Elliott Wave Forecast: Bull Market Nearing Interim Peak on SP500

Back on September 12th with the SP 500 at 1689 we forecasted a run in the SP 500 to 1829, a very specific number. We use Elliott Wave Theory and Analysis in part to come up with projected pivots for the SP 500 and this was our projection.

Elliott Wave Analysis is based largely on Human Behavioral patterns that repeat over and over again throughout time. It’s really crowd behavior or herd mentality as applied to the broader stock markets. This can also apply to individual stocks, precious metals and more. At the end of the day, an individual stock is worth what investors believe it is worth, and it won’t necessarily reflect what a private valuation may accord it.

With that in mind, the stock market as a basket of 500 stocks can pretty easily be patterned out and then we can apply our Elliott Wave Theory to that pattern and predict outcomes. Back in mid-September, we believed we were in a 3rd wave up of the bull market as part of what we call Primary wave 3. The primary waves are 1-5 and Primary 3 is usually the most bullish of the 5 primary waves with 2 and 4 being corrective. Well, within Primary wave 3 you have 5 major waves… and we projected that Major wave 3 would be running to about 1829.

This projection was based on the 1267 pivot for Major wave 2 of Primary Wave Pattern 3 which was a corrective wave. We then simply applied a Fibonacci ratio to the Major wave 1 and assumed that Major wave 3 would be 161% of Major 1. That brings us to about 1822-1829… and here we are a few months later heading into Thanksgiving with the SP 500 hitting 1807 and getting close to our projection.

What will happen afterwards should be a Major wave 4 correction. We expect this to be about 130 points on the shallow side of corrections, and as much as 212 points.

So the Bull Market is not over, but Major Wave Pattern 3 of Primary 3 is coming to an end as we are in a seasonally strong period for the market. We would not be shocked to see a strong January 2014 correction in the markets as part of Major wave 4.

Here is our September 14th elliott wave forecast chart we sent to our subscribers and you can see we continue now along the same path.....Read "Elliott Wave Forecast: Bull Market Nearing Interim Peak on SP500"


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What NOT to Do When Investing in Miners

By Eric Angeli, Investment Executive, Sprott Global Resource Investments

 

Precious metals miners are the most volatile stocks on earth. They're so volatile that investors often forget that underneath those whipsawing stock prices lie real businesses. But even many of those who consider themselves old pros in natural resource investing tend to get one thing wrong. Eric Angeli, an investment executive with Sprott Global Resources and protégé of legendary resource broker Rick Rule, explains how not to fall into the "top down" trap…



If the past two years have taught us anything, it's that trying to predict short term moves in the gold price can be a road to ruin. Parsing the umpteen countervailing forces that combine to set the price of gold is tough. And it's even tougher when you consider that oftentimes, market moving news, such as a central bank trade, isn't reported until after the fact.

In my years spent evaluating natural resource companies as a broker and analyst, I’ve found that there are two ways to successfully invest in precious metals equities. Doing it right can bolster the strength of your portfolio, not to mention your own confidence in your holdings.

Method #1—Top-Down Approach

 

You may have heard this method referred to as “Directional Investing.”
A directional investor decides that gold prices will increase in the long run. That's the starting point of his thesis. He then proceeds to find the companies that will be successful if his prediction comes true. He looks for companies with leverage to the gold price.

If an investor can get the timing right, this can be a lucrative strategy. There is an obvious caveat, though: for this strategy to work, precious metals prices must rise.

In my role as a broker, I deal with both companies and investors all day long. I can tell you that most speculators involved with gold equities use this top down approach.

That's why the number one question I’ve heard over the last three months has been, “Why isn’t gold moving up?” To directional investors, the answer to this question is paramount.

This mindset leads to the herd mentality and, frankly, gives us our best bull markets.
I prefer method #2.

Method #2—Fundamental Approach

 

Fundamental investors ignore prognostications about where gold prices might move next. We eliminate gold price movements as the crux of our investment decisions, which removes a lot of the guesswork from our portfolios. For a fundamental investor, gold prices are still a piece of the puzzle, but they are not the only driver.

Fundamental investors want to know: which company has a promising deposit in a relatively safe jurisdiction? Which has a tight share structure? This “bottom up” method, however, does require a lot more homework.
Fundamental investing is all about identifying the difference between a stock’s intrinsic value and the price at which it is trading at in the open market.

While I do believe in higher gold prices eventually, and inevitably, I know that short-term movements in the price of gold are beyond my control. I instead prefer to position my clients for success in the current environment. Instead of focusing on when the gold price will move, which we can never know, we focus on picking quality companies.

Why Hasn’t the Top-Down Approach Been Working?

 

You might say: because the price of gold hasn’t gone up! That's true, but there’s more to the story.
Until quite recently, gold has continued to rise, though not at the same clip we enjoyed after 2008. The problem is that miners' operating costs rose faster than the price of gold. Investors didn't expect that.
Nor did they factor in other cost increases. Sure, the value of a deposit rises every day the gold price rises. But did oil prices jump at the same time, making trucking the goods out more expensive? Did your laborers start demanding high wages? Did energy costs increase? Did the federal government demand a bigger slice of the pie?

