No Surprises Here
Were You Listening?
Aren’t the markets wonderful! They give us so many choices, so many possibilities, so many alternatives and so much information! But how much of it is useful? How much of it is helpful? As I noted in the last issue of this report, listening to the experts on business television or reading their writings can only confuse you. The amount of information available these days is, without a doubt, overwhelming and, I do believe, destined to confuse you. The metamorphosis of the current decline in stocks is just another example of what I’m referring to. Had you listened to the experts on CNBC prior to the current decline you would have heard about 90% bulls and only a few bears. The comments that were being disseminated by experts several weeks BEFORE the declines can be summarized about as follows:
“We would buy into any declines since they are likely to be nothing more than bull market corrections”
“The declines should be limited and represent opportunities to buy stocks in an otherwise strong economy”
“We do not consider inflation to be a major problem for the stock market and would use declines as buying opportunities”
“The decline in petroleum prices is healthy for the market and should provide support on declines”
“The market is in a ‘rotation’ phase as investors move into higher quality stocks”
All I can tell you is that prices have plummeted and investors who took the advice of most experts on television, are really getting “rotated”!
The Bad News and the Good News
If you listened to the experts who have been telling you to buy into the foreign markets then you really got hammered! The bad news is that your timing was pitifully bad and the good news is that you got into stocks on a decline. In short, you “caught the falling knife.” And that can be dangerous. I speak from experience. In my more than three decades of trading I’ve caught too many falling knives. But more importantly,
where do we go from here in the stock market?
Divergence and the Cycle Take Their Toll
If you have been a reader of this newsletter and/or a follower of cycles and divergence then you know the following:
1) An approximate 4 year cycle top was long overdue in stocks. Accordingly, the market was “living on borrowed time” and a correction down was likely
2) Given that the cyclical to was delayed, the market had to “catch up” by sharply to compensate for lost time. This decline is now in process
3) Momentum divergence as well as several other indicators that I have developed not only gave advance notice of the declines but also gave triggers for the declines ahead of time, and
4) Small traders, as shown by my Daily Sentiment Index (DSI) were at 88% bullish several days after the recent top. This high level of bullish sentiment was yet another “nail in the coffin” of the up trend.
What Now? Where Now?
If you follow the cycles then you know that lows are due late this year, most likely in October. The odds are that trends will continue lower until sentiment has reached very low levels and many traders have been stopped out or given up hope of a bull market. This could take some time.
Furthermore, seasonal lows are due in late October to early November. And so, the strategy is to remain bearish unless there is a major change in the indicators.
FREE SEMINAR LOS ANGELES 24 June 2006 Last Call for Reservations - We are Nearly Full My free seminar Los Angeles is almost full. As of this writing 85% of the available seats have been taken. Accordingly, I urge you to make reservations immediately since I expect that all spaces could be spoken for by mid week. This is a totally FREE all day , very specific seminar with quality speakers and topics. It won’t be specious!
Jake Bernstein
COWS (Corn, Oats, Wheat, Soy Complex)
An examination of the cycles, long-term trends, relative price value and Commitment of Traders commercials positions leads me to the conclusion that these markets are headed higher. The supply and demand situation, as well as the other relevant fundamentals will follow. Some of these are already beginning to fall into place. Edward R. Dewey, the so called “father of cycle analysis” defined cycles as “the mysterious forces that trigger events”. I believe that these forces are now hard at work as they begin to form bull markets. The events that “explain” these patterns are yet to follow, and in spite of the “deflationary fever” that is now sweeping the markets due to severe declines in the metals, I believe that the grain and soybean markets are poised to move higher.
Soybean Complex
My long-term 5-3-7 Report, recently issued, provides details about my bullish projections for soybean meal and soybeans. I believe that meal is likely to rally strongly and that this move is in its initial stages. Soybeans are also consolidating for a rally that has NOT, as yet, started. The hotline will likely recommend longs in the bean complex if and when prices decline to short-term technical support. If my expectations develop as predicted, then the rallies recently witnessed in the soybean complex are merely a harbinger of what’s to come. I remain bullish on all three commodities in the soybean complex.
