Black Dragon Year portends opportunities in both directions for investors and traders

Happy "Black Dragon" New Year 2012 in Chinese Astrology!

Let's discuss the more bullish prospects revealed for this year due to a strong January, influences from astrology and the solar system, and prescient analysis. Theres a good chance that, after the next correction/consolidation (which could start anytime soon, actually), the next rally later this year might produce higher highs. While Raymond Merriman provides excellent work based on western astrology for financial forecasting and economic, political and social predictions, with the Chinese Black Dragon New Year we'll take a look today at some insights and predictions from Chinese astrology. And like Merriman's comments, there's definitely something you must know - the world does NOT end in December! To the extent there's any cycle closing, it's always a transition to a new cycle beginning. The end of a cycle in the winter solstice, December 2012, implies a turn and new hope for tomorrow. There's a good article "2012 Doomsday Chinese Astrology, I-Ching Prediction and Mayan Calendar Prophecy"at http://www.chinesefortunecalendar.com/MayanCalendarDoomsDay.htm. Here is a quote about this:

In China, there is no doomsday prediction for 2012 besides Hollywood movies. On the contrary, China has one prophecy regarding to 2012 from Ching 清 Dynasty. It said that a wise man will appear to make the world prosperous and peaceful in the year of Black Dragon. (Chinese language page Chinese Prophecy for 2012).

A quick lesson about marking the Chinese new year start - the traditional Chinese astrology uses a solar-based timing and identifies today, February 4, 2012, as the start of the new year - see http://www.fortuneangel.com/ChineseAstrology2012.htm.

The lunar calculation, which is popularly used, placed the new year's start on January 23, 2012 - see http://www.fortuneangel.com/2012.htm.

Chinese astrology provides much information which can be very revealing for those willing to spend a little time learning its concepts. Guidance actually covers all aspects of life for individuals, as well as societies and the world. The hints from Black Dragon being strong in water even suggest that "wood" type investments will be well-supported, while sectors like communications, shipping and technology may not do as well. More information on the Chinese Horoscope 2012 and Chinese Astrology 2012 - Year of Black Dragon can also be found at http://www.chinesefortunecalendar.com/2012ChineseHoroscope.htm.

As the solar start to Black Dragon Year has arrived, it's interesting that several events have occurred. The S&P 500 got into the 1340's and overbought - something I discussed in other recent posts. Warnings have sounded from the VIX falling wedge, and from the commitments of traders (COT) as described by Alex Roslin at his COTs Timer blog. Even the last "Occupy Wall Street" camp was closed, which could be a socionomic signal of a top, even if an interim one. And at the end of the past week, just before the solar Black Dragon Year started, with its strong water energy, we saw divergence across various markets (discussed in my prior recent posts here). It may not be a coincidence that crude oil - related to fire and, in a way, earth - already started weakening from the lunar start January 23.

Here's the introduction to a forecast the McClellans are featuring this weekend as their Free Weekly Technical Analysis Chart by McClellan Financial, 2/3/12 at http://www.mcoscillator.com/learning_center/weekly_chart/

February 03, 2012

Eurodollar COT Indication Calls For Big Stock Market Top Now

Back in May 2011, I introduced Chart In Focus readers to the leading indication that I get from looking at Commitment of Traders (COT) data on eurodollar futures. Since then (and also before) readers of our twice monthly McClellan Market Report newsletter and Daily Edition have appreciated getting to see this relationship on a more frequent basis. For almost a year, we have known that a top was due to arrive in February 2012. And sure enough, stock prices have been rising nicely in recent weeks as fulfillment of that expectation. Now this leading indication says that things are going to… more

Guess what - the McClellan COT-based forecast chart bears some resemblance to the combined solar-lunar/Bradley forecast for 2012 by and at Amalgamator (included in the sites list at the right side of the full site page here). That 2012 forecast calls for a crest anytime in coming trading days, then working down into late spring or early summer. Then a rise about July, some pullback, then upward into late this year.

It's also consistent with the "Three Peaks and a Domed House" scenario being tracked by Hirsch in their article at http://blog.stocktradersalmanac.com/post/New-Highs-But-3-Peaks-Top-Looms. The idea appears to be that we're hitting a crest or plateau from which we should expect correction or consolidation for awhile. Then another big move up to complete the final dome ... And then, down smartly. It's all enough to make one think that the bearish time will be in 2013. Maybe that's just fitting, 4 years after the March 2009 lows.

Some Chinese-calendar astrologers recommend investing in Chinese and Russian stock markets for those who want to "ride the dragon". That's mentioned in the article cited below, as well as this quote:

"The world economy will be unstable in the Year of the Dragon, because the economies in Europe and the U.S. are still suffering from the effects of the recession," Hong Kong Feng Shui master Anthony Cheng said.

See the article "Chinese New Year 2012: Meaning and Predictions for the Year of the Dragon - International Business Times" at http://www.ibtimes.com/articles/285634/20120122/chinese-new-year-2012-predictions-dragon.htm.

Remember - the good news is that human civilization has at least 60 or 70 million years to go, according to the Chinese astrological system - it certainly doesn't end in 2012! But the rise we get in the second half of the year isn't guaranteed to be massive - let's focus more on time than price. There's potential cautionary notes coming from financial astrology, including in the Chinese method. There's a prediction article by Raymond Lo (source cited below) which deserves careful attention because it provides much information for all aspects, including health and politics as well as the economy. Raymond Lo is a Professional Feng Shui Researcher & Practitioner; and we might consider that there may be many Chinese investors who will be influenced in their approach by these concepts. Here's a quote about markets, but do read the whole article:

Regarding the economy, fire element is often the driving force behind the stock market. The five elements are also affecting peoples mood. In general fire is joy, water is fear, Earth is meditation, metal is sadness, and wood is anger. As such, fire year often generates optimism and drive up the stock market, such as 2006 and 2007.

But in 2008 the water arrived and obviously people began to have fear about worsening of the USA sub-prime problem and recession. In the year 2009 there [was] pure earth on earth. The earth element is stopping the water and it also symbolise meditation. So it means people will be conservative and play safe but gain more stability. In 2010. the Tiger carries the seed of fire element and so there had been substantial economic recovery with stronger optimism starting from the spring season. There is a short setback with the economic crisis in Greece and Portugal in late spring but with summer fire coming in May, the stock market recovered with strong momentum.

In 2011, the Rabbit [was] pure wood, it is not so strong in generating fire like the Tiger. So the economy was not as fast moving as the Tiger but there is also strong summer fire supported by wood in 2011, so the stock market continued to be vibrant and active in first half of 2011 until August when autumn arrived and no more fire support, there is serious setback in second half of 2011. With strong water coming in 2012, one have to be cautioned against more setback lasting into 2012.

2012 is year of water and earth, it is continual absence of fire element, so this could be a year that the economic activities and stock market will further slow down. The strong water this year is creating the mood of water, which is fear, people will be less optimistic. This will become more serious in the winter months of October, November. The economic crisis in certain European countries may be deepening and causing downturn in the global economy and stock market. Investors should enter a caution period especially in the second half of 2012.

See the whole article at http://www.raymond-lo.com/article_details.php?id=45.

Therefore, in addition to sector rotation which may favor agricultural commodities, textiles and clothing, we should remain alert that not all highs are higher highs. Like 2011, this year may prove to be one when timing is important.

Happy Black Dragon Year!