Top down investors can stop trying to figure out why they haven’t been correct over the last several years. They were correct on the gold price, but they ignored underlying cost factors.

The Top 7 Things to Look For

This is where the Fundamental Approach shines. All of your investments should fulfill a few key checkpoints:

1. Look for companies where management owns a large percentage of the stock. A vested interest at a higher share price is even better.
2. Look for a tight capital structure. A bloated outstanding share count is a red flag. As is a history of management carelessly diluting away shareholder interest by issuing new stock.
3. Look for a thrifty management team. A good company should spend their capital on projects, not swanky new offices.
4. The company's mine should remain profitable even if gold drops to $1,000 per ounce. It could happen.
5. Look for companies with enough cash to finance their current drill program, expansion plans, feasibility study, or construction phase. This year in particular, companies are having a very difficult time finding financing. Those who have adequate cash are diamonds in the rough.
6. Know which countries support mining. A tier-one asset under the control of a wildly corrupt government isn't really a tier-one asset. You don't want to get caught in the middle of a government dangling final permits above managements’ heads.
7. Know the geological potential of the exploration area. A four-million-ounce gold deposit is swell, but what if your company discovers not just one gold mine, but an entire new gold district? How will you factor in that upside?

Don't Let Fear Make You Miss Out

 

Mining companies have a fiduciary responsibility to make their shareholders money, so they can’t help but paint a rosy picture for potential investors. That's why you need to have a disciplined and impartial eye. Most companies are not worthy of your hard earned capital.

Having an advisor you trust, or access to technical expertise, is crucial. Ideally you should have both. The most educated investor always has the edge.

I'll conclude with this: the markets have not been kind to the miners recently. But selling a stock just because it dropped in value is an emotional decision. Seeing red on your computer screen is painful, but it is not relevant. What is relevant is what you do with that capital going forward. Don't let emotion cloud your judgment.
 
On the other hand, if you’re waiting for the gold price to move higher before you sell, then you’re a speculator masquerading as an investor, and you may as well buy a ticket to Vegas.

My boss and mentor, Rick Rule, recently said, “Bear markets are the authors of bull markets.” When these markets do start moving, if you’re not positioned with the highest quality tier one companies, you could miss out on one of the biggest bull market moves of your investing life.

Eric Angeli is an investment executive at Sprott Global Resources. 

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Are Your Bullish Calls Plagued with Divergences?

By now everyone has a prediction about where the S&P 500 Index (SPX) is going to be heading in the future. Most of the sell side and their ilk are all rolling out the green bullish carpet and predicting that a major bull run is right around the corner.

If you are a contrarian investor by nature and tend to sell when others are buying this will be of great interest to you. When retail investors are buying and the professional sell side is quickly reducing their long equity exposure we get increasingly more bearish.

This recent report was accompanied by some eye opening charts...... 

View report and charts courtesy of Bank of America Merrill Lynch


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They Just Rang A Bell On Gold and Gold Stocks

Our trading partner David A. Banister of Market Trend Forecast has been the go to guy on gold and precious metals. Let's check in with Banister and see if he thinks the bottom is in for gold.

As they say on Wall Street, “They don’t ring bells at the top” and for sure they usually don’t give you a phone call at the bottom either. Many heads have rolled trying to call this recent near 2 year downdraft in Gold in terms of bottom callers, me included. I thought we would never get much below 1440 or so from the 1923 highs, but alas we all know we did.

What makes me think that last week put in the final Gold low for the bear cycle? Too many things to mention, but based on the work I do enough to give me some chutzpah to make this call now. The 1180’s are very close to a classic ABC 61.8% Fibonacci retracement of the prior 34 month bull cycle. That cycle ran from October 2008 to August 2011 with a rally from $681 to $1900’s area. The most recent 21 plus month decline dropped right into the 61% pivot retracement of that entire move, and over a Fibonacci 21 month period as well! Human behavior does repeat over and over again, and as we all know in hindsight at the tops everyone is bullish and at the bottoms everyone is bearish.

I think it’s pretty much as simple as that. Investors get overly optimistic and exuberant in all kinds of asset classes and finally at the highs everyone believes the rally can only go on and on forever. At the opposite near the bottoms nearly everyone is calling for lower prices and further catastrophe ahead. Stocks in the sector are priced for near bankruptcy. Newsletter writers are universally bearish, and the small trader has a big short position. Only a few weeks ago the Bullish Percentile index measurement on the Gold Stock Index was at 0! That means nobody was bullish on the Gold stocks by the measure that is used. We quickly had an 8% rally in the index after that reading, then in the last few weeks we came all the way back down again to even lower levels!

