MARKET RADAR: Stocks to Rally, Oil to Hold at $90, and Gold at $1660

Saturday, July 23, 2011

By Bill Sarubbi

As for the stocks, the last report cited the latter part of June as being a low. The market followed the cycles and accelerated from that point. The rally is likely to carry into early August at least.

Two surprises have been the resurgence in the largest-cap stocks and in selected stocks in the technology sectors. These areas will likely continue to move up.

The energy sector is also likely to remain strong. Dell Computer is due to report earnings on August 16th, and I project an upside surprise. So DELL is a trading recommendation in the second week of August.

The Nikkei still appears bullish, but is likely to run into resistance at 10,500.


Oil has also been a bit stronger than expected, hitting $90, rather than my $88 target. Support at 90 is strong and is expected to hold.

In the last half of July, the oil cycle turns up. This is confirmed by the natural gas cycle that also turns up at that time. (Initial work on a limited amount of solar power index data also shows a low at the same time.)

Thus, buy oil as it approaches the low 90s awaiting the cycle upturn at the end of the month. August is likely to be a strong month.


Gold has responded well to the upturn in the cycle. The up move broke gold out of a formation that projects a price target of $1625-$1660. Because gold has already rallied so much, it seems unlikely that it would only rally $40 more from now until the end of the month.

Therefore, I am more inclined to expect the higher price target of $1660. July has typically been a weak month seasonally, so the rally in the first 2 weeks of the month is a sign of underlying strength.

August is typically a low for gold seasonally, but the cycle turns down. The likely resolution of the conflict between the 2 cycles may be a sideways trading range at worst. Longer-term investors can continue to hold.

Bill Sarubbi, a strategist and portfolio manager currently operates his own business from Europe. He spends most of his time in Vienna, London, Tokyo, and Abu Dhabi.

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