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--- In gannsghost@xxxxxxxxxxxxxxx, "topos8" <topos8@xxxx> wrote:
I last updated my bond and stock forecasts in GG# 26884, May 13, 2004.
At the moment my square of 9 calculations say that the S&P's will
make a low at 1055 this week and then rally to or above the 1200
level.
The market has completed the three peaks part of a George Lindsay
style, "three peaks and a domed house formation" (March, April and
June are the three peaks in the S&P) and the current break is the
separating decline. Normally the subsequent rally that traces out the
domed house part of the pattern ends the bull market and also ends
what Lindsay called a basic advance. However, my calculations using
Linday's guidelines say that the current basic advance began in March
2003 and is likely to last into the second half of 2005. Even an 8
month rally (the typical duration of a "domed house" rally) from a
low now would not last into the second half of 2005.
I think this conflict will be resolved in one of two ways.
The first way is the pattern I have been expecting for the past year.
In this pattern the March top is iself only the first peak of a
larger three peaks formation that lasts through the end of 2004; in
this scenario the second peak still lies ahead (early November 2004
and about 1250 in the S&P?) and the third peak (January 2005 ?) will
be lower than the second. After the third peak in January 2005 the
separating decline will carry to 1075 in the S&P and last 1-3 months
from the third peak. After the 1075 low we then will see a domed
house rally that carries the S&P up to 1350 in the fall of 2005.
The second resolution is becoming more and more likely given the
degree of pessism I currently think I see in public investment
perceptions. In this scenario, the market rallies to 1350 in April-
June of 2005, then goes into a 6 month trading range (something like
March-September 2000) and then begins a new bear market.
In either scenario I expect the next bear market to extend through
most of 2006 and carry the S&P from about 1350 down into the 850-950
range.
In my May 13 message I said that the bonds were about to begin a
rally from the 103 level in the futures that would last 4-8 weeks and
carry the market up no more that 6 points. In the event we have seen
a rally that has carried the market up nearly nine points over a 12
week span.
I now think that this bond rally is nearly over. I can see the bonds
moving up a bit more into the 112-00 to 112-16 range(vs. a high of
111-26 yesterday) but first the market will probably drop to 109-08.
The 10 year notes reached the 113-10 level yesterday and have the
potential to get to get up to 114-16. First they will probably drop
to 111-16. The next big downleg will probably carry the bonds down
into the 100-102 range and that may well be the bear market low for
bonds. The notes will drop to 104 but I think lower lows for the
notes will evntually be seen as the yield curve continues to flatten
substantially.
I thought crude would top in the $41-42 range in May but all we got
was a break to $35. I now think that the bull market high will occur
in the $45-47 range and that the next bear market will carry down to
$18.
Carl
--- End forwarded message ---
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