Yesterday a little pressure eased in Euro debt as there were supportive bond-buying noises from the ECB, but Spain CDSs remain critical. Crude oil inventories came in above average, but didn’t translate into downward pressure in the oil price. Capitualtive Breadth ended at 6 or 7 despite the upswing in stocks, suggesting equities should be underpinned and that a rally remains likely. The US dollar index remains in its triangle for now.
Will Preston has kindly shared his updated models with us again. These models are an amalgamation of political cycles, economic cycles and statistical cycles. The first chart is the SP500, showing overall sideways volatility but with an upward bias into the summer.
Tom McClellan’s Eurodollar 1 year advanced model predicts sideways consolidation into June, whilst geomagnetism seasonality predicts an upward bias into June. Jan Benestad’s 100 day momentum indicator suggests a higher high in around 2 months time. Stock market health remains pretty good, with no typical major top signals at the March top. Euro debt, China growth and Economic Surprises remain threats, but leading indicators and Operation Twist continuing into June remain supportive. Drawing all that together, sideways volatility with an upward bias for the next couple of months appears reasonable, unless there is a significant escalation in one of the listed threats or US earnings signifcantly disappoint.
Next is Will’s gold model, which shows a steep upward bias from now into August, with a target of $2600 by early August.
The inverse head and shoulders formation, which can be seen in that chart, has a target of $2050. With gold recently triggering overbearish and intermediate term buy signals, I consider there is a reasonable chance of that fulfilling. That would make for a new all time high, and would decisively end any doubt that gold’s bull was over. With that confirmation, and into clear air, gold could really become a momentum buy. However, for now, we are a long way from that, with gold going nowhere in the middle of a 6-month sideways range.
Sunspots have weakened again, but by planetary influence should pick up in May/June again. Increasing sunspots should encourage speculation in commodities and inflation.