Larry Williams Forcast 2012

I Really Trade Presents Larr y Williams’ 7th Annual Market Analysis and Forecast Predictions for 2012

“You’ve got to go out on a limb sometimes because that’s where the fruit is.” -Will Rogers

Larry Williams Forecast 2012

Forecast 2012

Forecast Road Maps US Stock Market

3

Global Stock Indexes

24

US Treasury Bonds

34

Metals

41

Currencies

48

Individual Commodities

58

Individual Stocks

67

Set Up Markets

72

Closing

84

Glossary

85

Chart Index

86

Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

US Stock Market Forecast

“OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February.”

- Mark Twain

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

Chart 1: Dow Jones 2011 Forecast Daily Bars

Stocks Destined To Rally... Then Decline Those are the words that led off last year’s forecast prescient in what actually happened. For 2012 if there is a catch phrase to describe the future it would be “First of a Year Rally then down to September”. My summation for 2012 is...

When the president is in trouble, the market is in trouble. Couple that with the Man Financial fiasco (as well as the emotional ups and downs of an election year), tells me 2012 will be volatile; with numerous large rallies and declines. Shown in Chart 1 is our forecast for 2011. All in all, I think it was remarkably accurate; living proof that the future of tomorrow can be known today. My hopes are what I learned making that forecast and since then can continue this tradition of excellence. I want to begin by showing you some of the most dominant cycles and patterns I will be looking for in 2012; then hone in on the ultimate forecast.

Any one can forecast the future; the difficulty is doing it with accuracy.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

Chart 2: Dow Jones 2011 Years Ending in 1 Forecast With that thought in mind, Chart 2 revisits what I showed last year. That forecast was made by simply averaging all years ending in 1 (1911, 1921, 1931, etc.) to get what “usually” happens in years ending in this part of the decade, as originally suggested by Edgar Lawrence Smith in the 1930’s. This chart gives ample evidence that the future can be known; it is possible to have a decent notion of what stock prices will do at least one year in advance. As one trader told me, “I was always in the dark, fearful of what would happen, but last year’s article showed me we can get a glimpse of the future.” Using this simple tool in last year’s report we wrote, “The resulting decennial forecast calls for a strong up move early in 2011 that lasts into the middle of the year, followed by a decline into fall, and an end-of-year bounce.” The forecast has done a pretty good job of alerting us to the first of the year rally and the June sell off and October rally... the Dow 30 followed the road map. The good showing of the 2011 forecast gives rise to the question, “What do years ending in two suggest for next year?” The answer can be seen in Chart 3 where I took each day of all years ending in two, tossed them into my Cusinart computer, blending them together into the road map you will see next.

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US Stock Market

Chart 3: Dow Jones 2012 Years Ending in 2 Forecast What may well be in store for 2012 is a rally at the first of the year into a mid-to-late April top; which gives way to a sell off into late July. Hopefully that decline will be abated and generate a rally into late August, before another sell off leading to an election rally that begins around the first of October. In short, it looks like 2012 will be a market dominated by a Spring Time sell off and trading ranges, as opposed to a long-lasting trend.

Another Way of Forecasting In last year’s forecast I also suggested that there continues to be value in what Yale Hirsch wrote about in the 1960’s; that markets tend to perform the same way in the respective years of a president’s term in office. In my 1970 book, “The Secret of Selecting Stocks” I showed this pattern. The voice from 40 years still speaks. In other words, there seems to be a commonality in stock prices each year a President is in office. By that, I mean that there is commonality between how stock prices act in the first year of a president’s term, second year, third and fourth. While we saw earlier that all years ending in two tend to have a similar price pattern, I have also noted that all, say, 3rd years in a president’s term, seem to also have a common price pattern or cycle. The following chart is from last year’s forecast, and illustrates this point quite well. By and large, stock prices in 2011 acted about how they have in all third-year presidential terms.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

Chart 4: Dow Jones 2011 Presidential Pattern for 3rd Year in Office The chart published in last year’s article marked off 7/15 as the peak in stock prices. I’ll let you be the judge of that call. My comments were, “The bottom line is that various cycles are suggesting 2011 will start with a strong rally that will carry into mid-year. Bulls should feel free to roam on Wall Street until late June or July.” 2012 will be the fourth year of President Obama’s residency in the White House. If we think that can be used as a judge of what happens, we simply average together all of the fourth-year terms in office and Viola! We have a forecast. I am certain you will hear a great many comments on what happens in the fourth-year of a president’s term in 2012. Most of time, most of these prognosticators seem to grab bits and pieces of information and not the total picture. What you are seeing in Chart 5 is the total picture from 1950 forward of what has happened. It is what I will be relying on, not pronunciations from pundits.

Chart 5: Dow Jones 2012 4 Year Pattern Presidential Pattern © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

The Presidential Pattern is telling us to look for a low point around March 7/9. Then look for a market peak in mid-April, another market low around the end of May, leading to a mid-July rally. That rally peaks in late August or early September, leading into a very strong buy point in the middle of October.

Then things get good --- real good in October --- with another substantial rally starting shortly after the elections in November. I have visually looked at this Presidential Pattern for the last 100 years, and there are some specific observations I made. The most critical is that while the peaks and troughs in the forecast are usually correct, at times the market tops exactly when the Presidential Pattern forecast is calling for a rally, or rallies at the exact time the forecast is calling for a peak. The turning points of the Presidential Pattern (Chart 4) are important reference points for us to key off. Accordingly, we will want to pay particular attention to those time zones. Additionally, at least since 1946, there has been a very strong tendency for the market to rally in October and again starting shortly before the election. I believe these will be the best short-term trading opportunities for the year. As I’m certain you have noticed these two forecasts (years ending in two and the Presidential Pattern) don’t coordinate or jive with each other 100%. I suspect the best way of dealing with this in actual trading or investing is to see which cycle the market is most responsive to as the new year opens, and then be willing to respond to which ever road map, or path, the market is most closely associated with (which one it is following). You’ll also notice there are times when the two forecasts are in unison, and those should represent high odds or probabilities of rallies and declines.

Dispelling Some Myths Martin Armstrong and his cycles.... This business is full of colorful people. Rank them, and you would have to put Martin Armstrong in the top 5. No need to get into the full story here, you can Google that. But I do want to focus on his popular assertion that there is an 8.6 year (447 weeks) cycle to the stock market. Armstrong has gotten great press in Business Week, many web sites... even The New Yorker extolling Martin and his cycles. I say it is bunk. That’s not me speaking, but what the charts are saying. You can make your own decisions from the charts shown in this year’s forecast, starting with Chart 6 from 1930 and going © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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to 2011 in the charts that follow. A first, the 1929-1953 chart looks like Martin may have stumbled upon something.

US Stock Market

Chart 6: Armstrong 8.6 Year Cycle 1929 - 1953

Let’s dig a little deeper and see how this pattern has held up since then.

Chart 7: Armstrong 8.6 Year Cycle 1953 - 1976 In theory the black cycle line in the lower panel should be the path of what the market does, topping and bottoming at about the same time. As an example, the 8.6 year cycle called for a peak on 1963. Some peak... prices rallied for 2 1/2 years more. The 1958 and 1966 lows were good calls, but the peaks were years early. Let’s look at the ensuing calls for market highs and lows. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

Chart 8: Armstrong 8.6 Year Cycle 1975 - 1999 In the 1975 to 1999 time frame we can see how far out of step price was with the cycle... it suggested a cash position from 1989 to 1992... a strong bull market.

