S&P500 apparent 18 month cycle

I did this chart after the late 2004 vertical line (cycle low). The vertical lines are all the exact time distance apart (roughly 18 months) and are created by connecting previous market turning points like the 97 and 98 lows and the 99 high. These 3 points are all the exact distance apart and we can use that knowledge looking forward to predict when potential market turning points will be. So basically I use the charting program that overlays equidistance vertical lines with the length of time I decide.

After bringing the chart forward to today's date, incredibly the cycles are still working well and have aligned directionally with the 07, 09, and 2010 lows. All I did to this chart is update the time range and the charting program projects the cycles outward. The next cycle point based on this will be 18 months from June 2010, or December 2011.

The market will let us know if it is likely a high or a low.

Click on the title heading to see an updated chart.

Good luck!

Google Armageddon?

This chart is one I found online and decided it was so good looking I'd recreate it.

With today's bad Google news and subsequent big selloff afterhours, I decided it could be extremely relevant. Not much needs to be said that isnt on the chart...

If this is true though then 2011 should be as crazy or crazier than 2008. The hope is that the pink line of support will hold and keep the uptrend intact.

Good Luck.

Gold versus Silver? Which one?

Gold and Silver are all the rage right now!!! Sell your gold and silver advertisements are in every mall, infomercial, and financial website!

Regardless of my position on gold and silver, an investor still should choose wisely between them. Looking at the chart above, you can see why. Currently Gold is significantly underperforming silver. In fact it hasn't been this undervalued to silver since the early 80s. This can mean a lot of things (for instance what occurred in the early 80s? - hint, they both started to free fall).

However, if you must own one of them right now. Gold looks to be the far better choice. Eventually this ratio will find parity which could mean it rallies back up to at least the midpoint on the chart of around 50x. This means gold should be 50x the price of silver, or silver should be 1/50 the price of Gold. With a current gold price of $1450 silver, based on these historical standards should be around $29.

Either way, a move up or down in the metals, Gold seems to be the better choice right now.

Good Luck

A Lesson in Dow Theory

Attached is a chart of the Dow Transports and then the Dow Industrials in order to show how the 100 year old Dow Theory works. On the chart I have two captions pointing out two different timeframes. The black lettering is the shorter time frame and shows both the Dow Jones Industrials and Transports printing a high, a low, and then a new high. Because both of these resulted in new highs above the previous high (in Novemeber and December 2010), they confirmed a shorter term Dow Theory buy signal.

On the longest time frame, however, neither index has made a new high above the previous high (2007) and thus neither index has confirmed the long term buy signal.

The Transports are getting close to making a new high. If that occurs then we will look toward the Industrials to confirm the hew high by surpassing its 2007 high. Obviously this has a long way to go and will leave a lot on the table, but that's the way a trend following technique works.

If the Industrials fail to confirm the new high, and go on to post a high, a low, a lower high, and then a lower low (all below the 2007 top), that will be a Dow Theory Non-Confirmation and a pending sale signal. If that occurs and then the Transports do the same, that will be a Dow Theory all out sell signal, on the shorter black time frame.

Dow Theory can work at all time frames, but for this analysis I have just used the 2 longest time frames.

For more on Dow Theory and how it helped foreshadow the 2008 bear market in a January 2008 post, click on 'Dow Theory' to the right in the Labels Section.

Good Luck!