Corn: My indicators gave short-term buy signals. The intermediate-term trend remains bullish. I have given you a number of short-term trades in corn, all closed out profitably. I do not see any technical reason to change my long-term or intermediate term forecasts on corn given the continued intermediate-term bullish trend. Await new short-term buy recommendations.
Wheat: Commercials have accumulated large long positions in wheat which continues, in my view, to be the overriding bullish technical factor. Another buy recommendation should have been closed out at a profit. The intermediate-term trend in wheat remains bullish. The short-term trend remains bullish with a decline to support now in process.
Oats: I have been bullish and I remain bullish on oats. Volume remains thin. The market fell to support levels which were expected tohold. The short-term correction down was a pause in the long-term bullish trend. Prices shot up strongly, confirming my forecast. If the old adage that the oats market leads the grains is true, then the best is yet to come in the complex. The oats market is still a reasonable risk vehicle for new traders. If I recommend a position via the hotline, DO NOT USE market orders due to the very low trading volume in this market and, as a result, price fills could be bad!
Meat and Livestock
Hogs: As noted in the last few weeks, the ideal seasonal tendency is bullish. My advice was as follows “Trade from the long side and consider bull spreads”. As you know, the market has virtually exploded to the upside. If my work is correct, then this is just the beginning of the long-term rally. Await recommendations to go long on declines to support.
Cattle: I expected the decline to support to be followed by a major rally. The short-term trend remains bullish. The hotline will again recommend a long position in August cattle when prices drop to short-term support. I believe that cattle prices could move to much higher levels over the next few years. I
also advise bull spreads.
As readers know, I have been bullish, and I REMAIN BULLISH on cattle and hogs. Historically, as noted in this newsletter repeatedly, years ending in “6” have often correlated closely with the start of major bull markets. The hotline recommended a long in cattle which returned to a profitable position and was closed out at a small profit. Await long recommendations in Aug or Oct cattle on a decline to support. Hogs have been very strong, staging in their best upside performance in many months and confirming my bullish stance. Over the last few months commercials have accumulated the largest long positions ever. See right for more details. I believe that the best is yet to come in these markets and that the upside moves could be substantial.
Metals
The large declines this past week have washed out most of the longs in these markets. As noted last week, I believe that the large declines are reactions in major bull markets. And these reactions were long overdue. I believe that the course of inflation has been set and that the bulls who are supporting these markets will not quit very easily. I do not believe that the underlying commodity inflation is over or that this major up trend in metals is over.
IT WILL BE THE CHARACTER OF THE COMING RECOVERIES THAT TELL US WHETHER NEW HIGHS CAN
BE OR WILL BE MADE. Don’t be surprised is these markets come roaring back to life. Every bull market need a shake-out and this IS that shake-out. Buying opportunities are coming soon. The hotline will update you on current trades, thoughts, and recommendations.
Copper: My advice has been consistently bullish although I have warned you that the days of this “mother of all bull markets” were numbered. I DO NOT and have not recommended long-term short sales as yet because I still do not see technical signs of a major top as of this writing in spite of recent declines. The recent corrections are still corrections in a bull market. I need more technical data before I can state that a long-term top is still in place.
Gold: A long-term cyclical top in gold has NOT yet been made based on my timing and trend analyses. Caution is advised once again; a correction down was expected. I told you to wait for an intermediate-term BUY recommendation in the event of such a large decline to support. The decline is now in process and the developing buying opportunity could be the best opportunity we have had in many months.
Yes, there will be risk, but the odds now still favor a resumption of the up trend. The hotline recommended a long in min-gold futures due to the risk. NOTICE: UNLESS YOU CAN AFFORD TO RISK AT LEAST $70 ON A POSITION IN GOLD DO NOT TRADE THE FUTURES. TRADE STOCKS INSTEAD!