Chart 9: Armstrong 8.6 Year Cycle 1990 - 2011 Moving forward to 1990 thru 2011, I still don’t see much congruity between stock prices and the supposed cycle. After all, it called for a low at the end of 2000. Ouch! Another projection was for a high at the start of 2006. Another “Ouch!” as stocks rallied substantially higher for two more years, punishing anyone going short then. To its credit it did give a buy area in late 2009, about 7 months after the actual low. As they say on TV, “We report, you decide”. I already have. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Four Year Pattern For 2012

US Stock Market

Chart 10: Dow Jones 4 Year Pattern

As long-term readers know, this is one of my favorite patterns; I’ve been writing about it since 1970. It has stood the test of time over the last 40 years as well as any of the popular longer-term cycles. Its last significant call was for an important rally to start in late 2010. We wrote about that at the time, and that is exactly what happened. As you can see in Chart 10, it also suggests selling pressures would come in during the middle of 2011, another direct hit. The forecast for 2012 is for continued market weakness until later in the year. While this is not as precise of a timing tool as some of my other work, it does give a very good idea of the magnitude and severity of the moves to develop. Do not, however, put too much credibility in the overall trend; instead focus on the projected turning points.

The four year cycle is suggesting a low point that should end the current Obamanomic quagmire in 2014. I will deal with that in next year ’s forecast.

Two Year Pattern For 2012 I am very excited about what I’m going to show you this year for the two-year cycle. To begin with, this is a cycle that others have not written about. It seems unique to my work (I like to work with cycles other people are not writing or acting upon). In doing research © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

for the 2012 report I uncovered two very powerful formations or patterns within the cycle I would like to call to your attention because they are suggesting a very good sell and then buy point coming in 2012.

Chart 11: Dow Jones 2 Year Pattern 1959 to 1970 Before I get into the details of that I would just like to show some examples of how powerful this two-year pattern has been in calling market peaks and lows. Chart 11 from 1959 into 1970 shows how stock prices responded in almost perfect step to this cyclical pattern.

Chart 12: Dow Jones 2 Year Pattern 1985 to 1997 The music on the dance floor didn’t change much from 1985 into 1997 (Chart 12), which also shows how this pattern has continued to have a dominant influence on stock prices. Those who have read my earlier writings know that I have paid most attention to this in© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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dex to confirm longer-term market lows.

Chart 13: Dow Jones 2 Year Sell Pattern

It actually looks quite amazing in Chart 13 to see significant selloffs occurred just about the time the two-year cycle line had broken to the downside after being in a sideways move. It looks more amazing when we study the past and see how many instances significant selloffs have come when this pattern has existed. Let’s first look at the selling opportunities signal, long in advance, during the Great Depression. I have marked off all of these, again, with red vertical lines you can see in each instance that the market tumbled.

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US Stock Market

Let’s first look at the sell that has developed from this pattern I have marked off in Chart 13 (which covers the time period from 1969 to 1974). What I want you to call your attention to is afte the peak seen in the two-year cycle (red line) traces out a trading range area of approximately 8 months. After the trading range line dips sharply down as I have marked off with all of the red vertical lines.

US Stock Market

Chart 14: Dow Jones 2 Year Sell Pattern I really like to see cyclical patterns that have held up for a long time frame, not just the last 10 years or so in this two-year selloff phenomena that has been around for a long time. The next chart, Chart 15, shows how well the pattern worked as World War II broke out. Look how well it called the 1938 and 1940 breaks in the market.

Chart 15: Dow Jones 2 Year Sell Pattern It is too easy to find a pattern or cycle that worked in the past... but working for long periods in the future is another story. Let me bring you up to date with a study of the last 11 years of this pattern in the following chart. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

Chart 16: Dow Jones 2 Year Sell Pattern What we see is that the past has repeated itself… This little jog down rally and then break pattern in the two-year cycle has highlighted long in advance some significant selloffs in the marketplace. I hope I have your interest level high at this point, high enough that you are wondering about what this shows for 2012. Well let’s end the suspense… Here’s the chart.

Chart 17: Dow Jones 2 Year Sell Pattern 2012 The ideal time for the selloff to take place in 2012 is about the middle of April. Notice how well it called the 2008 debacle. It correctly forecasted the 2010 market high and now, I believe, is giving us advance warning of a spill-off to take place in April of this coming year.

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US Stock Market

That’s the sell side… Is their hope for a buy signal? Yes there is. Let me turn your attention to that next.

There is also an extremely valid buy signal we can derive from this same tool. What I have noticed in my study is that the ultimate low point of the two-year cycle usually puts in a pretty good buy. However, a more reliable buy zone comes a little later. My point is, following the first pullback in this cyclical index after the two-year low, a more important buy develops. Let’s look at the following chart so you further understand this discovery.

Chart 18: Dow Jones 2 Year Buy Pattern

This is kind of a run-up, dip back, and then blastoff to the upside. I hope I have illustrated it well enough for you to see in Chart 18. Keep in mind, the red line action (pattern) is known years in advance. Notice how the two-year low occurred during the middle of 1960. Then this index staged a substantial rally, with the pullback and end of a turn-up right when stock prices began a substantial move at the end of that year. Take a look at the 1962 bottom. We see the same phenomena while the ultimate low in 1962… in the index... not stock prices... came before the stock market low. The real blast-off in 1962 came on the first pullback, in the cyclical index. Typically the real blast-off for market rallies begins approximately 15 weeks after the ultimate cyclical low in the two-year pattern. See for yourself. I have marked off these points above.

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Now keep in mind we have the cyclical index going out many years into the future. So all of these turns in the index were known years in advance.

Chart 19: Dow Jones 2 Year Buy Pattern Let’s bring this up to the current markets and see how this has fared. The two-year cyclical low came early in 2002 with the first pullback occurring almost at the precise end of the 2002 bear market. The next two-year low occurred in early 2004…forecasting the 2004 low and up move. What we are really looking for here is that first pullback and then when it turns up (which is known long in advance) when a significant market rally should take place. You will see the same pattern taking place in 2006, 2008 and 2010. Admittedly, the 2008 was not good. I studied this pattern back to 1900, it has occurred 56 times. There were some amazing calls long ago. The massive run up into the 1929 as well as 1987 peaks were clearly signaled in advance... as was the ultimate 1932 low during the depression. I totaled up 5 misses; 1920, 1938, 1968, 1976 and 2008. My observations of this research tell me this is a very important pattern we can and should rely upon. Notice what it is telling us for 2012… The ultimate low in the two-year cycle comes during the last week of June. That may well be where the market bottoms… but, as we can see from many times in the past, often the market oscillates wildly before setting up a real blast-off point which is about 15 weeks after the low in the cycle. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

I remember so well how prices rallied off the 1962 to low, hung out in congestion, then sprang forward. I saw that pattern again in 1966… just as you can see it in the above chart and notice where the low came; exactly when the first turn-up in the cyclical index took place. I made a lot of money in 1970 being short stocks, my first million, but overstayed my short position. Looking at the 2 year pattern now, it is clear I should have been out of all shorts and long in October of that year, as we were seeing the first pull back in the two year cycle.

US Stock Market

The blast-off point from the cycle is set for the October 1, 2012. I certainly don’t expect the market to bottom or blast-off on that specific day, but it certainly is the time zone where I will be going long stocks. As you may recall this is in phase with what the Presidential Pattern is also suggesting.

Chart 20: Dow Jones 2 Year Buy & Sell Pattern We do not have total unanimity with the two-year, Presidential and Decennial pattern. Recognizing the lack of cyclical congruity in the middle of 2011 set me on a bit of a wild goose chase (we call that research) to try to combine all of this into one indicator to forecast this coming year. Before I show you the complete answer, let’s review one more critical factor that I think we should be looking in this coming year.

