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The Answer to the Biggest Question in the Markets Right Now

By Justin Spittler

Are we in a bear market or a bull market? If you’ve been reading the Dispatch, you know that U.S. stocks have had a wild ride this year. The S&P got off to a horrible start in 2016, plunging 11% in just six weeks. But since mid-February, stocks have staged a huge bounce, climbing 13%. Regular readers know we’ve been skeptical of this big rally. We’ve argued that until the S&P 500 sets a new high, there’s little reason to be bullish. And we just got another clue that this rally is “suspect”.

The initial public offering (IPO) market is at financial-crisis lows.....
An IPO is when a private company goes public by selling stock to investors. The health of the IPO market can say a lot about the state of the stock market. Buying stock at its IPO is typically a high risk, high potential move. IPOs have a lot of potential because they’re often involved in a new or exciting business. Many investors who buy are hoping to get in early on the next Starbucks, Facebook, or Google.

However, IPOs are also very risky. The companies are often based on new or unproven business models. Many companies with an IPO are losing money every quarter. Some barely earn any revenue at all. More often than not, investors who buy IPOs are buying hopes and dreams, not stable, profitable business. When markets are healthy, investors are more willing to take a chance at buying an IPO. But when markets are shaky, IPOs tend to do poorly, as investors seek safer, more stable investments.

The number of U.S. IPOs plunged to a seven-year low last quarter.....
Investor’s Business Daily reported on Wednesday.

Just eight IPOs got out the door in Q1, down 76% from 34 in Q1 2015. That was the fewest IPOs since Q1 2009, which had just one. The $700 million in proceeds raised was the lowest total in 20 years, down 87% from the $5.5 billion raised in Q1 2015, according to Renaissance Capital, which manages two IPO-focused exchange traded funds.

Like us, The Wall Street Journal thinks this is a bad omen for the rest of the stock market.

[I]f the pace of IPOs doesn’t accelerate, it could be a warning sign for the rally.

The U.S. IPO market is heading toward its worst year since the financial crisis.....
On Tuesday, VentureBeat reported that just 24 companies have filed for IPOs this year. You can see in the chart below that the IPO market is on track to have its worst year since 2008.

We warned that the IPO market was slowing in October.....
Back then, the IPO market was just starting to show cracks. The S&P 500 was coming off its first 10% decline in four years. Companies are hesitant to go public when markets are volatile, because nervous investors are less likely to buy shares in an IPO. We also noted that several high profile companies either cancelled or postponed their IPOs. Supermarket chain Albertsons, which delayed going public in October, still hasn’t had its IPO.

Casey Research founder Doug Casey said to avoid one of the year’s most anticipated IPOs.…
The Italian carmaker Ferrari (RACE) went public on October 21. Days before the IPO, Doug urged readers of The Casey Report to not buy the stock.

Ferrari is going to have an IPO on its stock soon. A smart move on their part; when the ducks are quacking, you should feed them. I wouldn’t touch it if your broker offers you some…

Doug’s call was spot-on. Ferrari’s stock has plunged 25% since its IPO.

Most of last year’s IPOs have been huge disappointments..…
Investor’s Business Daily reports:

Among all IPOs of 2015, their stocks are down 18% on average from their IPO price and down 28% after the first trading day, Renaissance says.

Instead of buying IPOs, investors have been buying “defensive” stocks..…
For example, utility stocks have jumped 13% this year. The S&P 500 is up just 1%.
As Dispatch readers know, utilities tend to perform well when markets are shaky. No matter how bad the economy gets, folks still need running water, electricity, and gas to heat their homes. Investors often pile into utility stocks for safety.

Consumer staple stocks, which sell things like groceries, toothpaste, and laundry detergent, have also done well this year. The Consumer Staples Select Sector SPDR ETF (XLP), which tracks 39 consumer staple stocks, is up 5%. It hit an all-time high on Wednesday. Like water and electricity, folks buy these items no matter what’s happening with the economy.

