Summary:
2009 is likely to surprise most investors as it regains some of the 2008 losses. Gold, grains, and crude oil will probably move together with a rally ending in the summer of 2009. The rallies will most likely be larger than most expect. The stock market will be different, in that its up trend will continue into early 2010. Commodities will fall back late 2009. Commodities will not trend higher again until mid-2010. The U.S. dollar will give up some of its 2008 gains before extending its long-term upward move. A U.S. Dollar decline will allow gold, grains, and crude oil prices to advance. The bond market will probably collapse this year and likely very soon. One of two scenarios will play out: either the trend down has already begun with the 30-year bond going to 120 in less than 2 months; or one more rally into February 2009 will preclude a decline into June. The likely direction, price targets and time on each market continues below.
STOCKS: DOW JONES INDUSTRIAL AVERAGE
Current Price: 8,281
We accurately predicted another wave lower after the election with a DJIA price target of 7100 - 7500 in late November. The equity markets are likely to rally in 2009. The November 21, 2008, low will probably hold.
Intermediate cycles for the year are as follows:
HIGH mid-February,
LOW late-April and
HIGH mid-July and
LOW late-October, ending with a strong rally up into first quarter 2010.
IMPORTANT NOTE: Although we don't expect new lows, there is still a chance they could happen. The decline this month that started at DJIA 9088 could take out the 7450 low by January 26. If the DJIA takes out the 7900 level, it could quickly fall to 7000 or lower. If that happens and the stock market does make another low under 7450, then the huge rally will get going. Given the price action so far in January, there is a 50% chance this will happen.
If this should happen it would be a huge opportunity to buy stocks. Not the start of some more serious decline, but the start of a 12- to 16-month rally. Any pullbacks will be temporary and should be used as buy opportunities. This market will be completely different from the one we experienced in 2008.
If the market takes out 8800 on the upside, the chances of new lows go down to 10%. If the DJIA doesn't make new lows in January, we expect 10,000 by mid-February. If we do make fresh new lows, then we expect Dow 10,000 by March 15. Being a bit cautious this next week is prudent. However we are quite bullish.
Long-Term Trend: BEARISH The market is currently in a bearish consolidation phase of a long-term cycle. We project the long-term cycle low for the DJIA to be 5500 - 6000 in 2014. In this case, the short and intermediate-term cycles will develop. This will offer buy and sell opportunities within the longer-term consolidation cycle.
Intermediate Trend: BULLISH The intermediate cycle has turned bullish from now until February 2010 with a DJIA target of 13,000 - 14,500. Begin positioning your portfolio for this intermediate-term bullish run. There will be short-term down cycles that will make you think the intermediate term cycle is not real. Be patient and allow this cycle to form. These short-term pull-backs are buying opportunities.
Short-Term: BULLISH The DJIA will have lows on January 15 and January 26, with rallies continuing until February 12-16. This short-term move higher will peak around 10,200.
U.S. DOLLAR
Current Price: 81.10
The U.S. dollar will give up some of its gains from 2008, with a sell off from January into April, before rallying from May into August 2009. We have a price target of 91.
Long-Term Trend: BULLISH The dollar is in a long-term upward trend with a price target of 120 - 125 by June 2010. The short-term consolidation is good buying opportunity.
Short-Term Trend: BEARISH The U.S. dollar will give up some of its gains from 2008. The next trend, beginning now until the middle of January, will be down into April 20-30 with a price target of 75 - 77.
U.S. 30-YEAR BOND/INTEREST RATES
Current Price: $135.10
Major bull markets often end with explosive moves higher to complete their advance. This has occurred with U.S. treasury bonds as they moved decidedly higher at the end of 2008. This is signaling a top in U.S. treasury bonds. The next major move beginning very soon will be a multi-year decline.
Long-Term Trend: BEARISH We changed our long-term signal from bullish to bearish. The next major long-term move will be lower. We foresee a low in July 2010 with a price target of 100.
Short-Term Trend: BEARISH Bonds have come a long way. We changed our short-term signal from bullish to bearish. Look to enter short positions with a price target of $120 by May 2009.
GOLD
Current Price: $839.9 per ounce
The U.S. dollar's sharp decline is making dollar-denominated gold prices rise. Gold will be in a trading range of $650 - $1000 per ounce over the next 18 months.
Long-Term Trend: BEARISH After a rally in the first half of 2009, gold will continue its longer-term correction until June 2010, with a price target of $625 per ounce.
Intermediate Trend: BULLISH An intermediate term rally will coincide with the dollar decline into June, with a price target up to $1000. There is major resistance at $920 on the way up. This would be a price to reduce your long exposure.
Short-Term Trend: BULLISH We expect a temporary low to occur January 14 to January 26, with a price between $740-$810 per ounce, then a rally into mid-February.
CRUDE OIL
Current Price: $42.57 per barrel (March contract)
Crude oil has temporarily finished its decline. We expect the crude market to gyrate within a range of $30-$40 on the low end and $60-$65 on the high end over the next couple quarters.
Long-Term Trend: BEARISH Crude oil is in a large down cycle that will have short-term rallies. The long-term cycle won't end until September 2012 at $25 per barrel. Originally we thought the bottom of this cycle was February 2010. We now think the cycle low will be 2012.
Intermediate Trend: BULLISH The intermediate projection for crude oil is a rally into June 2010, with a target of $80 per barrel.
Short-Term Trend: BULLISH Crude oil will make a move higher, with highs in February and April and sell-offs in March and May.
SOYBEANS
Current Price: $10.20 per bushel
We expect soybeans to trade between $8.90 and $11 most of the time for the next few months. We expect a high in this cycle June 2009 with a high of $12.25.
Intermediate Trend: BULLISH The next move in soybeans will be higher until June 2009, with a price target of $12.25 per bushel.
Short-Term Trend: BULLISH Prices will move higher into February 9, then down into March 4, and then back up into June 4.