If you watched the action last Thursday as Gold was melting down below $1200 a curious thing happened. The gold miners were ignoring the move and going green! On Friday, as Gold reversed to 1234 they went ballistic with one of my favorite miners going up 16% on Friday alone on the highest volume in 5 years! Those are the signals I’ve been waiting for to call the capitulation lows. My guess is some money managers are front running the coming 3rd quarter rotation they see in Gold and Gold Miners, Copper, Coal, and other commodity stocks.

So below is my basic GLD ETF multiyear chart using very simple monthly views to see the big picture. You can see a classic ABC pattern of bear market correction and now a near 61.8% perfect Fibonacci retracement of the prior leg up. I’d say enough is enough, pick your spots and start buying.




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Precious Metals & Miners Start Bottoming Process

Precious metals and their related mining stocks continue to under perform the broad market. This year’s heavy volume breakdown below key support has many investors and trader’s spooked creating to a steady stream of selling pressure for gold and silver bullion and mining stocks.

While the technical charts are telling me prices are trying to bottom we must be willing to wait for price to provide low risk entry points before getting involved. Precious metals are like any other investment in respect to trading and investing in them. There are times when you should be long, times to be in cash and times to be short (benefit from falling prices). Right now and for the last twelve months when looking at precious metals cash has been king.

Since 2011 when gold and silver started to correct the best position has been to move to cash or to sell/write options until the next trend resumes. This is something I have been doing with my trading partner who focuses solely on Options Trading who closed three winning positions last week for big gains.

In 2008 we had a similar breakdown in price washing the market clean of investors who were long precious metals. If you compare the last two breakdowns they look very similar. If price holds true then we will see higher prices unfold at the end of 2013.

The key here is for the price to move and hold above the major resistance line. A breakout would trigger a rally in gold to $2600 – $3500 per ounce. With that being said gold and silver may be starting a bear market. Depending what the price does when the major resistance zone is touched, my outlook may change from bullish to bearish. Remember, no one can predict the market with 100% accuracy and each day, week and month that passes changes the outlook going forward.

The chart below is on I drew up on May 3rd. I was going to get a fresh chart and put my analysis on it but to be honest my price forecast/analysis has been spot on thus far and there is no need to update.

Gold Daily Technical Chart Showing Bottoming Process:

Major technical damage has been done to the chart of gold. Gold is trying to put in a bottom but still needs more time. I feel gold will make a new low in the coming month then bottom as drawn on the chart below.

Silver Daily Technical Chart Showing Bottoming Process:

Silver is in a similar as gold. The major difference between gold and silver is that silver dropped 10% early one morning this month which had very light volume. The fact that silver hit my $20 per ounce level and it was on light volume has me thinking silver has now bottomed.

But, silver may flounder at these prices or near the recent lows until its big sister (gold) puts in a bottom.



Gold Mining Stocks Monthly Investing Zone Chart:

Gold mining stocks broke down a couple months ago and continue to sell off on strong volume. If precious metals continue to move lower then mining stocks will continue their journey lower.

This updated chart which I originally drew in February warning of a breakdown below the green support trend lines would signal a collapse in stock prices, which is exactly what has/is taking place. While I do not try to pick bottoms (catch falling knives) I do like to watch for them so I am prepared for new positions when the time and chart turn bullish or provide a low risk probing entry point.

While we focus more on analysis, forecasts and ETF trading another one of my trading partners who focuses on Trading Stocks and 3x Leveraged ETF’s has been cleaning up with gold miners.

Gold, Silver and Mining Stocks Conclusion:

Precious metals continue to be trending down and while they look to be trying to bottom it is important to remember that some of the biggest percent moves take place in the last 10% of a trend. So we may be close to a bottom on the time scale but there could be sharply lower prices yet.

The time will come when another major signal forms and when it does we will be getting involved. The exciting this is that it could be just around the corner. So if you want to keep current and take advantage of the next major moves in the market be sure to join our newsletters.

From COT trading partner Chris Vermeulen


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Update.....Is it finally time to go long coffee? Mike Seery weighs in!

Late last week one of our trading partners Jim Robinson gave us his take on the sideways trading in coffee right now. Mike Seery jumps in to give us his take with a recap on how coffee traded last week and where he sees it headed. Is it time to go long coffee?

Coffee futures finished down 295 points and had a disappointing week finishing lower by about 800 points still in a real seesaw chart pattern finishing around 137.00 a pound creating a false breakout to the upside last week with a false breakout to the downside a couple weeks ago so were still unable to breakout of this 8 week consolidation.

We are entering the volatile season in coffee as frost season is right around the corner which could propel prices higher if there are any weather problems but this trend is sideways and I’m still recommending traders to avoid this market until a trend develops and I do believe that the three year downturn in prices is nearing an end in my opinion.

One strategy if you’re looking to get involved in coffee and avoid some of the volatility which could be coming is to look at bull call option spreads and that is an option play which limits your risk to what the premium cost and I would go out to the month of September which gives you around 3 months to hold that position before expiration.

Trend: Sideways – Chart structure - excellent


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Correction near but Bull Market has LONG waves to Go!

