By: Money and Markets
Thursday, April 23, 2009 11:23 AM
by Larry Edelson
Six weeks ago, on March 12 and again on March 16 in a related column I write, I told my readers in no uncertain terms that “major market moves are about to unfold” and that “there’s oodles of money to be made over the next few months.”
For the Dow, I forecast that “a powerful, multi-month rally is about to begin that could eventually see the Dow rise to over 10,000, a gain of almost 50 percent from current levels.”
Similar gains, I said, were in store for the S&P 500 … the Nasdaq … Hong Kong’s Hang Seng Index … the Shanghai Composite … Japan’s Nikkei … and for Europe’s and Britain’s markets.
I went a step further and told my readers that I wanted them to “have the early-bird’s advantage to cash in on the coming profits.”
And I showed them the results of some of my work based on data from the Foundation for the Study of Cycles, a think-tank established in 1940 by President Hoover and Wesley Clair Mitchell, Hoover’s chief economic advisor and the founder of the National Bureau of Economic Research.
My cycles research, a long-time favorite area of my studies, helped me identify the March bottom. You can see it in the chart to the right, which I published on March 16.
Also on March 16, I told my readers that the best way to play my forecasts was to consider buying positions in the Dow Jones Diamonds ETF (DIA) … the iShares FTSE/Xinhua China 25 (FXI) … and the Energy Select Sector SPDR (XLE), an ETF designed to play the rally I saw coming in oil and oil and gas shares.
Now, let’s take a look at how my forecasts and recommendations panned out …
Here’s the same cycle chart that I showed on March 16, with the price action updated through Friday, April 17.
Pretty amazing, eh? The Dow has now rallied a whopping 28 percent from its March low.
That’s the biggest, most powerful rally in the Dow in 76 years — since its Great Depression low in 1933!
Notice how the cycles point to a continued rally into late April and May. Of course, it won’t be a straight up affair. There will be pullbacks, like the one this week. But I do expect the Dow to get as high as 10,000 by mid- to late-May.
And what about foreign stock markets? Well,
- China’s up almost 18 percent since mid-March and up 52.4 percent since its low last November.
- Hong Kong’s Hang Seng Index — up 33.2 percent.
- Japan’s Nikkei — up 24.6 percent.
- And the major European markets — up an average of 22.8 percent.
Does all this mean the global financial crisis is over? No, not by a long shot. Thus far, we are merely witnessing a major bear market rally. The rally could turn out to be something much bigger, even a new bull market. But so far, the evidence is way too inconclusive to say with any certainty.
Meanwhile, the positions I suggested in that March column are likewise soaring …
The Dow Jones Diamonds ETF (DIA) is up as much as 25.5 percent from its low, while …
The iShares FTSE/Xinhua China 25 (FXI) is up a whopping 38.8 percent!
What about oil? Oil’s up as much as 10.9 percent since mid-March, while the Energy Select Sector SPDR (XLE) is following right along … up as much as 10.9 percent.
Not bad for just over a month!
What’s more, in one of my premium trading publications, my cycles studies pinpointed when to jump into trades. Subscribers who acted on those recommendations bagged gains of 61.9 percent … 92.3 percent … and 268.8 percent — in six weeks or less!
So Why am I Telling You All This?
What’s My Point?
Simple: I want to show you how important it is to understand the inner workings or rhythms of the markets.
Despite all the bad news pouring out of the economy, Washington, and the media in March — by using cycles research I was able to identify major lows in virtually all stock markets as well as in oil. Thus giving my readers and subscribers six major winners in just six weeks!
Cycles come in all forms and time frames. They affect our everyday internal clocks and psyches, crowd psychology, and even society at large.
Cycles can range in length from days and weeks in duration to decades and even centuries.
Like the infamous Kondratieff and Juglar cycles that have been proven repeatedly to have major implications for society — often pinpointing the swings between periods of capitalism and communism … between democracy and autocracy … and even the rise and fall of civilizations.
I first started studying economic and market cycles more than 30 years ago and since then they have long been a major focus of my attention.
And market timing cycles can be, as I just showed you, a key tool in helping you profit, especially in times like we have today when history is repeating itself (though importantly, not necessarily duplicating itself.)
Best wishes for your health and wealth,
Comment from Leslie
Long Live Cycles!
(borrowed from Bill Arnold)