Fundamentals Matter... There is an important fundamental factor that is also at work for 2012. It is depicted in the Chart 21 which is the yield curve (the difference in short-term and long-term interest rates). This is a critical fundamental indicator that has often called significant market tops… two years in advance.

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US Stock Market

Chart 21: Yield Curve Projection for S&P 500 In this chart you are looking at now, at least should be, you will notice the yield curve tops and bottoms at just about the same time as the stock market curve does. However, the yield curve has been moved forward two years in advance! As you can see the yield curve, projected two years in advance, peaks in April 2012. I think the conclusion from looking at Chart 21 is rather obvious… Stock prices should peak at about that same time and… more importantly… prices will most likely not make any significant market low until the yield curve turns up. So far that is not even in sight. With that bleak fundamental background in mind let’s now move to the actual forecast for this coming year. Chart 21was prepared for us by my friend Andrew Horowitz, who is a master of economic data charts. http://www.horowitzandcompany.com

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US Stock Market

Going Way Back In Time... Before everyone had computers there were just a handful of us trying to out-guess the markets. One of the giants back then was Sherman McClellan, who along with his wife produced the McClellan Oscillator.

Another gem the two produced was their son, Tom, who after hanging up his goggles from flying jets for the Army, took over the family business and has flown well through the peaks and valleys of the markets.

Chart 22: Dow vs Commercials Net Long in Eurodollar

A few years back Tom noticed that if you lag forward the Net Long Commercial position in the Eurodollar by 52 weeks (WE-067 in Genesis) you get a pretty good forecast of what will happen in the future. The Chart 22 shows the Euro projection for 2012... it is remarkably similar to what the other forecasts show... a break early in the year then a rally later on. A tip of the hat to Tom for coming up with this one. You can see more at http://www.mcoscillator.com.

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You have seen what I think are the important factors that will be influencing stock prices 2012. Clearly, the Two Year Pattern, the Presidential Pattern, the 10 Year (or Decennial pattern), and the yield curve will impact the market. I have pointed out those times in the above commentary. However, that’s not enough. We also need to have a more precise forecast of what to expect this coming year based on a synthesis of all of this information. Accordingly, I am showing the following chart which I believe is the general Road Map stock prices will take 2012.

Chart 23: Dow Jones 2012 Forecast Weekly Bars This forecast is decidedly different than the Decennial Pattern forecast. That is because there are years outside of the Decennial Pattern that still influence prices, and that’s what this chart attempts to synthesize for us. I believe this is the general Road Map the Dow Jones Industrials will follow in 2012. You can now see when the more substantial moves will take place; when you should be more bullish and when you should be more bearish.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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US Stock Market

2012 Forecast

US Stock Market

Chart 24: Dow Jones 2012 Forecast Daily Bars As I do every year, I admonish you that the forecast is just that…a forecast of when to expect the major twists and turns of the marketplace. I doubt the market will top and bottom on the exact dates shown here. This is a general guideline…a road map. I believe we now are prepared for what 2012 will bring. Clearly we need to be careful of stocks in mid-April and look to go long in August with a potential for a sell off at year end. Do not, under any circumstance, think the magnitude of the red line above depicts exactly the magnitude price will take. The forecast is much more about time the magnitude. The magnitude is a suggestion of the intensity of a rally or decline. Specific days to expect rallies are:

Specific days to expect declines are:

January 20th February 22nd March 9th March 27th April 23rd May 23rd June 21st July 18th October 18th October 19th November 13th December 5th December 12th December 21st

January 4th January 31st February 13th March 1st April 16th May 2nd June 8th July 9th August 10th August 28th October 3rd October 26th November 21st

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A Backup Plan...

US Stock Market

Chart 25: Dow Jones 2012 Alternate Scenario

There is an alternative scenario that may take place in 2012. I have presented it above as our “backup plan”. Should stocks rally, with vigor, the first quarter of the year I will switch to the above scenario and advise you accordingly.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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AROUND THE WORLD IN 8 FORECASTS

Let’s next turn our attention to markets throughout the world. These markets were selected because they are where we have the most followers and students. There are other markets of the world that we could forecast, but these are the ones that have been requested the most during this last year. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Forecast Projection For Australia

Chart 26: SPI 200 Presidential Cycle Chart 26 is an interesting one… it shows the Presidential Cycle (years of the president’s term in office in the United States that we just looked at) but applied on Australian stock prices. Overall it has done a decent job of correctly predicting the market. In many respects Americans now have much more in common with our Australian mates than our friends across the great pond. The 2011 forecast suggested a dip at the first of the year, a mid-year high, and then a selloff; exactly what happened.

Chart 27: SPI 200 Index Forecast 2012 © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Australia Forecast

Let’s start with my almost adopted home, Australia. Louise and I still have fond memories of our almost 3 years down under. I have paid particular attention to this market since living there.

Australia Forecast

When we turn our attention to my Natural Cycle in this market (Chart 27) we see it has had an excellent job forecasting the SPI 200 index. In 2011 it called for a sharp move early in the year to the downside, an immediate rally back, and then a decline until late in the year. This is “spot on” what happened; no “Fine Cotton”, this one. The forecast for 2012 doesn’t show any significant moves until June 1st. Then we go down, down under. I expect a significant selloff to take place at that time.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Forecast Projection For China

China Forecast

Chart 28: Shanghai Index Forecast Road Map 2011 & 2012 The red line above shows the forecast made for the Shanghai Index in early 2011 for a presentation I did in China. The market there has closely followed this forecast; which now suggests a rally, a pullback after the first of the year, then a rally into early June before a down move begins. For those who think that China is the rising economic power I suggest you take a look at the last six years of stock performance in China. If the stock market is the best leading indicator of economic activity, and I believe it is, there is a real lesson for us here about what is going on in China. Consider that China has the highest percentage of government employees of any country in the world, almost 50%; you have to wonder how they can keep the game going.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Russia Forecast

Forecast Projection For Russia

Chart 29: Russian Trading System Index 2012 Forecast Road Map

One of the highlights of my life was speaking at the first stock conference ever held in Russia. To go from digging a bomb shelter in our back yard to speaking about free markets in the country that was supposed to bury us was a walk-up call on the massive changes the world was going through. The forecast here is similar to China... up then down. Some explanation... the photo to the left was taken on my first visit to lecture in Moscow. Back then, taxi cabs were scarce. They were hard to get to stop for you, unless you held up of a pack of Marlboros as a tip. Hence this picture take by Scott Slutsky and Glen Larson. How it resurfaced is beyond me!

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Forecast Projection For Singapore

Singapore Forecast

Chart 30: Straits Times Index 2012 Forecast Road Map Singapore... the island is the midpoint of business between India, China, Australia and Japan. This tax haven for many has not gone without difficulties this past year or changes; chewing gum is now allowed. Here I expect first of the year strength then down.

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India Forecast

Forecast Projection For India

Chart 31: NFTY Index 2012 Forecast Road Map

The stock market in India has been very ragged this year and deftly to the downside. This confuses many who just read the mainstream media because they have expected that India, China and Brazil were supposed to be straight up for 2011. That has not been the case; industrial output in India was down 7% for October 2011. The 2010 & 2011 forecasts correctly called the trend of the market and when the most significant turns developed. I believe it will continue to do that. This coming year’s projection is for a high in mid-February, then down, leading to two bounces, and a nice year end rally.

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Forecast Projection For Germany

Germany Forecast

Chart 32: DAX 2012 Forecast Road Map

Speaking of across the pond… the 2011 forecast for Germany’s DAX Index was proven remarkably correct. I hope we can maintain this accuracy in 2012. The suggestion is for a rally at the first of the year until late February, mid-March... then a gradual down move or trading range with a sharp break in the September-October time frame.