Are you using Elliot Wave theory in your trading? Today David Banister of Market Trend Forecast is laying out the Elliot formations in detail. Do yourself a favor and take a few minutes to make sure you are looking at this market through his eyes. Can any of us call the pull back exactly and reliably? No, of course not. But we should all be taking this into consideration.

The SP 500 has been on a tear as we all know especially since the SP 500 bottomed at 1343 several months ago. My work centers around forecasting using Elliott Wave Theory along with other technical indicators. This helps with projecting the short, intermediate, and longer term paths in the stock market and also precious metals. This larger picture Bull Cycle started in March of 2009 interestingly after an exact 61.8% Fibonacci retracement of the entire move from 1974 to 2000 lows to highs. At 666, we had completed a major cycle bottom with about 9 years of movement to retrace 26 years of overall bull cycle. That was a major set of 3 waves (Corrective patterns in Elliott Wave Theory) from the 2000 highs to 2002-3 lows, then 2007 highs to 2009 lows. Once that completed its work, we were free to have a huge new bull market cycle off extreme sentiment and generational lows.

It’s important to understand where we were at in March of 2009 just as much as it is today with the market at all time highs. Is this the time to bail out of stocks or do we have a lot more upside yet to go? Our short answer is there is quite a bit more upside left in the indexes, but there are multiple patterns that must take place along the way. We will try to lay those out for you here as best we can.

Elliott Wave theory in general calls for 5 full wave cycles in a Bull pattern, with 1, 3, and 5 bullish and 2 and 4 corrective. We are currently in what is often the most bullish of all the patterns, a 3rd of a 3rd of a 3rd. In English, we are in Primary wave 3 of this bull cycle which will be 5 total primary waves. We are in Major wave 3 of that Primary 3, and in the Intermediate wave 3 of Major wave 3. That is why the market continues its relentless climb. This primary wave 3 still has lots of work to do because Major wave 3 still has a 4th wave down and a 5th wave up to finish, then we need a major 4, then a major 5.

That will complete primary wave 3. This will then be followed by a Primary wave 4 cycle correction that probably lasts several months, and then a Primary wave 5 cycle to finish this part of the bull market from March 2009 generational lows… and all of that work is going to take time. Once that entire process from March 2009 has completed, then we should see a much deeper and uglier correction pattern, but we think that is at least 12 months or more away.

What everyone wants to know then is where are we at right now and what are some likely areas for pivot highs and lows ahead? We should complete this 3rd of a 3rd of a 3rd here shortly and have a wave 4 correction working off what will likely be almost 300 points of upside from SP 500 1343. We could see as much as 90-120 points of correction in the major index once this wave completes. Loosely we see 1528-1534 as a possible top and if not then maybe another 30 or so points above that maximum into early June. This should then trigger that 90-120 point correction, and then be followed by yet another run to highs.

We could go on but then we will lose our readers here for sure, and as it is… this is all projections and postulations, so it’s best to keep the forecast to the next many weeks or few months. Below is a chart we have put together showing the structure of Major wave 3 of Primary 3 since the 1343 lows. Once that Major wave 3 tops out (see the blue 3) then we will have Major 4, then Major 5 to complete Primary wave 3 since the 1074 SP 500 lows. Whew!



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Ignore Banks' Bearish Statements on Gold

By Jeff Clark, Senior Precious Metals Analyst

Goldman Sachs has lowered its gold price projections and says the metal is headed to $1,200. Credit Suisse and UBS are bearish. Citigroup says the gold bull market is over.

So I guess it's time to pack it in, right?

Not so fast. As we've written before, these types of analysts have been consistently wrong about gold throughout this bull cycle. Another reason to disagree, however, is history; we've seen this movie before. In the middle of one of the greatest gold bull markets in modern history, the one that culminated in the 1980 peak, gold experienced a 20 month, one way decline. Every time it seemed to stabilize, the bottom would fall out again. From December 30, 1974 to August 25, 1976, gold fell a whopping 47%.

1976 had to be a tough year for gold investors. The price had already been declining for a year – and it just kept on sinking. Since that's similar to what we're experiencing today, I wondered, What were the pundits were saying then? I wanted to find out.

I enlisted the help of two local librarians, along with my wife and son, to dig up some quotes from that year. It wasn't easy, because publications weren't in digital form yet, and electronic searches had limited success. But we did uncover some nuggets I thought you might find interesting.

The context for that year is that the IMF had three major gold auctions from June to September, dumping a lot of gold onto the market. Both the US and the Soviet Union were also selling gold at the time. It was no secret that the US was trying to remove gold from the monetary system; direct convertibility of the dollar to gold had ended on August 15, 1971.

The public statements below were all made in 1976. You'll see that they aren't all necessarily bearish, but I included a range to give a sense of what was happening at the time, especially regarding the mood of the gold market. I think you'll agree that much of this sounds awfully darn familiar. I couldn't resist making a few comments of my own, too.