Silver: Long-term investors were advised to hold positions in silver and silver mining stocks with trailing stops to lock in profits. My long range target of $10 or higher was achieved. The next long-term resistance level and projection was $13 area which has been hit. What’s next? Is $17 still a possibility
given the huge decline. I advised you to “be prepared for even larger intraday price swings.” Witness what happened last week. If you’re a new trader then my advice is to STAY AWAY. There was a bearish seasonal for May as noted in this newsletter earlier in the month. Await buying opportunity at major support - that opportunity is NOW developing.
Platinum/Palladium: My opinion has not changed. Platinum and palladium are still in major bull trends. The huge corrections down were overdue given the dominance of large traders and hedge funds. I do not see any triggers of a long-term top as of this writing. My platinum projection was $1240 or higher - and it was hit. Next new target of $1310 was hit and surpassed. My comment last week was as follows ”For those who have been patiently waiting to buy, I believe that the opportunity to do so will soon be upon us.”
The huge declines to support were expected and should come as no surprise to you if you’ve been reading my forecasts.
Currencies
Aussie $: I advised you that a low was developing. The market bottomed and rallied strongly in sympathy with the metals. The odds are that a top has been made. The trend is down in sympathy with the lower prices for metals and energies. Eurocurrency and Swiss Franc: Both markets rallied to projected long-term resistance areas and topped as expected. A bullish short-term pattern developed. The trend is now bullish, however, a short term top is developing. The US dollar should regain its strength and may have made a low.
Japanese Yen: The Yen is positioned for an approximate 7- year cyclical low which may have been made. I expected a MAJOR rally in the Yen vs. US dollar over the next few years. This move appears to have started.
BrPound: The market has made an 8.1-year cycle top almost exactly as predicted. Long term trend is down. A short-term low made as predicted. Lows were expected to be tested . They were. Prices rallied strongly to test resistance levels established in 2004. I expect a short term top very soon.
US Dollar: I am long-term bullish on the US dollar. A shortterm low was made. A buy recommendation was given via the hotline and closed out at a profit. The long-term trend is bullish
with a major test of support having been passed initially and now developing once again.
Canadian $: I believe that the Canadian dollar can test the 93 level or higher vs. I advised you to expect a short-term top. That top has been made.
Tropicals
Cocoa: The long-term trend remains bullish. The seasonal was short term bearish and prices declined. The hotline entered a long position at short term support. The Jly long was rolled into Sep per the hotline updates. Now that many of the hedge funds have closed out their longs in the metals, they will need
to find a new home for their money. Several candidates emerge.
Among them are the grains and soybeans, sugar, coffee and cocoa. While sugar prices have already gained considerable ground, the others are ripe for accumulation. And I don’t think that the fundamentals will matter once the hedge finds “pile in.”
Sugar: My next target is in the 23-25 area. I advised you to careful of a downside correction. That correction is now in process and, if my work is correct, then the decline should end soon. The hotline recommended a long position which now shows an open loss. My current long recommendation carries large risk, however, remember that with sugar prices now at their highest levels in many years, it is reasonable and normal to expect large price swings. And large price swings require the use of large stops. DO NOT trade this market unless you can risk $2500 minimum. Based on my long-term analysis, this bull market is still very much alive and also ripe for accumulation by hedge funds.
Orange Juice: Readers of this newsletter know that I turned bullish on OJ long before the start of this bull market. I DO NOT see any significant technical indications of a top as yet. My long-term bullish forecast remains in effect. This is a special situation market. As you may know, I rarely recommend longs in OJ via the hotline given the thin trading volume. Given the developing weather situation there is a good chance that OJ could climb to all time highs before this year is over.
Many traders are banking on this eventuality and they could be right. But if they’re wrong - if the weather problems do not materialize then the market will come crashing down. Is that the kind of gamble you want to take?
