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http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
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The Oracle of 2008
With the 4.2 year cycle bottoming in early 08, the US Dollar is likely to start a rebound that should last until 2009 or later, like it did in 2004 and 2005. While the recent move up from the December 07 lows is promising it will take a move above the breakdown level of 82 before we can be confident this rebound is real. Since the 4.2 year cycle is not due until early 2008, we could see the US Dollar turn down again and make a real panic low near 0.70 or even 0.65 and that would set it up to rally back to 82 near 2009 and then fail again and make further lows near 2012. Charts courtesy of StockCharts.com Precious Metals have an exhaustion rally in 2008
While the US Dollar may have already found a low, the Precious Metals look due for one more exhaustion rally for the 2 year cycle high like we had in 2004, 2006 and now 2008? With the 8, 13 month, and 2.1 year cycles all favorable for Silver, Gold, and Palladium we are likely to see an exhaustion rally in early 2008, possibly coincident with a US Dollar panic low. Charts courtesy of StockCharts.com Oil will rise to 110-120 and then decline to 60-70 in 2008
With gains of more than 50% in 2007 Oil is likely to have a significant pullback as we head into the next 5 year cycle low in 2008. Since a pullback to 60 is not unreasonable given the geometry of the advance since 1999, that level would be a 50% retracement from a possible high of 120, or a 38% retracement from the current level of 100. Since Oil is in a bull market expected to end near the 30 year cycle high of 2010, I am expecting Oil to exceed the 100 level by 10-20%, or enough to frustrate early bears. Charts courtesy of StockCharts.com
Credit fears spread to high-grade Bonds by mid-year
Borrowing costs for the best high-grade US Corporate Bonds rose ahead of the subrime crisis in June 07, but have since recovered to record low levels in late 2007. Short and long-term cycles suggests that this optimism is about to change in 2008 and we will see the cost of corporate debt rise significantly in 2008, further pressuring corporate profits and probably equity markets ahead. Charts courtesy of StockCharts.com Equity Markets are making the highs of the decade
There are fundamental and cyclical reasons why I suspect equity markets are making their highs for the decade. The main fundamental reason is that the credit bubble has been pricked, and just like no one will pay crazy valuations for any internet idea anymore, few will trust asset backed securities for many years. The net effect will be a decrease in liquidity, initially from the losses incurred in the subprime area, but also by a decrease in the amount of lending facilitated by the old blind trust in these securities. We have already seen a wave of earning estimates downgrades for 2008, and that trend is likely to continue as problems become more widespread. While Central Banks will do all they can to promote lending, even buying questionable paper, the old confidence is gone and it will be hard to replace all the lost liquidity generated by loose mortgages. My cyclical studies have led to the development of a mathematical model for the US markets over the last 150 years. While it is not perfect and I am still improving it, it has proved quite accurate, and it suggests that the many undercurrents to the US economy will eventually drag equities down significantly in 2008. Charts courtesy of StockCharts.com    |
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