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A month ago I wrote an article that provided my thoughts about where I thought the markets might go. Every once in a while I hit the target, not only at the right price, but also at the right time. Can anyone say Bullseye!  Okay, okay... so I only gloated for a day and the market bounced right back up in fashion. So where do we go from here?  I have a few scenarios that are spinning around in my head that I will quickly review here…

 

Figure 1

The stock market has been as volatile as ever. Our November target was actually exceeded for a period of one day. Since then the indices have rebounded 20% off their lows in one week, making this the biggest weekly gain percentage since 1933. This exact drama unfolded a month ago and if history repeats itself, we will have a minor top off sometime this week and then head lower. The only way this won''t happen is if retail sales are fantastic, credit miraculously frees itself up, and the fed reduces interest rates once again. Either way, I got another big month unfolding. My bet is to the downside.

Figure 2

Oil has also been active in the past month, as November saw a 30% drop in the price of oil from the high to the low. The King of Saudi Arabia came out this weekend saying that the price of oil should be $75 a barrel. Funny… I am not hearing a word from the greenies about the price of Gas lately. Maybe because it''s selling for less than $1.50 a gallon in some places. So where is it likely to go?  My first thought is not to listen to someone who''s about to trade in their SUV for a hybrid. That almost makes me think that Oil should continue downward. More than likely Oil will move in the same direction as the stock market. That means if we see new highs in the market, oil should go up too, and maybe the King will be right. BTW, the King will probably do everything in his power to restore Oil to $75 a barrel. What he hasn’t thought about yet is that you can''t dictate the price of Oil to a falling global economy. I have two prices of Oil over the next month.

 

Figure 3

Now here''s a chart of a different color… Yellow. Gold has been moving in its own direction, meaning it has moved non-correlated to the stock market. This one might be the easiest to predict using technical analysis. Of the three charts shown in this week''s update, Gold has the highest probability of moving higher. Laying the past two months of Gold over the stock market, I believe it too will move with the stock market short term.

So in conclusion, if the stock market rises over the holiday season, expect commodities to rise too. And of course if the stock market reverts and heads south once again, so should the tangibles. I am expecting a slight pullback, but I do believe we will retest the November 4^th highs soon.  

Tom Gentile
Chief Strategist
Profit Strategies Group, Inc.

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