Sand Spring Advisors LLC
Our Best Foot Forward for Early 2002
January 2, 2002
by, Barclay T. Leib
We looked long and hard at individual equity and equity index chart patterns over the past few days. While many seem ripe to roll over and head south once again, we are respectful of the typical rah-rah "January effect" where institutional and private investors can get all excited at putting money to work in the New Year. We are also quickly approaching our next 4.3-month cycle turn date in early February. Could 2002 see an early February high lead to a mid-June low, followed by an early November 2002 high? That may well be the rhythm that we are looking at.
Or maybe the large corrective A-B-C rally since September is already complete -- per the hourly chart of the cash S&P 500 index below. As our readers know, this has been our preferred wave-count interpretation to date, and while a clear downside resolution to this pattern has been slow in coming, and the February cycle date is fast approaching, it remains at present our preferred view. In our heart, this more-immediately bearish interpretation is simply more compelling technically -- the cycles be damned. Specifically, any close now below moving average support near 1142.75 on this cash index would be a very bad sign for early-year equity bulls. Only a close back above the early December high of 1173.62 would instead send this interpretation to the dustbin.
Chart constructed using Advanced GET End-of-Day
But since the short-term equity picture, while certainly "toppy" looking, is less than absolutely compelling at present, let us start the New Year discussing a chart pattern that does appear more immediately compelling to us. This may seem repetitive to some, but that chart pattern remains that of gold.
Chart constructed using Advanced GET End-of-Day
Basis the hourly rhythm of the February Gold contract shown above, we see at least a further short-term spurt in this metal's price to the 287.9-289.5 region. We say this given three reasons: the overall Fibonacci rhythm of the chart pattern that fits both on the way down and on the way up near 289.5; a gap on the chart that we spy at the upper edge of our Fibonacci target range; and a trendline angle that also comes in near this price area.
Longer term, maybe gold has even more in store for us to the upside in 2002. But let's fight one battle at a time, and go step by step here. For now, we'll be happy to see gold up into the 287.9-289.50 region, and think that there is a high probability of getting there sooner rather than later.
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