printing of money that subsequently occurred. Each era brings the usual excuse “this time its different”. But the same debasing of money, the same political hubris, the same grasp for political power create the same drivers that cause the boom and the bust.

We watch at the moment the European debt drama playing out in Greece. Other nations sit on the edge of potential debt crises including Spain, Portugal, Italy, Puerto Rica and various cities of the US. This is just the beginning. Soon we shall see the debt crisis spreading to northern Europe, Japan, China and the US. Its about sovereign debt of course, the debt accumulated by generations of politicians spending other people’s money.SouthSeaIn Japan they experienced this in the early 1930’s when massive money printing operations inflated their economy. It resulted in the assassination of the Finance Minister and Prime Minister, the establishment of the military as the power brokers of Japanese politics and the beginnings of the build up for for WWII. That didn’t end well for the Japanese people.

Between 1740 and 1783, the French experienced it with the massive indebtedness of the monarchy, high taxes, high levels of regulation and cronyism led to the French Revolution, Napoleon and a final defeat in 1815.

Pax Romana followed a similar path where eventually the debasement of the currency and accumulated debt caused the empire to implode. To look at Pax Americana is to see an identical script unfolding. Massively unsustainable debt levels, vast militarization, endless monetary debasement, constitutional decay and subjugation of citizens by taxation, regulation and blatant spying signal, as it has in many previous civilizations, the demise of this short lived empire.

Using financial markets as a barometer we observe markets in major topping patterns, working out of main trends. The next 3-6 months will prove critical in determining if the Great Sovereign Debt Crisis has truly arrived or if there is still enough gas in the tank for one last sprint before the weight of debt, regulation and political hubris bring down the liberal – democratic nations of the world. dow-jones-100-year-historical-chart-2015-08-07Once again the cyclic nature of human egress and regress is playing out at individual and aggregate levels and from where we stand, major and minor cycles of human endeavor are changing direction. Crisis bring danger and opportunity for those so prepared.

Financial Markets Update 25/07/2015

At this stage we are set for a stock market crash in the US for the fourth quarter of 2015. As per our previous warnings our Business Cycle Analysis suggests M2 NSA quarterly average money supply growth is collapsing, undercutting the existing capital-consumption structure of the US economy. M2 NSA has fallen to 1.5% from its March 2015 peak of 8.25%. Furthermore we now have a series of lower highs and lower lows occurring since 2011 implying a long term weakening of the capital-consumption structure.

US Stock Markets
Translating that into stock market prices we at Emerging Events suggest the potential for one last high on the DJIA and S&P500 is still present. The DJIA has the potential to rally to 18351-18500 (S&P 2134-2150). A fall below DJIA 17465 (S&P 2044) would see this invalidated and a confirmation that the top is already in. Substantial falls are directly ahead. Our short term downside target once the top has been confirmed remains below DJIA 15855 (S&P 2061).

Gold
Sentiment in gold has reached extremely pessimistic levels. Whilst the potential for marginally new lows can occur the next major move will be a move to above US$1307 before the resumption of the long term downtrend from its 2011 highs. The move above US$1307 should be a very fast move.

US Interest Rates
Long interest rates appear to be completing a consolidation phase – basing before moving substantially higher. Thus the trap will be closing to trigger “The Great Sovereign Debt Crisis of the 21st Century”. In the short term however there is potential for interest rates to continue to base prior to the commencement of this upward move on rates. Expect 30 Year US Treasuries to work into the 2.75-2.85% before moving higher with the potential to spend more time basing. When the up move gets underway we see the 4.5-5.0% for 30 year Treasuries as the next interim target. Expect global interest rates to follow accordingly.

US$
The US$ has strengthened since our last financial markets update. This is in keeping with our view that money will continue to be sucked from the periphery to the centre. We anticipate the US$ to continue to strengthen sucking money from the third world, Asia and Europe with frequent rallies along the way. Expect the Euro to test its recent low around 1.04 and potentially 1.00. The $Yen will move above 125 – 130. Aus$ to test 70 cents.

Australian Stock Market
The nature of the stock market has since the 2009 lows has been a corrective recovery to date. It has failed to make new highs whilst other world stock markets have done so. This reflects the major restructuring needed in the Australian economy. We anticipate the Australian stock market to continue its down trend and look for further acceleration downwards as the rest of the world starts to catch up later this year. Significant falls lie ahead and initially we are looking for a test of the 2009 lows.

Oil & Gas
We see oil & gas continuing to consolidate its falls of early 2015. At the moment they are probing towards the lows. We see those lows holding up and eventually oil prices moving to test the US$67-68 per barrel level for crude before a resumption of the long term downtrend and our long term target of US$12 per bbl.

 

Warning: use extreme caution

US money supply growth (M2 NSA quarterly average) has fallen consistently since early February to present. From a high at 7.88% money supply is now at 3.16%. This means that the stock of new money coming in to support the existing capital-consumption structure of the US economy is being undermined. The analogy is ‘as if the amount of gas flowing into your stove has been cut by half’. It means you have less fuel in which to continue cooking your meal at the same temperature. The economy needs new money (gas) to be sustained if it is to continue to grow.

Whilst there is still a lot of cash sloshing around the US economy, the fall in the rate of growth of money supply implies the capital-consumption structure of the US economy is being undermined and now subject to rebalancing or correction. Whilst there is a possibility of stock markets kicking back to make new highs, probability is now moving towards extended falls in line with prior forecasts.

Already we see US stock markets off their all time highs. We have written about this previously, warning there was significant downside to stock markets based on the potential for money supply growth to collapse. Using money supply growth to track investments and economic activity is an aspect of Austrian Business Cycle Theory which depicts economic booms and busts as the consequence of money growth and decline.

