It is time to do quick recap of
the big picture view, which is unfolding pretty much as I expected.
The CRB is now in the process of
putting in a three year cycle low (this should correspond with a three
year cycle top in the dollar) and stocks have put in an intermediate
cycle bottom.
As I expected gold bottomed slightly
ahead of the stock market and stocks. The trend is now up for all assets
and all we are waiting on is confirmation that oil has bottomed. Once
oil and energy stocks join the party the bull will be firing on all
cylinders.
The economy will continue to respond
to Keynesian economic policies until commodity prices surge into a final
parabolic advance and prick the bubble. However that isn't due until
sometime in late 2014 when the dollar forms its next three year cycle
low, so I think the perma bears are just kidding themselves if they
think the US is ready to rollover into a recession right now.
The recent stock market decline was
just a normal intermediate cycle correction in an ongoing bull market.
Yes it was rather severe, but this was just a normal regression to the
mean event triggered by an extreme stretch above the 200 day moving
average that was generated by the European LTRO and Operation Twist.
I expect stocks will continue to grind
higher this year and start to stagnate next year as commodity prices
began to pressure profit margins. By early 2013 the stock market should
begin rolling over into what I expect will be a very drawn out, and
volatile bear market as deteriorating fundamentals do battle with ever
greater liquidity injections. This is the prescription for multiple
violent bear market rallies in what I expect will be a very long
agonizing grind lower as commodity prices gradually pick up momentum and
move into the final parabolic spike in 2014.
Gold has started a new C-wave advance
that should at least test the $1900 level sometime this fall. Don't
expect a breakout to new highs until next spring at the earliest
though.
Gold may enter the final bubble phase
of the bull market in late 2013 & 2014, although I think a more
realistic scenario would be that this just evolves into another
garden-variety C-wave, topping around $3500-$4000 in late 2014 or early
2015 followed by a severe correction into the eight year cycle low in
2016 and a vicious rebound and final bubble phase of the gold bull in
2017-2018.