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Japan Forecast

Forecast Projection For Japan

Chart 33: NIKKEI 2012 Forecast Road Map

Next let’s take a look at Japan… last year’s forecast wasn’t bad. It did catch the early selloff, so my friends there side stepped what amounted to a massive selloff. The problem with the forecast, in my opinion, is it did not show the selloff that took place in mid-year although if did forecast the year end rally. For this coming year in Japan I would look for lower prices until March, a strong rally, then around early or middle May expect the market to go into the doldrums, perhaps a trading range but definitely with a downward bias.

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Forecast Projection For Brazil

Brazil Forecast

Chart 34: Bovespa 2012 Forecast Road Map

The Bovespa has responded well to the Natural Cycle, perhaps better than any other stock index as we can see from the forecasts made for the last 3 years. The road map calls for a turn down in late January... the 26th to be precise... then weakness until mid September. We should see a rally begin in mid-April lasting until mid-June. A year end rally is forecast.

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US Treasury Bonds

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Bond Forecast For 2012

US Treasury Bonds

Chart 35: Bonds 2012 Forecast Weekly Bars Let’s get right to it. The Chart 35 shows the general trend of what I believe Bonds will do in 2012. I expect a selloff until late June or early July before any meaningful rally takes place in Bond prices. As you can see the blue line (which I believe is the real seasonal cycle in this market) suggests A downward drift. Perhaps more importantly though, the red line, (my Natural Cycle) also suggests a first of the year drift, a rally into about the first week of March, then down into the September low point. There are several cycles we should also be concerned with this coming year. Let’s look at those next.

Chart 36: Bonds Important Short Term Cycles

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US Treasury Bonds

What you see in Chart 36 is a summation of all important short-term cycles that have been operating in the Bond market the last 16 months. I do not expect the cycle will hold up for a long time in the future. Anyone who has worked with cycles knows they come and go. However, once you nail one down it usually last for at least a repetition or two. Thus I would expect Bonds to have some type of a rally into late February and then look for a decline into the middle of March… generally speaking. In short, this is a short-term cyclical phenomenon we should be paying attention to. More importantly, perhaps, would be the Presidential Pattern in the Bond market. This is something I first wrote about many years ago, which I would like to update now with the following chart.

Chart 37: Bonds Presidential Pattern 2012

While it is obvious that politics affects interest rates, and by the same token, interest rates affect who gets reelected, it is not so obvious as to the validity of this pattern. True it did a good job of forecasting the 2010 rally, but did a mediocre job of forecasting the 2011 rally. It is suggesting a peak in December (as this is written), a decline into late April, then the next significant rally should be due around August 30th. I will be paying attention to these points in time. However I will not be putting a great deal of stock in this pattern. I think it is more of a general impression that does not have as good of a record of the specific timing model as the yearly forecast I’m about to show you.

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US Treasury Bonds

Chart 38: Bonds “Kick-Up” Cycle I want to call your attention to the “Kick-Up” cyclical phenomena I noticed while I was doing work for this year’s report. Chart 38 shows when the cycle (as identified by the blue line) has an immediate “kick-up”, prices tend to stage an immediate rally at about that time. I have projected this out in the future as we can see from the Chart 39. I have shown all instances of this pattern for 2012. The pattern suggests a rally in very late April, late July and about October 26th. I will most definitely be looking for short-term explosive sweet spot rallies at these times.

Chart 39: Bonds 2012 “Kick-Up” Cycle

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US Treasury Bonds

Chart 40 shows my 2012 forecast for the Bond market on a daily basis. The red line (my Natural Cycle) shows the longer-term trend of what this market should do… the Road Map if you will. The blue line is a combination of the active cycles that have been operating in this market, and I expect will hold up for much of this coming year.

Chart 40: Bonds 2012 Forecast Weekly Bars The basic projection is for Bond weakness into the end of February, then a gradual decline with no substantial up move until the middle of June, at which point Bonds should rally until shortly before the election. Specific days to expect rallies are:

Specific days to expect declines are:

January 13th March 9th May 8th June 4th July 20th July 25th August 3rd August 29th September 18th October 16th October 26th November 1st November 13th December 7th December 10th

January 20th February 3rd February 22nd March 20th April 13th May 23rd June 29th August 17th October 1st November 19th December 17th

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 38

New For 2012 Forecast Report The CRB Index

I was pleasantly surprised to find there is a repetitive pattern to this market. Once I locked into the cycle I back tested it. You can see this in Chart 41. While not perfect, it certainly has called the major swings. Keep in mind the red line forecast, or Road Map, includes no data from the time period directly above it. You will note that I have forecast this market out to 2014.

Chart 41: CRB Index 2012 Forecast Weekly Bars

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P Page 39

CRB Index

A long time follower asked if I could/would do a forecast for the CRB Index, generally considered a leading indication of inflation and certainly a harbinger for natural resource commodities.

CRB Index

Chart 42: CRB Index 2012 Forecast Weekly Bars

Let’s switch a daily chart to get a closer view of what to expect. As always, I urge you to look more for the cyclical highs and lows than to expect the magnitude of the predicted price move to be as large as shown on the chart. This is true of all forecasts due to scaling issues. Look for the major moves in price to take place when there are major moves in the forecast.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 40

Metals

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Page 41

Metals Forecasts

2012 End Of The Run For Gold 2012 should mark, for the time being, the end of the amazing run up Gold has had over the last few years. My main indication of this is the 4 Year Cycle, as mentioned in the 2011 Mid-Year Forecast. Here is the chart and comments from the report for those who may not have seen it.

Chart 43: Gold 4-Year Pattern 1974 - 1997 Gold had its first massive top in 1980. Simply move forward every four years from that top and you find a similar selloff or slide in this market. The blue line above is the Four-Year Cyclical Pattern for this market. Invariably, it appears Gold is predestined to go down when this index peaks. With that thought in mind let’s take a look at Chart 44 which forecasts price action through 2013.

Chart 44: Gold 4-Year Pattern 1990 - 2014 © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 42

And Now... The “Official 2012 Gold Forecast”

Chart 45: Gold 2012 Forecast Daily Bars

The Natural Cycle (in red above) speaks for itself in the calls it made last year. I have indicated the most likely times for market turns to the upside based on this cycle and the traditional seasonal pattern. Our Road Map is looking for a down market until July, then a rally into late September. The Natural Cycle (coupled with the seasonal) when given the backdrop of the four-year pattern, suggests to me lower prices for Gold into August of 2012. It sure looks like the best trading strategy would be to sell big rallies, cover on the breaks, and wait to resell rallies.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 43

Metals Forecasts

We see in Chart 44 this four-year peeking pattern in Gold has been quite consistent… most importantly... it is calling for a long-term top to begin about January 13, 2012. It should also be pointed out an important low in Gold prices occurs also about every four years. A low was in 1990, (marked in green on Chart 44), 1994, 1998, 2002, 2006, 2010 and coming up, 2014 which we will address at that time.

Metals Forecasts

Chart 46: Gold Most Dominant Daily Pattern Chart 46 shows what has been the most dominant daily pattern in Gold as discussed in the 2011 Mid-Year Forecast Report… a 112 day pattern or cycle. As long-term readers will recall, in our June mid-year forecast we referenced a low to start during the middle of August, which indeed took place. The forecast was made, in part, because of this 112 day cycle. Thus I thought it would be relevant to place it in this years forecast, so we can see when the significant market turns should appear based on this phenomena. I would point out that if the market is declining say into March 14th of this coming year, the cycle projection would indicate a low to be made. In other words, the dates shown above are times I would look for reversals. They should be in the direction indicated but in any event they should be a reversal of what price trend is at those time periods. Specific days to expect rallies are:

Specific days to expect declines are:

January 6th January 16th January 27th February 6th February 17th March 27th May 2nd June 28th July 9th July 25th August 15th September 10th September 26th October 23rd November 12th December 12th

January 20th February 20th March 19th April 5th May 10th May 23rd July 19th August 20th August 31st September 18th October 8th November 5th November 22nd November 29th

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Page 44

Silver To Slide

Metals Forecasts

Chart 47: Silver 4 Year Pattern Weekly Bars Given that Gold and Silver move together the obvious expectation is for Silver to move lower this coming year as well. I am showing the Four Year Cycle in Silver in Chart 47, and as you can see, it has been as effective and is making the same forecast for Silver as we saw in the Gold market. Let’s take a little closer of view of what might happen in Silver the next chart.