Investors are also buying gold..…
As we often say, gold is money. It’s preserved wealth through economic depressions, currency crises, and every other kind of financial disaster. Investors often buy gold when they’re concerned about the economy or stocks. This year, the price of gold is up 16%. Yesterday, gold closed its best quarter since 1986.

Gold is the ultimate defensive asset.....
Even though utilities and consumer staple stocks are less risky than most stocks, they’re still stocks. They generally move with the rest of the market. During the 2008 financial crisis, the S&P 500 plunged 57%. Utilities fell 49%. Consumer staple stocks fell 34%. Gold only fell 29%. And in the aftermath of the crisis, gold recovered much more quickly than stocks. It went on to surge 167% from November 2008 to September 2011.

Today, gold is coming off a five-year bear market.....
It’s down 36% from its 2011 high. But as we mentioned earlier, gold has taken off this year. In case you missed it, Casey Research founder Doug Casey recently wrote an essay explaining why gold could easily triple. You can read it here.

There’s more risk than opportunity in U.S. stocks right now.....
The S&P 500 has climbed 205% since March 2009. That’s far more than the average gain of 136% for U.S. bull markets since 1932. The S&P 500 is also 56% more expensive than its historic average, according to the long term CAPE valuation ratio. U.S. stocks have only been more expensive three times in history: before the Great Depression...during the dot-com bubble...and leading up to the 2008 financial crisis.

Investors who buy U.S. stocks today are betting that the market keeps breaking records. That’s not a gamble we want to make. On top of owning gold, we encourage you to set aside cash. This will help you avoid major losses should U.S. stocks fall. And it will put you in a position to buy stocks when they get cheaper.

You could also make money “shorting” one of America’s most vulnerable industries.....
“Shorting” a stock is betting that it will go down. E.B. Tucker, editor of The Casey Report, recently recommended shorting a major American airline.The airline industry has been booming since the 2008–2009 financial crisis. But E.B. thinks the good times are coming to an end. In short, E.B. thinks the industry boomed on cheap credit, and that it will suffer huge losses when the easy money stops flowing.

E.B is targeting the most vulnerable U.S. airline. The company’s stock has surged an incredible 1,600% since March 2009. That’s eight times the return of the S&P 500. But like most stocks, it’s gone nowhere this year. It hasn’t set a new high since May. E.B. thinks this stock could plunge more than 50%. You can get in on this trade by signing up for The Casey Report. Click here to begin your risk-free trial.

Chart of the Day

Investors have turned bearish on biotech stocks. Today’s chart shows the performance of the iShares Biotechnology ETF (IBB), which tracks 189 biotechnology companies. Biotech companies develop or manufacture new drugs. Some of these companies are trying to cure diseases like cancer, HIV, and Alzheimer’s. Because a successful new drug can be worth billions of dollars, biotech stocks can soar hundreds of percent in short periods.

But they are also very risky. Most young biotech companies only have one or two products. And many biotech companies don’t make any money. Biotechs are the type of stocks investors like to own in a strong bull market. Between March 2009 and July 2015, IBB surged 574%. The S&P 500 gained 215% over that time. Since July, IBB has plunged 34%. It’s trading at its lowest price since October 2014.
The selloff in risky biotech stocks is more proof that investors have gone on the defensive.

The article The Answer to the Biggest Question in the Markets Right Now was originally published at caseyresearch.com.

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Good Reason for Doom and Gloom

By Doug French, Contributing Editor

Predicting the future, like getting old, ain’t for sissies. Questioning the bull market is even more treacherous.
Howard Gold, writing for MarketWatch, makes fun of seers who made what he calls “the four worst predictions to gain traction over the past few years.”

Gold says the last six years have been a disaster for those who stayed out of the stock market. He claims there’s a bull market in doom and gloom, referring to a column by his colleague Chuck Jaffe, who points out, “The fortune-tellers … know that the more outrageous the prediction, the more attention they get. They can highlight any forecasts they get right, knowing that their misfires are forgotten quickly. Thus, calamity and catastrophe sells. Right now, it’s a bull market for bearish forecasts.”

If such a bull market in doom were really happening, the market wouldn’t be hitting all-time highs. Besides, no one ever went broke being out of the market.