To highlight the timing, I put the comments into a price chart, pinpointing when they were said relative to the market. Keep in mind as you read them that the gold price bottomed on August 25, and then began a three-and-a-half year, 721% climb…

[1] "For the moment at least, the party seems to be over." New York Times, March 26.

[2] "Though happily out of the precious metal, Mr. Heim is no more bullish on the present state of the stock market than any of the unreconstructed gold bugs he's had so much fun twitting of late. He's urging his clients to put their money into Treasury bills." New York Times, March 26.

Me: These comments remind me of those today who poke fun at gold investors. I wonder if Mr. Heim was still "twitting" a couple years later?

[3] "'It's a seller's market. No one is buying gold,' a dealer in Zurich said." New York Times, July 20.
Turns out this would've been an incredible buyer's market – but only for those with the courage to buy more when gold dropped still lower before taking off again.

[4] "Though the price recovered to $111 by week's end, that is still a dismal figure for gold bugs, who not long ago were forecasting prices of $300 or more." Time magazine, August 2.
The "gold bugs" were eventually right; gold hit $300 almost exactly three years later, a 170% rise.

[5] "Meanwhile, the economic conditions that triggered the gold boom of 1973 through 1974, have largely disappeared. The dollar is steady, world inflation rates have come down, and the general panic set off by the oil crisis has abated. All those trends reduce the distrust of paper money that moves many speculators to put their funds in gold." Time magazine, August 2.

This view ended up being shortsighted, as these conditions all reversed before the decade was over. Does this sound similar to pundits today claiming the reasons for buying gold have disappeared?

[6] "Our own predictions are that gold will go below $100, with some hesitation possible at the $100 level." As stated by Mr. Heim in the August 19 New York Times.

Yes, this is the same gentleman as #2 above. I wonder how many of his clients were still with him a few years later?

[7] "Currently, Mr. LaLoggia has this to say: 'There is simply nothing in the economic picture today to cause a rush into gold. The technical damage caused by the decline is enormous and it cannot be erased quickly. Avoid gold and gold stocks.'" New York Times, August 19.

You can see that these comments were made literally within days of the bottom! Take note, technical analysts.

[8] "'Gold was an inflation hedge in the early 1970s,' the Citibank letter says. 'But money is now a gold-price hedge.'" New York Times, August 29.

Wow, were they kidding?! This reminds me of those dimwits journalists who said in 2011 to not invest in gold because it isn't "backed by anything."

[9] "Private American purchases of gold, once this was legalized at the end of 1974, never materialized on a large scale. If the gold bugs have indeed been routed, special responsibilities fall on the victorious dollar." New York Times, August 29.

The USD's purchasing power has declined by 80% since this article declared the dollar "victorious."

[10] "Some experts, with good records in gold trading, declare it is still too early to buy bullion." New York Times, September 12.

Too bad; they could've cleaned up.

[11] "Wall Street's biggest brokerage houses, after having scorned gold investments during the bargain days of the late 1960s and early 1970s, made a great display of arriving late at the party." New York Times, September 12.

No comment necessary.

[12] "He believes the price of bullion is headed below $100 an ounce. 'Who wants to put money over there now?'" As stated by Lawrence Helm in the New York Times, September 12.

The price of gold had bottomed two weeks before, making the timing of this advice about the worst it could possibly be.

[13] Author Elliot Janeway, whose book jacket states, "Presidents listen to him," was asked by a book reviewer about his preferred investments. He writes: "Then, gold and silver? He likes neither. In fact he writes: 'Any argument against putting your trust in gold, and backing it up with money, goes double for silver: silver is fool's gold.'" New York Times, November 21.

Mr. Janeway ate his words big-time: from the date of his comments to silver's peak of $50 on January 21, 1980, silver rose 1,055%!

[14] "Mr. Holt admits that 'in 1974, intense speculation caused the gold price to get too far ahead of itself.'" New York Times, December 19.

So, anything sound familiar here? Yes, it was a brutal time for gold investors, but what's obvious is that those who looked only at the price and ignored the fundamentals ended up eating their words and dispensing horrible advice. Investors who followed the "wisdom of the day" missed out on one of the greatest opportunities for profit in their lifetimes.

I was pleased to learn, though, that not all comments were negative in 1976. In fact, in the middle of the "great selloff," there were those who remained stanchly bullish. These investors must've been viewed as outliers – they, much like some of us now, were the contrarians of the day.

Also from 1976…

• "Many gold issues, in fact, are down 40 percent or more from their highs. Investors who overstayed the market are apparently making their disenchantment known. The current issue of the Lowe Investment and Financial Letter says, 'We are showing losses on our gold mining share recommended list… but keep in mind that these shares are for the long-term as investments.'" New York Times, March 26.
  
  Sounds like what you might read in an issue of a Casey Research metals newsletter..

• "The time to buy gold shares," [James Dines] declares, "is when there is blood in the streets." New York Times, September 12.
  
  If you glance at the chart above, Jim's comments were made within two weeks of the absolute low.