Chart 48: Silver 2012 Forecast Daily Bars Now we are looking at the seasonal which typically calls for a peak around February 22nd and the low around August 6th. The Natural Cycle agrees with this, showing two selloffs; the February one, as well as one in early May. The forecast given by this Natural Cycle last year while not bad, it certainly wasn’t perfect. Perfection in the art of forecasting is very difficult to come by. To even think we can foretell the future takes a leap of faith, to actually do it is a separate matter! I expect this coming year Silver will get back into its Natural Cycle. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 45

Metals Forecasts

Chart 49: Silver 112 Day Cycle Daily Bars You are probably wondering by now what about the 112 day cycle; if it works in Gold does it work in Silver? The above chart answers that question which, I believe, is that it has implications for the price of Silver as well. I have indicated points when you should be looking for reversals in the Silver market. The same strategy for Gold should work in Silver. The big thing for Silver and Gold traders is to just remember to sell what has been the weaker of these two on rallies, and buy what has been the stronger of these two on what appears to be a market bottoms.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 46

Copper Is Not Gold Or Silver...

Metals Forecasts

Chart 50: Copper 2012 Forecast Daily Bars

Chart 51: Copper 2012 Forecast Weekly Bars Copper oftentimes moves in unison with Gold. Then again, at other times it doesn’t. That explains why the seasonal in Copper as well as the Natural Cycle are quite different for this metal. While it is true that Copper is usually found or associated with Gold and Silver, Copper is not as precious. It is more of an industrial metal, a sign of an expansionary economy. The Natural Cycle is almost identical to the Seasonal Cycle this year. The December rally appears to have begun at the time this is being written. I expect the overall trend in Copper to be up until late April, down until the middle of June, with a rally into an early August peak, and finally back to a rally attempt in the middle of October. The path seems pretty clear and is how I will be trading this market in 2012. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 47

Currencies

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” -Robert G. Allen

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 48

And Now For The Commodities...

On a global picture the only question is will the Eurodollar die of a heart attack or selfsuffocation? Certainly things in Europe are unsettled and that is not about to change as a cathartic economic processes is taking place there. This process will have an impact on the American economy as well. Perhaps that is why my cyclical work is negative for Gold and Commodities. But there is more than that… The economies of China, Japan and India have also begun receding. This is best seen in imports to the West Coast. Lawrence Dunnigan, manager of business development with the Port of Oakland recently said, “All of the imports are very soft this year.” My friends in China are now frequently referring to a recession taking place. This is old news to anyone who has looked at the Shanghai Stock Index, which has been in a continual bear market for several years now. While imports from Asia to America are down, imports from Asia to Europe are down a lot; Europe has stopped buying and given the turmoil taking place in Europe it is difficult to expect a reversal of this trend. Top all this with my personal knowledge of several cases where Americans are now owed money by slow pay or no pay Chinese, and you have to seriously question if the bubble is bursting. A quick look at commodity prices in the United States shows the last quarter of 2011 has produced a substantial decline across the board, the worst since 2008, and future prices are typically a harbinger of deflation and tough times ahead.

Chart 52: 2011 Manufacturing PMI

My suspicion is that an unsettled world wide economy will create a flight to the US Dollar this coming year as investors seek protection from the European debacle and Asian meltdown. This potential flight to the US Dollar may well be accentuated by the election of a more fiscally conservative president. If it becomes obvious that such a candidate will defeat © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 49

Currencies

Cur rencies To Cr umble?

Currencies

President Obama, I would expect this as an additional influence to the US Dollar. The reelection of the President does not mean the Dollar cannot rally, just that it will not be as flashy. With that in mind let’s look at what cycles suggest for the future for currencies...

The British Pound

Chart 53: British Pound 4 Year Pattern 1989 - 2013 The most import long term cycle for currencies is again the Four Year Pattern and have illustrated it in Chart 53 of the British Pound. We have seen significant highs in this market, in fact in almost all of the currencies, about every four years. It is noteworthy that we are now at the end of the cycle and would expect a down move for approximately 2 years. I think this is a big overhang on all of the currencies, not counting the US Dollar.

Chart 54: British Pound Long Term Cycle Daily Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 50

Chart 55: British Pound 2012 Sweet Spot As to just where the, “sweet spot” of the cycle is, I refer you to Chart 55 which on a daily basis shows the ideal trough would, be April 25th. This I think is noteworthy in terms of the projections that we look for stocks to peak at about the same time.

Chart 56: British Pound 2012 Forecast Daily Bars Finally I’m showing the Dominant Cycle that has been operative here, as well as a major long term cycle, to give a feel of the general trend of the British Pound this coming year and when to expect peaks and rallies.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 51

Currencies

There’s another long term cycle of 580 days that has had a great impact on the British Pound as you see in Chart 54. This suggests further weakness into the end of the first quarter of 2012 before we have any type of a rally. I will be paying close attention to that as a potential by point.

Currencies

The Australian Dollar...

Chart 57: DJIA Forecast 2011 For Reference The Australian Dollar has pretty much danced in tune to our 2011 forecast for the Dow Jones! Chart 57 shows the 2011 forecast on top of what took place in the Australian Dollar. The forecast for stock prices was equally good for the Australian Dollar. I believe this will hold true for 2012 as well. So I suggest you also refer to the forecast of stock prices for this currency.

Chart 58: Australian Dollar 2012 4 Year Pattern The Four Year Pattern seen in the British Pound is also evidence in the Australian Dollar as we see in Chart 58. There has been a strong tendency for the Australian Dollar to have a significant top about every four years. I see no reason why this time would be different. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 52

The Australian Dollar is important to me, not only because of the many friends we have down under, but because Australia represents the largest number of followers of my work outside of America.

Currencies

Chart 59: Australian Dollar 2012 Forecast Weekly Bars Thus I prepared Chart 59 to show what I believe will be the short term swings of the Australian Dollar this coming year. The chart speaks for itself.

The Canadian Dollar...

Chart 60: Canadian Dollar 2012 4 Year Pattern While the Australian Dollar has been a proxy for the United States stock market. The Canadian Dollar has been a proxy for Crude Oil prices. Any projection for Crude Oil will most likely work well for the Canadian Dollar. The above chart also shows the same Four Year Pattern or phenomena discussed earlier about the other currencies. All of these seem to be lining up for a significant decline. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 53

Currencies

Chart 61: Canadian Dollar 2012 Forecast Weekly Bars Chart 61 shows the forecast using the Natural Cycle, in red, and the longer-term cycle for the Canadian Dollar in black. Here it looks like we are expecting a low point in late February, a dip into May and a rally into August. Again I think the most important thing will be to use this commodity in conjunction with forecasts for the energy markets.

The Euro FX...