But more importantly, there is a very good reason people respond to gloomy forecasts. Behavioral economics pioneer and 2002 Nobel Prize winner Daniel Kahneman explains in his bestseller Thinking, Fast and Slow that when people compare losses and gains, they weigh losses more heavily. There’s an evolutionary reason for this: “Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce,” Kahneman explains.

Most people, when given the opportunity to win $150 or lose $100 on a coin flip, decline the bet because the fear of losing $100 is more intense than the hope of gaining $150. Kahneman writes that the typical loss aversion ratio seen in most experiments is 1.5 to 2.5. Professional stock traders have much higher tolerance for risk, but most people investing their retirement accounts are not pros and have little fortitude for losses.

The average Joe can’t just sit tight while his retirement account drops 40%. He’s not wired that way. His retirement savings represent safety, and a market crash is the modern equivalent of a flood, a bear, or a warring tribe. When stocks start falling, survival mode kicks in. He or she sells and runs for cover.
So when someone makes a compelling case that stocks might crash, the average person rightly listens. Otherwise they don’t get any sleep.

Gloomy Forecasts

Economist and financial newsletter writer Harry Dent predicted the DJIA would crash to 3,000 and told investors to bail out between early 2012 and late 2013. Some people likely took him up on it. In July 2010, Robert Prechter of Elliott Wave fame predicted the DJIA would fall to well below 1,000 over the ensuing five or six years.

“I’m saying: ‘Winter is coming. Buy a coat,’” Prechter told the New York Times. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”

While Prechter sees massive deflation on the horizon, Marc Faber, editor of the Gloom, Boom & Doom Report, says Zimbabwe-style hyperinflation is on the way. Gold calls this “the single worst prediction of the past five years.” Gold calls Faber wacky for telling Bloomberg in 2009:

I am 100% sure that the U.S. will go into hyperinflation. Not tomorrow, but the problem with the government debt growing so much is that when the time will come and the Fed should increase interest rates, they’ll be very reluctant to do so and so inflation will start to accelerate.

Peter Schiff’s call for $5,000/oz gold also has Mr. Gold laughing. Schiff sees the Fed printing more to stimulate the economy, which will send the yellow metal soaring.

“Back in the real world,” sneers Gold, “new Fed Chairwoman Janet Yellen is actually winding down the Fed’s extra bond buying (quantitative easing, or QE), and she’s on pace to finish by fall.”

Europe’s economic problems had establishment news outlets like The Economist saying in November 2011, the euro “could break up within weeks.” President Obama’s former chief economist, Austan Goolsbee, said “there probably isn’t” any way to hold the eurozone together.

And the ultimate establishment voice, Alan Greenspan, told CNBC the divergent cultures using one currency “simply can’t continue to work.”

So it’s not just wackadoodles wearing tinfoil hats missing the mark, as Mr. Gold implies. He writes, “But too many people have lost precious time and a chance to make real money by listening to these fear mongers. They’re probably kicking themselves now, or should be.”

However, nearly all of the gloomy prognostications Gold makes fun of are in response to the actions of central bankers, who have been at least as wrong as anyone else in their predictions.

Big financial-services companies should be kicking themselves for paying Greenspan $100,000 a speech these days. The Maestro reportedly hauled in an $8.5 million advance for his book, The Age of Turbulence. That’s a lot to pay for someone who whiffed on the housing bubble. In 2002, Greenspan said, “Even if a bubble were to develop in a local market, it would not necessarily have implications for the nation as a whole.”

Ben Bernanke, who used to make $200,000 a year, now makes “that in just a few hours speaking to bankers, hedge fund billionaires and leaders of industry,” the New York Times reports. “This year alone, he is poised to make millions of dollars from speaking engagements.”

He hasn’t exactly been an accurate predictor either. In 2005, Ben Bernanke was asked if the housing market was overheated. “Well, I guess I don’t buy your premise,” he replied. “It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis.”