Coffee: My long-term cycles tell me that coffee is overdue for a significant rally, that could take prices much higher in 2006 or beyond. The market still has large upside potential in 2006 with the move now just getting started.
As we go to press two factors are in play. First, I think that this market is a prime candidate for accumulation by professional traders and second, there is considerable bullish divergence that COULD trigger the start of a rally at any time now. BE PREPARED!
[Fibers/T-Bonds and TNotes Reserved for Subscribers]
Stocks
Well ahead of the current large and persistent decline in stocks I advised you, without a doubt, that the markets were in trouble and that bearish divergence would eventually take its toll. I also stated clearly and explicitly that “when stocks begin their decline the drop could be significant.” A bullish seasonal was
expected first and it developed. But where do we go now? I suggest you read my comments on page 1 of this report.
There are those who believe that these declines represent excellent buying opportunities. As far as my work is concerned the opposite may well be true. My projections strongly suggest that stocks could trend lower until later this year, perhaps not bottoming until late October to be followed by a strong year end rally.
Until then, many traders could be in for some considerable pain if they are looking at the current decline as an investment opportunity.
Natural Gas: My forecast and price trend projection of the approximate 3-4 year cycle in natural gas futures, prior to the top, suggested that the market was likely to decline. Another 3- 4 year cycle low is expected this year, and that low COULD be developing now. In fact, as of this writing at least one of my
indicators has turned bullish.
TRADER HIGH RISK WARNING: don’t trade this market unless you are fully aware of and can assume the HUGE risks and major volatility. If you must trade this market then consider the mini-contract. But note that trading volume is low. For intermediate or long-term trades consider the lower priced natural gas stocks. Note also that there is a smaller sized contract available. You might consider this as an alternative to the very volatile full sized contract.
Petroleum Complex
Crude; Heating Oil; Unleaded Gas: The bullish fundamentals continue to convince traders that the long side is the best side and that $100 is inevitable. The media and the business press are telling us to prepare for $100 / barrel crude and $5 a gallon at the pump, and many traders have “bought” this story just like they believed the Y2K story and the bird flu epidemic. Over a month ago we were told that bird flu would be seen in California in a matter of days. We’re still waiting. I reiterate my warnings that TOPS are made on bullish news such as this and that high prices will bring out HUGE supplies.
I advised you to BE PREPARED for a severe decline. I also told you that “it’s possible that we will see $50 before we see $100”. This is still my forecast. While I do not believe that the crude oil market volatility is over, I DO BELIEVE that many hopeful longs will be washed out before another big run to the upside develops.
Another Gift From Me to You in 2006. . .A FREE One Day Stock and Commodity Seminar in LOS ANGELES no tricks, no gimmicks - no strings attached - SATURDAY JUNE 24th, 2006!!
Response to the Free Chicago Seminar was HUGE! You asked me to do it again...here's your chance, and it's all free of charge!
Topic: Methods and Systems for Maximum Performance
* I will teach you two, 100% objective, high odds short-term trading methods.
* How to find and trade major moves using The Power Momentum Formula (PMF) Trading Method.
* My market forecasts through 2008!
* My new MTT Indicator!
Pete Kilman - Genesis Financial Technologies
Topic: How to Develop Winning a Trading System
Ike Iosif - Aegean Capital
Topic: Using options to protect your portfolio
Adrienne Toghraie - Trading on Target
Topic: Overcoming Emotional Roadblocks to Success
Here is your LAST opportunity to attend my free seminar in Los Angeles. The Chicago meeting was sold out. This one is standing room only and is accepting waiting list reservations only.
NO REGISTRATION AT THE DOOR - YOU MUST REGISTER BY EMAIL OR FAX. See details below
Note: Please act immediately-the seminar will soon be completely booked!*
*Further details will be provided with your reservation confirmation.
To register: Fill out and submit the form Here
Questions? e-mail: lynn@trade-futures.com
About Jake Bernstein