Chart 62: Euro FX 2012 Forecast Weekly Bars The blue line in Chart 62 is a long-term cyclical projection for this market. What it is suggesting is that prices will continue going lower until April or May. Then prices start a rally in late June, followed by taking off to the upside around the 6th of July. I have marked in red this Natural Cycle projection © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 54

The Japanese Yen…

Currencies

Chart 63: Japanese Yen 2012 Forecast Weekly Bars The red line, Natural Cycle, is telling us to expect a continual downtrend into April then a rally to the upside. That leads to another decline back into the late July time when hopefully the longer-term combined cycle projection (black line) kicks in for a rally.

The Swiss Franc…

Chart 64: Swiss Franc 2012 4 Year Pattern We saw the Australian Dollar moves with the United States stock market, the Canadian Dollar with energy prices, and now I would like to show you that the Swiss Franc moves in tandem with Gold. First however please note that the Swiss Franc also appears to be influenced by the Four Year Pattern I have discussed. It too is now biased to the downside. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 55

Currencies

Chart 65: Swiss Franc Relationship to Gold

Chart 66: Swiss Franc 2012 Forecast Road Map

My projections for the Swiss Franc for 2011 were not good… True we got the mid-year rally, but we didn’t have any indication of a rally at the first of the year. I believe this is because the Swiss Franc now is tied so closely to Gold. As you can see in Chart 65, Gold (the blue price bars) tops and bottoms pretty much at the same time as the Swiss Franc. Thus any projection for Gold should work for this currency. Chart 66 gives you the Active and Natural Cycles along with the current True Seasonal.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 56

US Dollar Index...

Currencies

Chart 67: US Dollar Index 2012 4 Year Pattern My expectations are for an overall uptrend in the US Dollar until late March, then a decline. Around the middle of May I will be looking for another rally to begin, taking prices higher until late June. Look for another selloff to begin at that time, giving way to a year end rally starting in mid-October or early November.

Chart 68: US Dollar Index 2012 Forecast Road Map © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 57

Forecasts For Individual Commodities

What follows is my labor of love and mathematical madness. A few years ago I think I tumbled on to what the dominant influence is that causes cycles - price swings - in commodity prices. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 58

Active Commodities I call this my “Natural Cycle” as it is not a fixed, say 22 week, cycle. The Natural Cycle, shown in red in all of the following charts differs for every commodity. That’s the labor of love. The purpose is to find the price pattern the market will most likely follow this coming year. It is a road map. I have used the ‘099’ or cash contract in the Genesis Data format as that sidesteps the problems of continuous contract back adjustment. The madness comes from the blue line which represents what I think is the current shorter term cycle influencing prices. Then toss all these cycles into one indicator and we have the short term “Most Active” Cycle. The real madness of this is that it is usually correct in calling turning points and trend. Yet, if you take the time to study these charts you will see times when the Most Active Cycle was calling for a rally and that’s exactly when prices declined. That’s what I want you to be in the lookout for... if price has been rallying and the blue line shows a cyclical low, that is really telling us to expect a reversal at that time. The peaks and troughs of this indicator are best at saying, “Expect a trend change about now”. The purpose of this line is to give us short term perspective. Finally there is the green line or “True Seasonal”. This is my attempt to resolve a problem that does not seem to be recognized by other seasonal experts... they just run the data and let it spew out using a 12 month, yearly, time frame. What happens in that process is that we are forcing the market into a time window that may not be the one it fits. Here’s a case in point; the life cycle of a pig (think Lean Hog market) is 18 months. That is true. So why force a fixed 12 month cycle on this market??? Instead I have done my best to get at the “real” seasonal for each of the following markets with the green line which should give us long term perspective.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 59

Individual Commodities

And Now Forecasts For All

Individual Commodities

The Grains…

Chart 69: Wheat 2012 Forecast Daily Bars

Chart 70: Soybeans 2012 Forecast Daily Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 60

Individual Commodities

Chart 71: Soybean Oil 2012 Forecast Daily Bars

Chart 72: Soybean Meal 2012 Forecast Daily Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 61

Individual Commodities

Chart 73: Corn 2012 Forecast Daily Bars

The Softs...

Chart 74: Cotton 2012 Forecast Daily Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 62

Individual Commodities

Chart 75: Lumber 2012 Forecast Daily Bars

Chart 76: Coffee 2012 Forecast Daily Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 63

Individual Commodities

Chart 77: Sugar 2012 Forecast Daily Bars

The Meats…

Chart 78: Live Cattle 2012 Forecast Daily Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 64

Individual Commodities

Chart 79: Lean Hogs 2012 Forecast Daily Bars

The Energies…

Chart 80: Crude Oil 2012 Forecast Daily Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 65

Individual Commodities

Chart 81: Heating Oil 2012 Forecast Daily Bars

Chart 82: RBOB Gasoline 2012 Forecast Daily Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 66

Forecasts For Individual Stocks

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 67

Individual Stocls

And Now Some Individual Stocks Forecasts... Out of my own intellectual curiosity I’ve been preparing forecasts for stocks as well. It does appear the same techniques work in equities. Here are a few markets of stocks I closely follow and my expectations for the coming year based on my cyclical studies.

Chart 83: Microsoft 2012 Forecast Weekly Bars

Chart 84: General Electric 2012 Forecast Weekly Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 68

Individual Stocks

Chart 85: Hewlett-Packard 2012 Forecast Weekly Bars

Chart 86: IBM 2012 Forecast Weekly Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 69

Individual Stocls

Chart 87: Wal-Mart 2012 Forecast Weekly Bars

Chart 88: Apple 2012 Forecast Weekly Bars © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 70

Individual Stocls

Chart 89: Annaly Capital Management 2012 Forecast Weekly Bars

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 71

Set Up Markets For The 1st of 2012

Here they are, my hand picked selections of the markets most set up for moves as the new year begins. You will also learn why I think so, along with possible entry points.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 72

Cotton

Set Up Markets

Chart 90: Cotton 2012 Set Up Weekly Bars Chart 90 of Cotton displays the major tools I am using to select the set up trades. I would like to take a moment to explain the tools, then show what they are suggesting. In the panel under price (blue line) you see my Institutional Buying Index. This is not the Commitment of Trader Report but rather a special tool I have developed that gives us an indication of when very sophisticated Institutions are accumulating or distributing a stock or commodity. High readings above the green line show accumulation; low readings below the red line indicate distribution. As you can see in the above chart, prior to the peak in 2011, the blue line shows the Institutions were unloading the long Cotton positions they had established in 2009 and 2010. As this is written, December 19, 2011, the Institutional Buying Index has risen above the green line which represents a zone of extreme bullishness on part of the Institutions. A quick glance at the chart shows that usually when the Institutional Index is at this level rallies follow… then or… shortly thereafter. I like to see more than just one indicator supporting a trade. So let’s next turn our attention to the Commitment of Trader Report data, which is in the bottom panel. There you will see the Commercials identified by the red line, the Public (Small Speculators) by the green line, while the black line represents Total Open Interest. Currently we are seeing a massive divergence in that the Commercials have been increasing their long position while the Small Speculators (the green line) have been decreasing. This is the exact formation that is often seen at significant market bottom. It can be confirmed by looking at Open Interest. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 73

Set Up Markets

Open Interest, in this case, has been dwindling along, neither rallying or declining, which tells us that there has not been much interest in this market. It is off most traders’ radar screens. That is why the Commercials buying is particularly bullish at this point. They are accumulating in a market that no one else is interested in. With the above comments in mind you can study the chart yourself, as well as the following charts to get a sense of how these indicators play against one another.

Cocoa

Chart 91: Cocoa 2012 Set Up Weekly Bars Currently in Cocoa we are seeing a very high reading by the Institutional Buying Index. At the same time there is an extremely pessimistic view by the Small Specs as the green line showing their net position is at or close to an historical low. In other words the Public just doesn’t want to buy Cocoa. I don’t think Cocoa will bottom this instant, but certainly over the first months or so of 2012 we need to be taking buy signals. I buy cocoa pods like these (right image) at our farmers’ market. The white coating is loaded with caffeine. The seeds need to be toasted and are quite bitter (without sugar).

