PanOrient News | MARKET RADAR: Pay Attention on the Date of December 21st.

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MARKET RADAR: Pay Attention on the Date of December 21st.

Thursday, December 2, 2010

By Bill Sarubbi
Cyclesresearch.com

For the Stocks, December has been the strongest month of the year historically. My seasonality studies show that the period from December 15 through January 7th shows the highest expected return of any period in any year. From the 12th to the 24th, the intermediate stock market cycle rises, supporting the seasonal cycle described above. The last date is close to that of the 22nd, so this may be the high for the month. Three factors suggest that the last week of the month may not be seasonally strong: the 22nd is a turning point; the cycle hits a high; and there may be cap-gains tax selling.

The date of December 21 deserves our attention for 3 reasons. First, it is the Winter Solstice, one of the seasonal 4 seasonal turns that W.D. Gann advised us to watch for turning points. In addition, it is the date of full Moon. Third, this lunation is also a lunar eclipse. Thus, there are 3 indications that this day will be volatile or a turning point. Because there is a projected turning point on Friday, the 10th, there is confirmation of a turning point, likely a high. On a more mundane level, the rise in the capital gains tax is likely to bring tax selling before the end of the year, so the December effect may be a bit muted

Oil

The last report stated that a rally would likely carry into the 17th-26th. The cycle makes a double top in that time period and then falls into February. The weekly graph shows that oil is now up against the prior high and the 50% retracement level of the entire 2008-2009 decline. It appears unlikely that oil can break through this barrier in the high 80s at this time.

Gold

There is no change in the gold projection. I have chosen to stay long. In utilizing cycles, one must deal with the choice between following a cycle in a market and following the technical indications from that market. When they confirm, all is well. When they part company, one is usually best in following the technicals. With gold, I have been placing more emphasis on the technical indicators than on the cycle. I continue to do so. Experience has shown that strong technicals and a weak cycle can sometimes simply result in a trading range. In any event, the maximum downside that I would expect would be to $1312. This is about 5% below current quotes.

There is a cluster of daily day counts in the 17th-20th time span, confirming the projected cycle low. This will lead to an upside acceleration. In addition, there are 4 weekly time cycles coming due in the week ended December 24th, another indication of a significant turning point. If the market is rising into that date, then we will likely see a more meaningful correction in January. The next upside objective is $1440.

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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