Sometimes a very simple picture can replace 1000 words, so as such,
this brief update will illustrate what is driving the market. There was a
minor shooting star doji put in place yesterday, which suggests weakness into
the start of next week before starting to rise towards 81.5. Other charts
that will be presented on Wednesday will illustrate that the coming top will
be just that and in the process, create a setup for a very sharp decline. After wave [E] completed a long-term
triangle, a subsequent cliff-like decline occurred, which appears to take the
form of an elongated flat to form wave (A).
Wave (B) underway at present
appears to be forming an elongated flat (3-3-5) which is denoted as A-B-C.
Wave C is forming a terminal impulse, which is characterized by wave
[ii]-[iv] overlap. Wave [v] most likely started on Wednesday, which was
characterized by the sharp move off the lows. Based upon expected equivalency
between waves [i] and [v], expect 7-10 days of upside...which translates into
another 6-7 days. If wave [v] takes on a triangle, then the pattern could
extend towards the end of the month. There are several worrying aspects of
how quickly the US Dollar Index could fall out of bed, but the most visible
thing is the decline of wave [iv] and how high wave [v] must rally to at
least reach the top of wave [iii]. If wave [v] fails to reach the height of
wave [iii], then it is classified as a failed fifth, which would result in a
complete retracement of wave C in an equivalent or shorter period of time.
Based upon the Contracting
Fibonacci Spiral (CFS) cycle that I discovered in July 2011, modelling with
expected future time posts to indicate tops suggested that development of an
elongated triangle or higher order structure (Diametric triangle, which has 7
legs, all equivalent in time and complexity, but totally different with
respect to price action between each leg) would be in play until 2020, with a
sequential break down in the US Dollar Index. In Glenn Neely's masterpiece
book, "Mastering Elliott Wave", he noted that elongated flats and
zigzags generally occur as entire segments of expanding triangles or as a
segment of a leg within the structure. Both of these structures are in place
so far, strongly suggestive that an elongated triangle is indeed forming. The
next question on everyone's mind is "What next?".
Wave [A] of elongated triangles
are always have the greatest rate of change (quickest decline per unit time),
with each subsequent leg usually being longer than the prior wave (up to one
leg can negate this trend for the pattern to be valid). Based upon the CFS
cycle, a bottom in the US Dollar Index somewhere between 70-72 is expected
between July and August 2013, followed by a very sharp move up to 85-90 by
late 2014.. Subsequently, a sharp decline in wave [C] to below 70 is expected
(65-67) by mid 2016. The next sharp wave of deflation is expected to last
until 2018 with a US Dollar move expected to hit 90-95 in wave [D], followed
by move down into 2020 to the 55-60 level. This will mark the lows of the US
Dollar Index and the bear market in play since 2000. After 2020, expect a shift
in longer-term interest rates to occur, along with higher taxation. This is
the longer-term theory in play at the moment and so far, it is has proven to
be accurate. I modified the CFS cycle recently in order to take into account
the gradual breakdown of phi as the number sequences approach 0, which fits
will with what is occurring in the market at present.
All of the items covered in
the daily analysis of the HUI, XOI, S&P 500, TNX, oil, natural gas, gold
etc. etc. are based upon where the US Dollar Index is within the evolution of
its development within the CFS cycle. I can not stress enough that causes,
rather than symptoms must be sought in order to understand what is going on
within the market.
Later on this afternoon or
tomorrow, I will update the various stocks we are following and when their
expected tops are to be put in place during 2013....it will be a game of
musical chairs because when the music stops, there will be no seats and those
holding the bag will really be holding the bag.
Figure 1
Larger
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Biotech - The Next Major Bull Market After 2020
One final note, while we have
a bull market in precious metals, the "other" stealth bull market
developing is going to be in the area of biotechnology. By time 2020 arrives,
many nations of the globe will nationalize resources in order to preserve
their currencies...this fits with human nature and when things appear
precious, people tap into their "squirrel mentality and hoard. The final
frontier that government will not be able to take is Intellectual Property
and this will be the driver behind biotech stocks thriving. North Americans
or other countries that have taken on this sort of lifestyle are chronically
obese, with symptoms and problems only magnifying in intensity during the
later years of life.
My actual career is in the
biotech sector, so I am well aware of developing trends and current
technological breakthroughs. As such, I finally am going to be putting
together a complete list of senior must-own biotech stocks, juniors that have
very promising products in the pipeline generating revenue and then microcap
biotech stocks that have received awards for their technology platforms, have
heavy IP locked in with patent portfolios, promising Phase 1 and 2 results
etc. etc.
Participating in biotech
stocks can be risky, because Phase 1 and 2 studies can be riskier than buying
moose pasture in hopes of finding gold. There has not really been any clear
sort of trends in biotech over the past decade because most of the major
companies such as Merck, J&J, Pfizer, Amgen, Genentech etc. have been
living high off the hog, with little participation in performing new research
due to the high costs for adding patents to their portfolio for future drug
development. Now, many important money-maker drugs or gene construct systems
for product expression (such as Lonza) are coming off patent within the next
2-4 years.
Several generic companies are
going to be trying to jump into the pool and participate to try and get a
portion of the profits. In order for the large biotech companies to
participate, the blue chip biotech stocks are starting to buy out the juniors
with promising products to feed their future pipeline and profit streams. As
an example, a private company in Vancouver was purchased by Genentech or
Amgen (cannot remember which one at present) because of the technology it
owned to identify important epitopes (sites on a protein that can be
recognized by the immune system). Identifying important target sites
(epitopes) and using libraries to select optimal binding for generation of
next generation monoclonal antibodies (mAbs) is critical for development to
treat pretty much anything. As a twist, antibodies from camels (camel mAbs)
are being investigated for brain tumours since they are small enough to cross
the blood brain barrier).
Other important areas of
development are DNA-based vaccines, which will likely have a similar effect
in vaccine and mAb development the first model T had on the horse and cart
industry. DNA based vaccines can be used to protect against viruses, cancers,
bacterial infections etc. etc., but there will always be a requirement for
mAbs to serve as some form of passive immunity, especially if elderly people
are unable to generate strong immune responses based upon their health. The
entire area of biotechnology is complex and identifying epitopes unique to a
cancer or other targets that have little to no cross-reactivity can be
challenging.
So, I hope that starting a new
segment to what I publish on the site (Biotech stocks) will aid in
diversification for investors. Having a strong technical analysis background,
coupled to my BScH and MSc. should provide a unique combination for selecting
new up and coming stocks.
One huge company that has
significant upside is Danaher (DHR) on the NYSE. They own some 30 companies,
but recently bought out MDS, rearranged its product profile, bought out
Molecular Devices and stuck their BlueShift technologies product in that
portion of their portfolio etc. Also Danaher bought out Beckman Coulter,
which is huge in the area of providing scientific equipment such as
centrifuges, cell counters, liquid fluid handling systems etc. I expect
biotech stocks and precious metals to run into mid 2013, so a company such as
Danaher has $12-15/share of upside between now and then. This is one example
of different stocks that I will be initiating coverage on, so watch for next
weekend when I update a list. Hopefully, we can get charts to automatically
feed into the site charts section.
This article turned out to be
longer than anticipated, so the precious metal stocks we follow will be
updated tomorrow AM. Have a great day. There are a significant amount of
profits to be made over the coming 6 months, but please be aware that
subsequent to a top in 2013, a huge downturn is expected. When everyone
appears bullish and think we are going to have hyperinflation, that is when
we know a top will have been put in place.