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 74

British Pound

Set Up Markets

Chart 92: British Pound 2012 Set Up Weekly Bars Frankly, the British Pound surprises me. I can’t imagine any reason why this market should rally. But when I look at the indicators it is quite obvious this market is being set up. Note the very low reading by the Small Specs and a very high reading in Open Interest. This tells us the only interested party has been the Commercials. They have been aggressively interested in buying this market. This is similar to the first of 2010 when the same scenario exhibited itself. I look for an up move to begin in late February to early March.

Canadian Dollar

Chart 93: Canadian Dollar 2012 Set Up Weekly Bars

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 75

Set Up Markets

The Canadian Dollar chart, above, almost looks like the S&P 500. The Canadian Dollar has been greatly influenced by energy prices, hence the parallel existence with US stock prices. Currently we see the Small Specs are at the lowest level since 2008 which was a significant buy point. The Commercials are holding the largest Net Long Position since the 2007 low. The Institutional Buying Index shows the Institutions just recently increased their buying to the point where we can expect a significant move. They are now in an accumulation phase. The end of January begins a strong seasonal rally zone.

Euro FX

Chart 94: Euro FX 2012 Set Up Weekly Bars If there is an economic big story of 2012 it would have to focus around the Euro FX. Check out the very high level of Open Interest in this market and that it is driven by the Net Long Commercial Position. Next, notice that the Small Speculators are the most bearish they have been for the last 11 years. Look at the time the Commercials started buying in 2011; my Institutional Buying Index also started moving to the upside as it has in just the last few weeks. It is in the buy zone. The first week of February is a seasonal sweet spot for rallies.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 76

Copper

Set Up Markets

Chart 95: Copper 2012 Set Up Weekly Bars Copper has a very strong seasonal tendency to rally at the first of the year. I hope it kicks in this year and expect that it will. We see the same phenomenon you’ve seen in the above charts… low levels of speculative buying by the Public and high levels of buying by the Commercials. The Institutions are also in the accumulative mode. The first week of February has been a seasonal sweet spot for rallies.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 77

Set Up Markets

Coffee Coffee is a market that trades with its own caffeine jitters. It does not have great liquidity but it certainly has great moves. Expect the moves for the first part of the year to be to the upside, given the very high level of Commercials buying in this market and extreme pessimism expressed in the green line by the Small Traders. There has also been a dramatic and long term decline in Open Interest; again we have a market where traders have given up. Low levels of Open Interest are most often seen at market lows.

Chart 96: Coffee 2012 Set Up Weekly Bars

Imagine what it would be like if the had been no Commercials buying! In short, the only interested party in the long side has been the Commercials. This is similar to what happened at the end of 2008 as well as the middle of 2005 and 2009. The second week of February has often been a catapult for higher prices.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 78

Sugar

Set Up Markets

Sugar is perhaps the most attractive of all these setup trades as it continues to stay in a massive uptrend. I see the Institutional buyers are just about to enter the bullish zone. This is a beautiful sight for me, to see the Small Specs at the most bearish position they have ever held in this market while the Commercials are at the most bullish reading since 2007. Who will win the battle; the Small Speculators or Commercials? My bet is with the Commercials. There is usually a seasonal break at the end of February. Forecast looks bullish for a mid March rally.

Chart 97: Sugar 2012 Set Up Weekly Bars

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 79

Set Up Markets

Silver

Chart 98: Silver 2012 Set Up Weekly Bars As you know from reading the forecast, I expect we are approximating a significant high in Gold which means we should see an equally strong down move coming in Silver. But... for the time being... it looks to me like Silver is going to rally. After all, check out the red line; the Commercials Net Long Position. My gosh, it is way up there while the Small Specs are at the most bearish reading since the start of 2009 and… well… you can see what took place. The set up is not quite as apparent in the Gold market but considering that Ag is set up, I would expect both Gold and Silver to have a nice buy point leading into the four-year market top I am looking for. The current move should last until the end of February.

Finally A Sell - Bonds And T Notes I have isolated only one sell candidate to start off 2012. My choice is the Bonds/Notes market. Notice recently the Institutional Buying Index was in the sell zone. There’s a very strong seasonal tendency for Bonds to decline at this time of year. That seasonal tendency is enhanced by the fact that Open Interest is low while the Small Speculators Net Long Position is very high. If you take a little bit of time to study Chart 99, you will see that typically good rallies in this market began from a high Net Long Position for the Commercials; in other words, the red line is relatively high compared to where it has been. That certainly is not where we are now.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 80

Set Up Markets

Chart 99: Bonds 2012 Set Up Weekly Bars There is more to glean from the next chart that shows my Valuation model for Bonds referenced to Fed Funds. My students know this as Will Val. The indicator is not for timing purposes but to show us when a market is in a longer term overvalued or undervalued mode. This is not an overbought/sold indicator. The chart speaks for itself.

Chart 100: Bonds 2012 Valuation - Will Val © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 81

Set Up Markets

Soybean Oil

Chart 101: Soybean Oil 2012 Set Up Weekly Bars Soybean Oil and Soybean Meal are both set up to rally here. By this time you should know yourself what to look for; the red line is high, the green line is low and the Institutional Buying Index is in the buy zone. It is almost that simple! The end of January has been a seasonal sweet spot for rallies

Soybean Meal

Chart 102: Soybean Meal 2012 Set Up Weekly Bars We see the same scenario operating in Soybean Meal that we saw in Soybean Oil. Again they clearly set up the market for a rally. Early March has been a seasonal sweet spot for rallies. © Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 82

Okay, we have our set up markets. But the question is, when will we hop aboard? There are several techniques you can use. One would be to use the Road Map Forecast for each individual market to further refine the timing of your entry. A second technique is one of my favorites; the qualified trend line from my course material. If you are not yet a student you could use a channel break out of the last 8 to 12 days as a potential trend change. Finally, I suggest waiting, for a buy, for the formation of a higher short term low; for selling, a lower short term high.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 83

Set Up Markets

Entry Points…

Closing

Closing There you have it… I have presented what my cyclical and pattern work suggests the most likely avenues price will wander upon this coming year. There’s a lot of information in this report. I suggest you read it a time or two, then focus on the markets that you are most apt to trade or want to know about in 2012.In some instances the charts may appear small on your computer. All you have to do is use your enlarge function and you will be able to make the charts as large as you want. Also please keep in mind all this material is copyrighted, and I strictly enforce those rights. We have repeatedly taken people to court for violations and will continue to do so in the future. This is my original work product; you paid for it. It is not fair to you or me that it be further distributed. I wish you a most prosperous 2012 and the entire year brings you good luck and good trading.

Larry Williams St. Croix, United States Virgin Islands

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

Page 84

Terms I Use COMMERCIALS Once each week the CFTC (the US government regulatory body overseeing the futures market) releases the long and short positions of three groups. Under US law you must report your position(s) to the CFTC each week if you exceed a minimum number of contracts in a particular market. The first group, Commercials, are the hedgers or users and producers of commodities. They are the smart money. Then there are the Large Speculators. These are now primarily funds, and they are most often found heavily long at market tops; short at market bottoms. The remaining positions in the markets are thrown into the third group, Small Speculators. This is the public who is most often wrong at all market extremes.

NATURAL CYCLE The Natural Cycle is unique to each market and is based on specific years in the past that have price commonality. The assumption is yearly patterns are repeated in the future. The effort here is focused on determining what years from the past are most likely to be replicated this coming year. This index is proprietary.

