Peering into the future : The Story of 2012

“Odds are that the consensus forecast for 2012 is wrong” 

I took this phrase from a respected economist.

2012 could be a year of surprises and perhaps lots of it. Many are looking for a recession and crash in 2012 and that itself, could actually come as a surprise. A major top looks to be taking place in March 2012, but whether that will be the final peak before the bear resumes, is a guess.

1. Fibonacci Series

1932 low to 1966 high = 34 years

1966 to 1987 = 21 years

1987 to 2000 = 13 years

2000 to 2008 = 8 years

2008 to 2013 = 5 years

We are oscillating in the time fib series since 1932 low. And if history is of any guide, the next peak should come between late 2012 to early 2013 and this later peak should form a negative divergence with the March top.

The monthly Stochastics had also given a buy signal. Now waiting for MACD to give confirmation. Notice that MACD is still residing above zero line ? It has not even come close to moving down below zero and notice this difference between the 2002 & 2008 recessions. Those two periods were below zero.

2. The Inflationary Piece

a. Gold

Gold has been in a secular bull since 2000. And gold’s secular cycles last at least 10 years.

GLD has been in a correction and the time band is getting close to a major reversal. The weekly stochastics are oversold and looked ready to cross up soon.

b. Oil

Oil had been slowly creeping up, topping near 100 level. Oil like gold,  had been in a corrective wave recently and is now ready to launch its next attack and hoard the headlines soon. Its stochastics had also given a buy signal.

The Spiral Model has oil topping in the 3rd to 4th quarter 2012.

With both gold and oil about to launch a major reversal from its sombre correction, the inflationary story remains at least till 3rd quarter of 2012.

When Oil, Gold and Stocks all peak at the same time, that will be the major signal to look for a peak in equities and a deflationary style crash to occur soon.

3. Recession Fears & 2012 Election

The biggest fear is not recognizing that greed is just next in line. The crash of 2008 is still vivid in everyone’s mind and the fear that is still lingering around has everyone worried and panicky about the next recession.

The mighty cyclical bull that stems out of the March 2009 lows were a result of the intense fear among investors. Between then and April 2011, SPX soared 101.6%. The wild volatility in recent months, Aug – Nov, were within the context of a bottoming process.

Through the media, almost everyone has been taught that 2012 will be a year of hardship and recession. Then came the 2011 mid year correction, which I believed had already priced in the so called “2012 recession”. Yearly targets and forecasts had been moved down in that retrospect.

And what happens if there is no crash next year, instead the economy remained on track. Many published growth results will be better than expected, the rally resumes and catches everyone off guard.

A major top could occur in March 2012, with a major low mid-year. But the market peak could come later, because of the interventions by monetary authorities. Afterall, it is the year of election.

4. Elliot Super Cycle Wave 4

In Elliot wave terms, on the bigger picture, we are in a Secular bear market supercycle wave 4.

I believe this 20 year bear will move sideways instead of zigzag. Hence, we will have sideway actions from 2000 to the end of the secular bear, which ends sometime 2019-2020. Price actions of wave 2 and 4 usually alternates. Wave 2 was the 1929 depression.

Bernanke, who studied extensively on the great depression, had successfully averted a crash style depression this time round. If it was a zigzag, it can turn out disastrous because we are looking at a supercycle degree.

What this means also, after this bear finally ends, we are looking at very bullish few decades ahead. Volatility will decrease and stocks will become a haven for long term investors again.

5. NASDAQ

If anyone noticed, COMPQ has become the leading indicator. It currently leads Dow. COMPQ is the first to fall and in larger % decline if we are starting a downtrend. It will also be the first to weaken in % drop if a trend change to up is coming.

If you look into the charts of Apple, IBM or Amazon, you will notice the beautiful and clear bull run up on weekly frames.  Compare it against the financial banks and you will see the drastic difference.

On a macro economic view, this implies that the next decades favours strong growth in the creative and technology sectors. These sectors will provide the highest growth to the economy and will be the first few sectors to recover and lead us out of the secular bear.

6. Sunspot Cycle

The sunspot cycle is a 11 year cyclical affair. It last peaked in 2002 and the next peak is expected in 2013.

Sunspot peaks had been associated with recessions and increased volatility. Scientists have warned that the next few decades could usher in quieter cycles, and we would be worrying of colder climates to come. If this is of any link to the markets, then the few decades would lead to a bull run which slowly uptrend without the bear market volatilites. The best rally usually comes from bear markets, hence we will probably not find 5 to 6% increases in a day and a fall of the same amount the next.

In conclusion, 2012 will be another volatile year but the well expected crash will probably not come. We have one more 4 year cycle still uptrending in 2012 but we could see a mid year correction. The crash will more likely visit us during the period 2013-2014, which happens to coincide with the bottom of Kress Cycles. After the 4 year cycle peaked, all cycles will be firmly down into 2014.

On personal front, this year had been a fruitful year for me. It was the period when I discovered that life itself is not  random and that everything in it’s tiniest bit has a role to play in contributing to the overall. Just like a spider weaving its web, in its conscious mind, it is not aware that the web it is weaving has taken on a geometric path. We are just like the spider. We are not aware but we contribute every bit of our way, to the overall through a specific mathematically designed pattern.

Happy New Year 2012. The year of water dragon. The year when the winter solstice sun will align with the dark rift and appear to be near the galactic centre. This is a galactic conjunction that happens once every 26,000 years. This winter solstice will occur on 11:11 GMT on 21 Dec 2012.

The next morning the sun will appear to rise from the galactic centre. It is also the location of the super-massive black hole at the centre of  Milky Way galaxy.