• "We're recommending to clients that they hold gold and gold shares," [C. Austin Barker, consulting economist] says. "The low-production-cost mines in South Africa might be interesting to buy for the longer term because I see further inflation ahead." New York Times, September 12.
  
  Investors who listened to Mr. Barker ended up seeing massive gains in their gold and gold equity holdings.

• "The probability of runaway inflation by 1980 is 50%... In light of this, the only safe investments are gold, silver, and Swiss francs,'" said the late Harry Browne on November 21 in the New York Times.
   

• "In the longer run, [Jeffrey Nichols of Argus Research] believes gold's price trend 'is much more likely to be upward than downward.'" New York Times, December 19.
  
  The "longer run" won.

• "'I think the intermediate outlook for gold is a period of consolidation and a bit of dullness,' says Mr. Werden. 'However, six or nine months from now, we could see renewed interest in gold.'" New York Times, December 19.
  
  He was right; within nine months gold had risen 13.5%.

• "Mr. Holt offers some advice to investors who are taking tax losses on their South African gold shares – some of which are selling at just 30 to 35 percent of their peak prices in 1974. 'If leverage has worked against you on the way down,' he reasons, 'why not take advantage of it on the way up?'" New York Times, December 19.
  
  Solid advice for investors today, too.

• "What's his [Thomas J. Holt] prediction for the future price of gold? 'A new high, reaching above $200 an ounce, within the next couple years.'" New York Times, December 19.
  
  His prediction was conservative; gold reached $200 nineteen months later, by July 1978.

It's clear that there were positive "voices in the wilderness" during that big correction, and as we all know, those who listened profited mightily.

There were other interesting tidbits, too. For example, gold stocks had been performing so poorly for so long that some advisors suggested a strategy we also hear today…

• "It is probably too late to sell gold shares, the stock market's worst-acting group these days, except for one possible strategy: selling to take a tax loss and switching into a comparable gold security to retain a position in the group." New York Times, September 12.

Even back then, it was widely known that gold often bucks the trend of the broader markets…

• "You might put a small portion of your money into gold shares and pray like the dickens that you lose half of it. In that way, chances are that if gold shares go down, the rest of your stock portfolio will go up." New York Times, September 12.

Gold miners provided critical revenue and jobs, just like today. From the August 2 issue of Time magazine…

• "South Africa, the world's largest gold producer, is being hurt the most. The price drop will cost it at least $200 million in potential export earnings this year."

• "Layoffs at the gold mines would make it even worse – the joblessness could intensify South Africa's explosive racial unrest."

• The Soviet Union, the world's second-largest gold producer, is feeling the price drop, too. The Soviets depend on gold sales to get hard currency needed to buy US grain and other imports."

Gold was also used as collateral…

• "The international gold market was also roiled yesterday by a report by the Commodity News Service that Iran was negotiating to lend South Africa roughly $600 million, predicated on a collateral of 6.25 million ounces of gold."

And just like today, there were plenty of stupid misguided US politicians: From the New York Times on August 27:

• "The drop in gold bullion prices from $126, which was the average at the first IMF auction June 2, provoked the Swiss National Bank to attack Washington's attitude toward the metal as 'childish.' Aside from the estimated $4.8 billion of gold reserves held by Switzerland, bankers there advocate some role for the metal as a form of discipline against unrestricted printing of paper money."

That last statement from the Swiss bankers is hauntingly just as true today.
Last, you know how the government in India has been tinkering with the precious-metals market in its country? And how it's led to smuggling? From the New York Times on August 27:

• "India announced it was resuming its ban on the export of silver. India is believed to have the largest silver hoard and the government there freed exports earlier this year as a means of earning taxes levied on overseas sales. However, most silver dealers minimized the significance of India's move yesterday. As one dealer explained, 'Smuggling silver out of India is so ingrained there that the ban will have no effect on the flow. It never has. Indian silver will continue to ebb and flow into the world market according to price.'"

So what's the difference in mood today vs. the mid-1970s? Nothing! This shows that the same concerns, fears, and confusion we have now existed at a similar point in the gold market then. There were also those who saw the big picture and stayed vigilant. Virtually every comment made in 1976 could apply to today. Keep in mind that most of the statements above are from two publications only; there are undoubtedly many more similar comments from that year.

The obvious lesson here is that patience won out in the end. It took the gold price three years and seven months to return to its December 1974 high. It only took another 18 months to soar to $850. Today, that would be the equivalent of gold falling until June this year, and not returning to its $1,921 high until April, 2015. It would also mean we climb to $6,227 and get there in November, 2016. Could you wait that long for a fourfold return?

This review of history gives us the confidence to know that our gold investments are on the right track. I hope you'll join me and everyone else at Casey Research in accepting this message from history and staying the course.

So, what will your kids or grandkids read in a few decades?

• "Buy gold. It's going a lot higher." Jeff Clark, Casey Research, March 24, 2013.