ROAD MAPS This is a combination of seasonal influences and times cycles all wrapped up into one index. The road maps forecast the direction, the basic path price will take, and the turning points.

SEASONAL PATTERN All markets exhibit times they are more apt to rally or decline. Obviously in futures markets with plantings, harvests, etc., this is even more pronounced. The seasonal pattern suggests when moves should take place.

INSTITUTIONAL BUYING INDEX When I first started trading 50 years ago we had Institutions in the stock market: banks, funds and the like. In recent years this crowd has crept into the commodity market. Accordingly I have spent the last two years developing indicators to track them. When at high levels, the Institutions have been buying, at low levels, selling. In recent years no major up or down move began until they were aboard. At times they may be early is the caveat. This index is proprietary.

VALUATION WillVal was developed in 1990. It is one of my approaches is to value any future contract to see if the item is under or overvalued. This is a very effective tool, to know a market is undervalued/overvalued... but it is not a timing tool.

For more information on my services go to www.ireallytrade.com.

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Chart Index Commodity/Stock

Chart

Page #

2011 Manufacturing PMI

#52 2011 Manufacturing PMI

49

Annaly Capital Management

#89 2012 Forecast Weekly Bars

71

Apple

#88 2012 Forecast Weekly Bars

70

Armstrong

#6 8.6 Year Cycle 1929 - 1953

9

Armstrong

#7 8.6 Year Cycle 1953 - 1976

9

Armstrong

#8 8.6 Year Cycle 1975 - 1999

10

Armstrong

#9 8.6 Year Cycle 1991 - 2014

10

Australian Dollar

#58 2012 4 Year Pattern

52

Australian Dollar

#59 2012 Forecast Weekly Bars

53

Bonds

#35 2012 Forecast Weekly Bars

35

Bonds

#36 Important Short Term Cycles

35

Bonds

#37 Presidential Pattern 2012

36

Bonds

#38 “Kick-up” Cycle

37

Bonds

#39 2012 “Kick-up” Cycle

37

Bonds

#40 2012 Forecast Weekly Bars

38

Bonds

#99 2012 Set Up Weekly Bars

81

Bonds

#100 2012 Valuation - Will Val

81

Bovespa

#34 2012 Forecast Road Map

33

British Pound

#53 4 Year Pattern 1989 - 2013

50

British Pound

#54 Long Term Cycle Daily Bars

50

British Pound

#55 2012 Sweet Spot

51

British Pound

#56 2012 Forecast Daily Bars

51

British Pound

#92 2012 Set Up Weekly Bars

75

Canadian Dollar

#60 2012 4 Year Pattern

53

Canadian Dollar

#61 2012 Forecast Weekly Bars

54

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Commodity/Stock

Chart

Page #

Canadian Dollar

#93 2012 Set Up Weekly Bars

75

Cocoa

#91 2012 Set Up Weekly Bars

74

Coffee

#76 2012 Forecast Daily Bars

63

Coffee

#96 2012 Set Up Weekly Bars

78

Copper

#50 2012 Forecast Daily Bars

47

Copper

#51 2012 Forecast Weekly Bars

47

Copper

#95 2012 Set Up Weekly Bars

77

Corn

#73 2012 Forecast Daily Bars

62

Cotton

#74 2012 Forecast Daily Bars

62

Cotton

#90 2012 Set Up Weekly Bars

73

CRB Index

#41 2012 Forecast Weekly Bars

39

CRB Index

#42 2012 Forecast Weekly Bars

40

Crude Oil

#80 2012 Forecast Daily Bars

65

DAX

#32 2012 Forecast Road Map

31

DJIA Forecast

#57 2011 For Reference

52

Dow

#22 Commercials Net Long in Eurodollar

20

Dow Jones

#1 2011 Forecast Daily Bars

4

Dow Jones

#2 2011 Years Ending in 1 Forecast

5

Dow Jones

#3 2012 Years Ending in 2 Forecast

6

Dow Jones

#4 2011 Presidential Pattern for 3rd Year

7

Dow Jones

#5 2012 4 Year Pattern Presidential Pattern

7

Dow Jones

#10 4 Year Pattern

11

Dow Jones

#11 2 Year Pattern 1950 to 1970

12

Dow Jones

#12 2 Year Pattern 1985 to 1997

12

Dow Jones

#13 2 Year Sell Pattern

13

Dow Jones

#14 2 Year Sell Pattern

14

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Commodity/Stock

Chart

Page #

Dow Jones

#15 2 Year Sell Pattern

14

Dow Jones

#16 2 Year Sell Pattern

15

Dow Jones

#17 2 Year Sell Pattern 2012

15

Dow Jones

#18 2 Year Buy Pattern

16

Dow Jones

#19 2 Year Buy Pattern

17

Dow Jones

#20 2 Year Buy & Sell Pattern

18

Dow Jones

#23 2012 Forecast Weekly Bars

21

Dow Jones

#24 2012 Forecast Daily Bars

22

Dow Jones

#25 2012 Alternate Scenario

23

Euro FX

#62 2012 Forecast Weekly Bars

54

Euro FX

#94 2012 Set Up Weekly Bars

76

General Electric

#84 2012 Forecast Weekly Bars

68

Gold

#43 4 Year Pattern 1974 - 1997

42

Gold

#44 4 Year Pattern 1990 - 2014

42

Gold

#45 2012 Forecast Daily Bars

43

Gold

#46 Most Dominant Daily Pattern

44

Heating Oil

#81 2012 Forecast Daily Bars

66

Hewlett-Packard

#85 2012 Forecast Weekly Bars

69

IBM

#86 2012 Forecast Weekly Bars

69

Japanese Yen

#63 2012 Forecast Weekly Bars

55

Lean Hogs

#79 2012 Forecast Daily Bars

65

Live Cattle

#78 2012 Forecast Daily Bars

64

Lumber

#75 2012 Forecast Daily Bars

63

Microsoft

#83 2012 Forecast Weekly Bars

68

NFTY Index

#31 2012 Forecast Road Map

30

NIKKEI

#33 2012 Forecast Road Map

32

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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Commodity/Stock

Chart

Page #

RBOB Gasoline

#82 2012 Forecast Daily Bars

66

Russian Trading System Index

#29 2012 Forecast Road Map

28

Shanghai Index

#28 Forecast Road Map 2011 & 2012

27

Silver

#47 4 Year Pattern Weekly Bars

45

Silver

#48 2012 Forecast Daily Bars

45

Silver

#49 112-Day Cycle Daily Bars

46

Silver

#98 2012 Set Up Weekly Bars

80

Soybean Meal

#72 2012 Forecast Daily Bars

61

Soybean Meal

#102 2012 Set Up Weekly Bars

82

Soybean Oil

#71 2012 Forecast Daily Bars

61

Soybean Oil

#101 2012 Set Up Weekly Bars

82

Soybeans

#70 2012 Forecast Daily Bars

60

SPI 200

#26 Presidential Cycle

25

SPI 200

#27 Index Forecast 2012

25

Straits Times Index

#30 2012 Forecast Road Map

29

Sugar

#77 2012 Forecast Daily Bars

64

Sugar

#97 2012 Set Up Weekly Bars

79

Swiss Franc

#64 2012 4 Year Pattern

55

Swiss Franc

#65 Relationship to Gold

56

Swiss Franc

#66 2012 Forecast Road Map

56

US Dollar Index

#67 2012 4 Year Pattern

57

US Dollar Index

#68 2012 Forecast Road Map

57

Wal-Mart

#87 2012 Forecast Weekly Bars

70

Wheat

#69 2012 Forecast Daily Bars

60

Yield Curve

#21 Yield Curve Projection for S&P 500

19

© Copyright 2011 Larry Williams CTI Publishing. All Rights Reserved.

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