2016 has come to an end, and we’re just hours away from 2017! I wish all readers a Happy New Year!
What will the financial markets do in 2017?
So, how will the financial markets and different sectors move during 2017? Without revealing too much of what our clients get access to, here are a few thoughts:
- US government bonds are due for a an upwards correction (that is, a reduction in their yield), which should start sometime during H1 2017. Severe technical damage in the US-5 Year, 10-Year and 30-Year bonds was done towards the end of 2016 however, and the downtrend might need some more room to bottom out this selling wave properly. Look for that type of move (bonds up -> yields down) to occur during H1 2017. Post such a rebound, the downtrend in Western world government bonds will likely resume across the board.
- Gold/USD (and probably Silver/USD) look like they’re going to start the year upwards. However, it seems both Gold/USD and Silver/USD are locked in sideways patterns (possible triangles), and post their respective sideways patterns, we might see another liquidation wave which will bring Silver to $10 and Gold to sub-$800 or less.
- Crude Oil Brent is at a juncture where predictability is not particularly good. While the longer-term pattern seems to bring Crude Oil Brent upwards to $80, in H1 2017, a correction down to $38-40 *might* occur first.
- The European and US stock markets might be due for a 25-35% drop. In fact, most stock markets around the world will probably join such a decline.
How to invest?
Well, the answer to that question – how to invest? – will be different for everyone. My general sense is that there will soon be another liquidation episode across most asset classes (with precious metals possibly being an exception), which will be followed by an ultimately futile QE episode (greater than the current measures put in place by some central banks), undertaken by one or more major central banks.
The renewed QE period will drive inflation, this time the most harmful type of inflation, in food and fuel. It will probably ultimately be terminated due to populist uprisings, especially in Europe, becaues the general populace will feel the hit from QE-driven harmful inflation the hardest, while the benefits in terms of boosted asset prices will only benefit a relatively minor portion of the populations. Also, renewed QE might also kill off any bounce in Western government bonds – the outstanding amount of government debt in the Western hemisphere far outweighs the current amount of QE we’ve seen, and outright monetization will also cause harmful inflation and make holding any government bonds in inflated currencies less attractive due to losses on the currency depreciation.
Hence, assets that might benefit from harmful inflation might be good to own as QE4 might start (after a stock market decline), and of course, the stock markets in general will rebound during QE4. If this will play out, it will of course be evident in commodity futures price action, and then, one might consider stocks correlated to any given commodity (if one doesn’t want to attempt to trade commodity futures outright).
What will actually happen?
Will any of the above actually happen? It might. It might not. The truth about the financial markets is that they are unpredictable – sometimes more, sometimes less. The truth about any analysis method, hence, is that they vary in their ability to make predictions. Standard Elliott Wave Theory doesn’t properly account for this, whereas the Extended Elliott Wave Theory we use and have painstakingly developed, attempts to do so.
Furthermore, the market drives our analysis and derived scenarios. It is the final arbiter of what is correct and what is wrong.
Thus, making predictions a year ahead, is a bad habit which analysts and institutions drive each other into doing. As is evident, we play along in this somewhat futile game…
What is guaranteed to happen?
The markets will move. And we will continue to serve our readers with technical analysis every day. We’ve recently initiated an upgrade of the market parameters we adress, to help further clarify what we see in terms of Elliott Wave patterns, standard technical analysis tools, market predictability and risk/reward estimates.
We wish all readers the best of luck with life and finances in 2017! And we especially thank our subscribers for your interest in our work. We certainly hope you are happy with our services!