Michael Turner has just launched Signal Investor. The following is an example of some of the commentary you can get from Turner’s groundbreaking services.
When market volatility rises, it’s always a good time to step back and take a look at the big picture. Is the market building a base? Testing highs or lows? And what does the pattern say about the next most likely path for the indices.
To get a read on all of this, I look at forward-looking time-cycle forecasts. I analyze the past three years of technical trends. And, I also look at the market over the past 114 years.
As you can see in the chart above, the market has experienced 4 major “Consolidation” periods where it traded inside a relatively well-defined band. The amazing ‘tell’ in the chart is that 100% of the time, once the market has broken out of a Consolidation period to the upside, the market ALWAYS went on to a multi-year bull market.
The average duration of these bull markets is about 12 years. Nothing guarantees that the market will continue this pattern the future, but it’s insightful to look at repeating patterns over a long period of time.
The next chart below shows a more recent view of the market—the last 15 years—so you can see in a little more detail, what’s happening now…
When you look at the chart of the Dow for the last 15 years and consider that periods of consolidation are typically strong foundations for market rallies, it appears that we are in the very early stages of what could be a multi-year period of strength.
You should in no way interpret this as a sign that the market will rise every day and that stock selection is of no importance. The market will have dips, there will be plenty of ways for investors to lose money and smart investors will focus on the industries and stocks that are experiencing a tailwind in this market.
Let’s start with a look at gold and see if there is a tailwind or a headwind facing these stocks right now.
No matter how strong or weak the market is over the next 90 days, I see significant headwinds facing gold stocks. I use a mathematically derived forecast that is based on a sophisticated time-cycle analysis. When you apply the forecast to gold stocks you see very clearly that gold has an elevated probability of selling off over the next 90 days.
The way to look at the chart below of the SPDR Gold Shares (GLD) (and any of my time-cycle forecast charts) is to consider the forecast to be purely historically pattern based. It does not mean this is an exact picture of the future; rather it is the likely ‘tendency’ of gold over the next 90 days.
In this current world, I would have a hard time shorting gold, even with this very bearish forecast. But, I certainly would not be buying gold here unless I was a very, very long-term investor. I would rather wait until the forecast becomes more bullish before I would put money into this ETF, or gold in general.
The next chart below shows you where I would be putting my money right now…
The oil sector paints an entirely different picture than the one for gold stocks.
Do I expect oil to move all the way to $118 a barrel or higher? Not necessarily, but I might seriously consider adding an oil ETF, or stock to my portfolio right now.
When you look at such an amazingly bullish forecast, as in the case of oil, it is very important to think about the color of the forecast as being nothing more than a “Plus Sign” —an indication of likely upward pressure. It is a mistake to look at the dotted line and bet on the ‘fact’ that oil will skyrocket up to $118.
When I look at this chart, I see a mathematical probability that the price of oil will have more upward pricing pressure than downward over the next 90 days. This forecast is predicated on the assumption that, over the past 20 years, the most persistent and predictive cyclical movements in oil, are now indicating a likely trend at this particular time to the upside. You should take this mathematical approximation as one of many inputs regarding the price of oil.
The chart does not take into account supply-and-demand; it does not consider what OPEC is doing or not doing; it does not know anything about the advancements in fracking in North America; nor does it take into account the Keystone pipeline (or lack thereof). So, don’t put all your chickens into this one chart, but it does have an often uncannily accuracy to it.
Which leads me right to an oil ETF that I like very much right now…
United States Oil Fund (USO)
Below is the chart for the oil ETF, United States Oil Fund (USO). USO is a domestic exchange-traded security designed to track the movements of West Texas Intermediate (“WTI”) light, sweet crude oil.
The chart shows the last three years and where my time-cycle system has indicated that the ETF is a good buy (green), hold (black) or sell/short (red). Recently, USO has been trading in a rather flat range, but if the time-cycle forecast proves to be accurate again, this ETF could move up to its recent high of near $40 per share.
If ETFs aren’t your thing, I also have an interesting oil stock that gets a strong buy rating from me…
I know I said that I was going to give you five charts, but I can’t help but add a sixth. And this pick may surprise you. After a prolonged slide, Halcón Resources (HK) is finally showing signs of bottoming and could prove an excellent turnaround candidate for purchase.
If you aren’t familiar with HK, the company is an independent energy company focused on the acquisition, production, exploration and development of onshore liquids-rich assets in the United States.
What I like most is the strong institutional ownership and if the time-cycle forecast is accurate, even in trend, this stock could easily move out of Zone 1 and move well up into Zone 2. This is a small-cap stock, so caution is advised.