Statistically the very strongest US stock period of the year is starting now. On average the months of November through January use to produce a rise of a 3.3%. No other three month period achieves something like that.

In addition to this pushing-up-prices fact, at short term also the usual election rally from the end of October until the election schedule is on the agenda. It’s November 6. In case Obama is re-elected – which seems to be most likely – the average course of the Dow Jones of the last 108 years in the election years shows that it will close near the election year highs.

Only in case Obama will be voted out of office, a 2012 close near the highs could be avoided. In this case 2012 would rather finish at the current levels. But… 1980 was the first and single year after WWII that a democratic president – Jimmy Carter – was not re-elected after his first term of office. Then the stock markets anticipated the vote out of office by dropping until election. So, by not rebounding next week in spite of all the positive signs the markets would point to a vote out of office.

In that case the markets might – as they did in 1980 (nearly +6% for the Dow Jones) – jump for joy until Thanksgiving (November 22), marking there some significantly lower highs and falling from there until the end of 2012.

That would be an abnormal, unusual pattern. As mentioned, everything is pointing to the outcome that the correction lows were reached last week being reinforced during the next 1-2 days respectively:



In the weekly time frame there is a clear buy signal. In September 2012 the 2nd double arc was broken upwards significantly. Target of this swing is now according to the rules – with more than a 70% of probability – to reach the 3rd double arc. We didn’t strive for a long-entry at the September highs waiting for a pretty long time for a profitable long-entry best at the presumable correction lows. By and large the S&P 500 performed as forecast in the last analysis of the market on 10/14. For a long time the 4th run-up and test of the 1*1 support Gann Angle visible in the chart above has been the target of this correction. As notified as early as on 10/14 we bought the market at 1416 index points on 10/23.

Also the last two weekly candles are still pointing to a normal correction in the uptrend. The S&P 500 keeps testing diligently the upper line of the 2nd double arc without producing a closing price within both lines of the 2nd. The market is dipping into the 2nd being rejected by the 2nd on closing basis.

Let’s go now to the important 4th test of the 1*1 support Gann Angle and how we’ll have to interpret/read this test:

According to W.D. Gann the third and the fourth test of an important angle are the trend-setting ones. If the angle breaks in the third or fourth test there’ll be a change in trend. If a rebound from the angle happens the existing trend will be continued even accelerating, i.e. in this case if the 1*1 resists this time again in the decisive 4th test taking place a visible rebound from the 1*1 next week the uptrend will be newly confirmed even intensifying powerfully and not ending before the main target of this setup, the 3rd double arc is reached (1525 until February… That would correspond to the scenario "Obama wins election"… Another long-lasting upswing until the end of the year would have to be the result – as analyzed above!

However if next week closes significantly below the 1*1 angle (about 1394-1390) for the first time since May 2012 the S&P 500 would quote in the bearish half of the weekly up setup. It would have broken downwards this absolutely most important support that gives the ascent of the market in price and time. That would go on implying falling markets, at least in the medium term because in that case the market would quote in the bearish half. The down-forces would dominate. Moreover the physical state would have switched from being the very most important support to becoming an important resistance on weekly basis.

So, if next week all in all goes on selling off as a matter of fact the "Romney wins election" scenario will be anticipated. Certainly as a result we’ll be allowed to reckon with a stronger recuperation rally after the election but it would be indefinitely difficult to re-conquer permanently the 1*1 angle once it is broken downwards. Such a market is supposed to continue in the bearish half of the setup. That goes with the message that a vote for Romney would point to a rather weak year-end 2012.

My assessment/forecast: It’s to be pondered well whether or not to bet against the strong period of November through January! In addition, so far 2012 has clearly followed the course of the typical election year winning the office holder. That’s why the 1*1 is supposed to resist also in the 4th test, next week we’ll have a strong up-week, Obama is going to win and subsequently the markets will finish the year 2012 rather at the highs. Target for the S&P 500 keep being the 1525!