Yanis Reveals EU Denial of Any Right of the People to Vote

Varoufakis Yanis

Greece’s Finance Minister Yanis Varoufakis has come out to reveal the quite shocking and anti-democratic events that took place during the last Eurogroup meeting. First, they do hate Yanis’ guts, for he understands far more about the economy than anyone in Brussels. At their demand, any further discussions will be without him. What led to the EU breaking off was exactly what we reported previously — they do not want any member state to EVER allow the people to vote on the euro. Brussels has become a DICTATORSHIP and is so arrogant without any just cause, believing that they know better than the people.

We are watching the total collapse of Democracy and the birth of a new era — Economic Totalitarianism from arrogant people who are totally clueless beyond their own greed for power and money.

Source: http://www.armstrongeconomics.com/archives/34115

Editor Note: Greece is the end of the beginning for the EZ and the beginning of a long period of political, social and economic instability that co-incides with the topping phase of the upward phase of the Industrial Revolution cycle that began in 1783-85.

ABCT Modelling shows US economy vulnerable at present to shocks

Our Austrian Business Cycle Theory (ABCT) model indicates potential trouble ahead.

It appears the capital-consumption structure of the US economy is vulnerable to potential shocks with the risk of economic activity failing. For existing capital-consumption structures to be maintained, our modelling shows M2 non-seasonally adjusted money supply growth which is currently running at around 7.3% p.a. needs to be running at 10 – 10.5%. The massive M2 growth over the last 8 years may well have a created a trap for central bankers who have engaged in money printing activity to support the economy. To bend the analogy used to describe the effects of money printing, there is not enough “punch” coming to the party and whilst the party staggers on , the participants are at risk of getting a hangover.

We can conclude therefore that unless there is an increase in M2 NSA money supply growth, a high risk exists for capital structures to fall. Interest rate markets are moving in anticipation of US Federal Reserve interest rate policy adjustments later this year. This will impact stock markets and real estate markets affecting near term direction. Whether this is the start of a bigger cyclical downturn remains to be seen.

Australian Stock Market Direction

The failure of the ASX SP200 to make new all time highs at 6851.5 whilst US stocks are at all time highs is highlighting problems for the Australian economy and may even be the ‘canary in the coalmine’ for all stocks. This divergence reflects Australia’s national issues including lack of diversity in its production base. It reflects the ending of the mining boom along with the high demand for US dollars sucking cash from peripheral nations to the centre.

Currently battling resistance at 5900-6000 it would appear that any international downturn at this time will bring the ASX S&P 200 down towards our initial long term target of 2295 – 3075. We’ll reassess from there. However, for now there is a long way to get back to all time high territory. And this reveals the major weaknesses and restructuring needed in our economy. We can anticipate the ASX S&P 200 moving to the 6000 level over the next several weeks finishing the final stages of it’s upmove since 2009.

A case can be argued that the Reserve bank of Australia over extended its mandate to control inflation and unemployment during the commodity boom that came to an end in 2012-2014. By maintaining higher than needed interest rates the RBA at that time, funds were redirected to higher yielding investment opportunities in the mining sector at the expense of other, lower performing sectors such as housing. This put stress on banks, the mining industry and its supporting industrial base as oil and iron ore prices have fallen through the floor.calling into question the viability of many of the projects initiated in the last 7 years. This is the hubris of central bankers and politicians alike and what Nobel Prize winning economist FA Hayek called ‘the pretense of knowledge’.

Shortly we will see global stock markets completing their major tops. We believe our prediction for a major cyclical top spanning over 200 years is on target. We had projected this top occurring between 2015 – 2018. Indicators are now warning that this top is completing now. By late October we shall see front page headlines as financial markets capture people’s attention once again.

Financial Markets Updates

Updating and revising our financial markets forecasts (here and on our Financial Markets Predictions page):

US Stock Markets

As per our 3/23 update, US stocks peaked just 5 days later and has since entered a series of lower lows punctuated with short rallies. Its still to early to determine if a major top is in place but we wait and watch.

The downward move targets DJIA 17,721 (already achieved), 17460, 17,037 to potentially test the mid October lows at 15,855. (S&P500 2061 (already achieved), 2045, 1980 & the October lows at 1820).

Gold

It appears gold will bottom at or around the previous 11/07/15 low at US$1131 this coming week. If confirmed we can anticipate a resumption of the counter rally from the September 2011 highs at US$1920. Our target of US$1430-1440 remains in place.

US Dollar

The US dollar has rallied strongly in the last few months. The US$ may already peaked and begun a consolidation phase lasting many months. Specifically:

– US$/Yen: We are anticipating one more high to 124.50+/- before beginning a consolidation phase lasting months.

– Eur/USD: From here or slightly new lows (1.02-1.0495) we view the market has completed its move down and anticipate a major bounce. We anticipate a test of the 1.60 Eur/USD level.

– Aud/USD: anticipating marginal new lows below 0.7560 before a move back towards 0.9500.

Crude Oil

Oil is continuing its consolidation phase before resuming its down move to our US$12/barrel target we first determined in 2011. Short term we view the market making equal lows (US$43.58) to slightly new lows before rallying back to continue its consolidation phase. Our upside focus is US$68.00 with an extreme case push to US$75.54.

Interest rates

US interest rates have the potential to also spike sharply in the near future. Using futures as our proxy a move on 10 year notes to 110 -115 in 2015 is very doable.

The potential for some markets to rally (gold, silver, oil, Euro, Au$ (US$ weakening) suggests inflationary pressures emerging in 2015 in the US. This is in line with our money supply analysis and Austrian Business Cycle Theory. Alternatively, a crisis in the next 6 months may cause markets to spike in response to some international political event. Several scenarios are potential: a Greek default and/or Grexit in the summer months, Ukraine/Russia troubles and China.