Four Pillars Finance Newsletter

Issue #115 (6 June 2012)

Hello everybody. Interesting times again in the markets. Most of our cycles have remained on track since our new year prognosis for 2012. Let's take a look on the prospects for the coming months.

Here is the FPF prediction chart for the Nasdaq in 2012.

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

Nasdaq
Current level: 2778

As was pointed out in our forecasts for 2012, based on our Chinese cycles we expected a market top in April, followed by a bottom in June. The Nasdaq has indeed rallied strongly until early April, when it peaked above 3100, and has since fallen back below 2800. I think we will now get some summer rebound, possibly climbing back to 2900 or even 3000, and then another bout of selling into October. You can do some buying at the current levels, or wait until autumn if you are a very patient investor. I would keep a stoploss somewhere below 2600, because if that level gets broken then the picture would worsen considerably. We give a weekly commentary on our http://lunatictrader.wordpress.com blog, so if you want more than the few times per year updates we give here at FPF, then you are welcome to bookmark that page.

Here is our updated prediction chart for Nasdaq

Gold
Current level for XAU index: 165

We have been warning for years to be patient in the gold stocks and wait for a probably drop to 160 or lower on the XAU index. This market has finally come down, and even touched a low of 140 in May. Also the price of gold and silver has experienced significant corrections. Gold stocks have been the worst performers so far this year. At the current levels we can slowly start looking to do some bargain buying in this sector. The expected cycle low is coming up in the next Earth months, August/September. We could get a double bottom around 140, or even make a new low in the 120-130 area. So, there is no need to rush.

Here is the current chart for XAU:

US 20 Year Treasury Bond Fund (TLT)

Current level for TLT etf: 128

Bonds (TLT) have once again rallied, because people are fleeing into the perceived safety of government bond paper. This is artificial and will get reversed sooner or later. You can see how quickly the trust in government paper can dissipate when you look at the interest rates that countries like Greece, Spain and Italy currently need to cough up in order to get buyers for their paper. If the economy stays weak, then many other countries could end up in that kind of situation. TLT has reached a new peak near 130, and this is another great selling or even shorting opportunity.

Here is the updated chart:

Euro US dollar
Current level for Euro-US$: 1.25

The Euro is continuing its downtrend, as we expected on the basis of our cycles. The Euro is now at almost two year lows. Going forwards I would look for a test of the 2010 lows near 1.18 and if that level doesn't hold then the door opens to 1.00 against the US dollar. Expected cycle lows for the Euro come in August/September and then December.

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.