Seasonal events are now indicating stronger gold and silver rises again

Both metals got into pretty bad ways during the current October correction. For me, too, again and again it is surprising how mightily and rapidly even the very strong first initial impulses are being corrected in these pretty narrow commodity markets…

The precious metals as well as the stock markets are in again for some strong months now. Whereas October – as mostly in the last 100 years – was weak correcting the rises of the last summer months and the frequently strong September, November is expected to perform very strong again. In gold so far the psychologically important 1700$ mark resisted, but a touch with the most important monthly support magnet at 1686 worked out in the last issue keeps being the preferred down target:



Above you see again the chart of last week with position of the 1686 magnet in the actually dominating monthly 13 candle up setup. We recognize October running into the resistance of the 5th double arc. In the following weekly setup we furthermore recognize that with the actual swing highs the yellow metal reached a very important weekly target simultaneously in the weekly time frame as well, rebounding from there:



After reaching the swing highs at the important 4th double arc the October correction started. The correction lows were made at 1698.70 last Wednesday. In all my important gold setups I haven’t elicited/found any GUNNER24 Magnet or Gann Magnet that points to the outcome that the 1698.70 are the final lows of the correction. But that doesn’t necessarily mean that the final lows could not have made. You’re going to learn more on this topic/problem in the silver analysis below. Maybe the final corrections lows were reached there because the actual lows arrived at an important Gann magnet that goes again with the fact that gold bottomed last Wednesday…

But let’s go on with the yellow metal. It took 14 trading days from the swing high on 10/05 at 1798.10 to the low on Wednesday (10/24) at 1698.70. Supposing that the next trading day (10/08) after the day of the swing highs was the first day of the correction, counting the days until the actual correction low we get 13. That’s a clear indication to a final low because it’s a very important Fibonacci number! Furthermore gold corrected by exactly 100$ almost down to a cent (precisely 99.40$), hmm…

So far the correction has lasted 16 days counting on to last Friday. Hence from the Fibonacci count a final low at the end of next week, on day # 21 of the correction is offering itself. That would be next Friday, 11/02.

But now it is thoroughly possible that since the Wednesday lows a little countertrend rally is on the way that might lead up to the lower line of the 4th until Tuesday – 1740?! From there a severe rebound might newly follow that might go down to the support Gann Angle that is visible in the setup above.

That one will reside next week at… - 1686!! The same magnet in two different time frames makes it to be a very important magnet. The probability of this magnet to be reached is rising exorbitantly!

If next week closes above 1742 and thus within both lines of the 4th the correction will be finished officially. That doesn’t mean that during the week after next the 1700-1710 region won’t want to be headed for again. But such thing should only be a matter of a test of the correction lows.

Let’s go now to the red arrows in the setup above. Supposing that the actual correction happens in a classical ABC-wave-structure maybe last Wednesday being the 13thh day of the correction we saw the final lows of the A-wave. Since then the market is possibly in a B-wave likely to last 5 days that may thoroughly correct a 50% of the last downswing, so it may go up to 1748. Then the C-wave with again 5 days but rather 8 or 13 days of correction might follow. Then there will be the high probability that the 1686 on daily basis won’t resist ending the correction at the 1672 surroundings or even at the "strongest support angle" which would be the 1650 surroundings.

Clearly visible silver Gann support being reached:



This weekly 21 candle GUNNER24 Up Setup starts at the February 2010 lows! It’s a matter of a very important setup because it is facilitating the very profound look into the internal structure of silver. The most important magnets that affect/have affected the price are becoming visible at once.

At first we see which way the 2011 top was made almost perfectly at the limit in price of the setup. Then there is the performance at the 5th that made silver classically rebound or top respectively. In addition we can make out the "Strongest Support Gann Angle" that was responsible for the formation of the 2012 summer lows. Then the long lasting resistance of the 5th double arc was taken and simultaneously the 1*2 Gann Angle was re-conquered.

The actual swing highs on 10/01 at 35.445 at the horizontal GUNNER24 Resistance was worked off and subsequently the actual correction low was formed on Wednesday super exactly and precisely at the 1*2. The last week candle is now showing a certainly still pretty weak rebound from the 1*2, but it closed in a plus already.

We just experienced the very first back-test of the 1*2 after its re-conquest at the end of August. Experience has shown that according to the rule of 3 and 4 this angle technically shouldn’t be broken downwards before the 3rd or the 4th test… for me silver is rather indicating that the correction lows were reached being supposed to prevail the strong seasonality from next week on.

But if silver wants to join the ABC-scenario sketched above for gold – here again traced with the red arrow – the correction should be finished within the lapse of the next 3 weeks at about 30$ before the year-end rally starts. Correspondingly a B-wave top shall follow between 33 and 33.20. At the moment I cannot really imagine a relapse to the "Strongest Support Gann Angle" during the coming three weeks…

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Eduard Altmann