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The 2 Energy Sectors You Should Invest in This Year

The Stock Market Trend & Hot Sector ETF’s

Trading with the trend should be your main focus for long term success no matter what type of trader you are (Options Trader, Stock Trader, or ETF Trader) although it’s not as easy as it sounds.

The good news is that there is a simple trading model that removes 95% of trading analysis and greatly reduces trading related emotions because the key technical analysis rules based on one of the world’s best chart technicians (John Murphy) technical analysis methods have been applied to the chart automatically. The key is to identify the trend of the market. Once that is known you can focus on trading strategies that take advantage of the current trend.

Over the past few years I have been creating this indicator/chart layout tool which converts my chart reading experience, tips and tricks into a simple system removing analysis paralysis which cause most individuals to second guess what they see and don’t pull the trigger. Using too many indicators or read/listening several other traders commentaries with different views than you causes this paralysis.

My simple red light, green light model clearly shows a viewer the current trend and expected price range (high and low) looking forward a couple days. I uses a series of data points like volatility, volume, cycles, momentum, chart patterns and logic rules. It even shows extreme pivot points helping you find low risk entry prices for both bull and bear market conditions.

Recent trends and signals for the SP500 Index Daily Chart:



Trading With the Trend – The Sweet Spots

Knowing the direction of the market is simple using the chart system above but trading with the trend is not that simple because of natural human behavior. Instead traders fall victim to trying to pick a top or bottom because they think the price is overbought or oversold and they want to catch the next big trend change.

We all know the saying “the market climbs a wall of worry”. Well, the biggest worry most traders have is buying long in a bull market because stocks and price always look overbought and ready to top each week… This leads to people trying to get fancy picking a top only to get their head handed to them a few days or weeks later depending on how stubborn they are to exit a losing position.

The key to long term success is to buy during broad market (SP500) corrections once sentiment, cycles and momentum are starting to flash extreme oversold conditions. These show up as green arrows on the trend chart. At that point most sectors and high beta stocks like IBM, GOOG etc… should be at a key entry points with most of the downside risk removed already. Remember ¾ stocks follow the broad market so it only makes sense to follow it also.

What about a runaway stock market? This is when the stock market does not pullback but just keep grinding its way higher and higher… The only thing you can do is sit in cash, or look for a stock or sector that is having a small pause or pullback and get long with a small position until you get that broad market pullback and major by signal to add more.

Below are a few sectors showing a minor pause/pullback within this bull market:


 

Mid-Week Trend Conclusion:

Overall, the broad market remains in an uptrend. While I would like to see the SP500 pullback and give us another major buy signal like it did in December and February I do mind that much if prices keep running higher as it just give us more cushion and potential profits for when the trend does eventually roll over and flip signals. I hope you found this report interesting. It’s just scratching the surface of this topic but it’s a start. Know the stock market trends by joining my free newsletter at The Gold & Oil Guy.com

Chris Vermeulen


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Do You Agree.... The SP 500 Nearing a Cyclical High

One of our favorite traders to follow is David Banister [make sure to sign up for his calls] and he just sent over this great post on his thoughts on the SP 500 nearing a cyclical high in the coming two weeks of trade. And here's what he is thinking.......

The SP 500 has rallied to a post June 4th high of 1409 this week, about 13 points shy of the Bull Market cycle highs of 1422 earlier this year.

The rally has overlapped along the way, forming a series of “3′s” which are sometimes found in impulsive bullish moves, but usually found at the end of bull cycles whether they be short term or long term cycles.

To wit, the first 11 trading days off the 1267 SP 500 lows saw a 97 point rally, again in only 11 trading days.

The last 34 trading days we have only been able to move up about 44 further points, indicating the rally is getting long in the tooth and a bit tired at that.

So 11 days, 97 points… 34 more days, only 44 further points.

Another 10 trading days would mark a 55 fibonacci trading day cycle, so we should be alert to potential rally highs between August 13th and August 22nd as a window for a top.

A few days ago I discussed we may see a continual sloppy drift up to 1425-1445 ranges, with 1434 a key pivot line to watch.

Although the count doesnt really fit for me, if this rally from the June lows is a 5th and final wave up… then a 5th wave rally to complete a larger cycle often is characterized by a series of 3′s.

To summarize:

The first leg of the rally was a 3 wave rally to 1363, about 97 points in 11 days. We have continued with overlapping 3′s. This final stage of the rally is likely going to be 5 waves or ABCDE in nature to complete the entire cycle up from 1267

That cycle high should come within the Aug 13th-22nd window and in the 1425-1445 ranges.

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Gold still at risk of a large downward move before the rally

Gold has been busy consolidating in what I believe will be a 13 Fibonacci month Primary wave 4 correction. The Gold bull market I’ve been following since 2001 is a likely 13 year bull cycle that will end in 2013 or 2014 depending on how you count. This current correction pattern is working off a 34 Fibonacci month rally that took Gold from 681 to 1923 at its ultimate highs. Last fall I warned about the parabolic run likely ending in the 1908 ranges and for investors to position themselves accordingly.

