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Four Pillars Finance Newsletter

Issue #112 (8 August 2011)

Hello everybody. Interesting times again in the markets. Most of our cycles remain on track. Let's take a look on the prospects for the coming months.

Here is the FPF prediction chart for the Nasdaq in 2011.

(Predictive chart made with FPF 1.1 software, available at http://www.fourpillars.net/finance/fpf.php)

Current level: 2532 The Nasdaq has held up till July, but seems to be falling off a cliff now. Chinese cycles pointed to lows in March and in August/September for this year, and here we are. Now that the two year uptrend is broken, we would look for 2100 2300 as a probable bottom area. For October/November our cycles suggest a rebound, but by December/January we may be testing the lows again, as that are the next upcoming Metal months. So, it's too early to jump in. Wait till September or even December to start looking for bargains. Don't try to catch a falling knife.

Here is our updated prediction chart for Nasdaq

Current level for XAU index: 196 Gold stocks continue to go largely sideways, even though the price of gold is making new highs again. October/November is the next Earth months bottom period for Gold stocks. We may get a chance to buy around 150-170 on the XAU. So just be patient.

Here is the current chart for XAU:

US 20 Year Treasury Bond Fund (TLT)

Current level for TLT etf: 102 Bonds (TLT) have finally made the jump to the 100-105 area, as we suggested in our new year forecasts. It may go to 110 to make a double top, but I wouldn't bank on it. This is a massive opportunity to get rid of bonds at very good prices. Interest rates have been kept artificially low by policy makers. That can't last forever. Either an improving economy, or inflation, or both, will push up interest rates in the longer run. You don't want to own long term bonds when interest rates go up. This may be the last good chance to sell at peak prices.

Here is the updated chart:

Euro US dollar
Current level for Euro-US$: 1.42 The Euro has shown the expected strength into summer, and now I think it is ready to give back those gains. On the chart we see a multi-year pattern of lower highs and lower lows. If the Euro drops below 1.40 then a one year uptrend would be broken, probably leading to a downturn. Targets are 1.30 and then 1.20 If 1.20 doesn't hold, then look for parity with the US$ one or two years down the road. The next Water months bottom period is coming up by February/March 2012

Here is the updated chart:

Happy trading, Danny

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Disclaimer: Investing in stocks, commodities or currencies is risky. No guarantee can be given that the above prediction will be correct. Fourpillars.net cannot in any way be responsible for eventual losses you may incur if you trade based on the information given in this article. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. This information should not be considered as a recommendation to engage in the purchase and/or sale of any futures contract and/or options. Trade at your own risk.