Today we have Gold trading around 1600 and our recent forecast in May was for a rally into Mid June topping around 1620-1650 ranges in US Dollars. The intermediate forecast still calls for a possible drop to 1445-1455 ranges this summer, the same figures I gave out on TheStreet.Com interview last September for a Primary wave 4 low.....Read the entire article and charts.


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The New Bull Market.....and it's OIL!

Today we will use our Trade Triangle Technology and figure out Oil’s next big move.

It appears as though the crude oil market [April contract] is coiling up and getting ready to spring upwards.

Here is our 3 main reasons for being bullish on crude oil.

# 1: All our Trade Triangles are green indicating that a very strong trend is in place.

# 2: Crude Oil tends to make major lows every eight or nine months (last major low in October) look at the weekly chart on the video and I’ll show you this.

# 3: The Crude Oil market tends to make a major high every 11 or 12 months.

Presently we are about 6 to 7 weeks away from making a major high in Crude. This cyclic pattern, if it persists, should push Crude up and into a new 6 week high in late March or early April. A move and close on Friday over $103.38 should be viewed as very bullish for Crude Oil, indicating sharply higher levels to come in the weeks ahead.

Big Picture: Strong Trend +100
Trade Triangles: Long Term = Bullish....Intermediate Term = Bullish....Short-Term = Bullish

MarketClub scoring: Trading Range (50 to 65) : Emerging Trend (70 to 80) : Strong Trend (85 to 100)

March crude oil was higher overnight as it extends this month's rally. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If March extends this month's rally, January's high crossing at 103.90 is the next upside target. Closes below the 20 day moving average crossing at 99.36 would temper the near term bullish outlook.

First resistance is the overnight high crossing at 102.95. Second resistance is January's high crossing at 103.90. First support is the 20 day moving average crossing at 99.36. Second support is this month's low crossing at 95.44.

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As with any market analysis there are no guarantees. Always use stops to protect capital and never trade with funds that you cannot afford to lose. With our monthly, weekly and daily Trade Triangles all in a positive mode, we expect to see further gains in Crude Oil.

Dennis Gartman: The Gold Bull Run is Dead

Calling the death of gold's bull run, and the beginning of a gold bear market, with Dennis Gartman, The Gartman Letter.



Is This December Similar to 2007 & 2008 for Gold & Stocks?

David Banister: Bears Yelling Fire in Empty Theater

The lows at 1101 were a convergence of Fibonacci weeks, months, sentiment bottoms and VIX extremes along with major insider buying all at the same time.

We rallied up in 5 waves from 666 to 1370 Bin Laden highs.  At that level we had re-traced 78.6% of the entire 2007 highs to 2009 lows, a common turning point.  Since then, we have had a 3 wave decline, also common for correcting a 5 wave move to the upside.  The decline halted at 1101, an exact 38% fibonacci retracement of the 666 lows to 1370 highs.  This is what I call a “fibonacci intersection”. The same thing happened in July 2010 at 1010 on the SP 500, where a huge bottom formed.

The rally since 1101 was a 5 wave rally, this is an early BULL SIGN.

A correction of this 103 point 5 wave rally would be normal, but the lighter the correction the more Bullish.  So far the correction is only 23% of the 104 point rally with a gap fill at 1180.

 
Let’s review: 13 Fibonacci month’s from the July 2010 bottom to August 2011 bottoms 7 Times in history we had the SP 500 double in a short period of time, and in every case it retraced 27-40% of the price movement from lows to highs. We just retraced 40% of our SP 500 double, historically very high retracement.

At 1101 we had 38% fibonacci ABC correction of the Bull leg from 666 to 1370.

In 1974-77 we had the SAME pattern, which I outlined for everyone last week.

13 Fibonacci weeks correction from the Bin Laden 1370 highs to 1101 lows. 1370 was a 78% fib of the 07 highs and 09 lows. 1101 is a 38% fib of the 666 lows and 1370 highs. Thats what I call a Fibonacci intersection. The same thing happened in July 2010 at 1010 lows.

Insiders with massive buying, corporate buybacks announced.

VIX at extreme levels.

Fear gauges at extreme levels.

5 wave impulsive rally from 1101 to 1204 ensued… now a pullback is due. Same thing happened last summer 1010 to 1130, pullback to1040 in 3 waves, then another 5 waves up.

What am I telling everyone?

Stop yelling fire in an empty theater….

This is options expiration week, trading this week is notoriously difficult…

The Bear case is crowded, the Bull case is not.

I’m leaning bullish as long as I keep seeing this type of confirming price action.

I’m watching 1165 on SP 500 as a pivot low worst case, but as long as we see price action above that I like the set up for a while yet on the long side.

So you say "But Dave, the textbook for Elliott Waves doesn’t agree with you".… good, that’s why I use other indicators!

Consider subscribing to David Banisters 24/7 email access so that you will be consistently informed and also get Gold and Silver forecasts on a regular basis. Subscribe now with a 33% discount coupon ahead of our rate increase Market Trend Forecast.Com for details.