Even former Treasury Secretary and ex-New York Fed President Tim Geithner is getting in on the action, receiving $100,000 to $200,000 per talk. Plus he likely received a large advance for his book Stress Test.
Geithner admits he didn’t see the financial crisis coming. In his review of Geithner’s book, Flash Boys author Michael Lewis writes, “The story Geithner goes on to tell blames everyone and no one. The crisis he describes might just as well have been an act of God.”

They Warn for a Reason

Mr. Gold believes that economic catastrophes have natural causes. “Bad things happen in life,” he writes. “Hurricanes and tornadoes destroy communities. Nuclear war and climate change are big long-term dangers. And there will be bear markets and deep recessions in the years ahead.”

Inflation to any degree is not an act of God. Neither are currency nor stock market crashes. Central bankers create these calamities and then ride off into the sunset, earning six-figure speaking fees and multimillion-dollar book deals. The positive reinforcement they receive ensures they’ll repeat the same mistakes over and over again.

Thus, warnings must be issued constantly. Bad things are going to happen to the finances of individuals who aren’t prepared.

It’s not a matter of if, but when. Better scared than sorry.

(Editor’s Note: How quickly a crisis can creep up on you is demonstrated in our Casey Research documentary, Meltdown America. If you haven’t watched it yet, you should. Click here to watch this free video.)

The article Good Reason for Doom and Gloom was originally published at Casey Research

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Gold, Crude Oil & the SPX Trends and Setups

Over the past year our long term trends and outlooks have not changed for gold, oil or the SP500. Though there has been a lot of sideways price action to keep everyone one their toes and focused on the short term charts.

As we all know if the market does not shake you out, it will wait you out, and sometimes it will do both. So stepping back to review the bigger picture each weeks is crucial in keeping a level trading/investing strategy in motion.

The key to investing success is to always trade with the long term trend and stick with it until price and volume clearly signals a reversal/down trend. Doing this means you truly never catch the market top nor do you catch market bottoms. But the important thing is that you do catch the low risk trending stage of an investment (stage 2 – Bull Market, Stage 4 Bear Market).

Lets take a look at the charts and see where prices stand in the grand scheme of things.

Gold Weekly Futures Trading Chart:

Last week to talk about about how precious metals are nearing a major tipping point and to be aware of those levels because the next move is likely to be huge and you do not want to miss it.

Overall gold and silver remain in a secular bull market and has gone through many similar pauses to what we are watching unfold over the past year. As mentioned above the gold market looks to be trying to not only shake investors out but to wait them out also with this 18 month volatile sideways trend.

A lot of gold bugs, gold and stock investors of mining stocks are starting to give up which can been seen in the price and selling volume for these investments recently. We are contrarians by nature so when we see the masses running for the door we start to become interested in what everyone is unloading at bargain prices.

Gold is now entering an oversold panic selling phase which happens to be at major long term support. This bodes well for a strong bounce or start of a new bull market leg higher for this shiny metal. If gold breaks below $1500 – 1530 levels it could trigger a bear market for precious metals but until then we're bullish at this price. We think we could see another spike lower in gold to test the $1500- $1530 level this week but after that it could be off to the races to new highs.

 

Crude Oil Weekly Trading Chart:

Crude oil had a huge bull market from 2009 until 2011 but since then has been trading sideways in a narrowing bullish range. We expect some big moves this year for oil and technical analysis puts the odds on higher prices. If we do get a breakout and rally then $130 will likely be reached. But if price breaks down then a sharp drop to $50 per barrel looks likely.



Utility & Energy Stocks – XLU – XLE – Weekly Investing Chart

The utility sector has done well and continues to look very bullish for 2013. This high dividend paying sector is liked by many and the price action speaks for its self. If the overall financial market starts to peak then these sectors should hold up well because they are services, dividend and a commodity play wrapped in one.


 

SP500 Trend Daily Chart:

The SP500 continues to be in an uptrend which we are trading with until price and volume tells us otherwise. But there are some early warning signs that another correction or a full blown bear market may be just around the corner.

Again, sticking with the uptrend is key, but knowing what to look for and prepare for is important so that when the trend does change your transition from long positions to short positions is a simple measured move in your portfolios.



Weekend Trend Conclusion:

In short, we remain bullish on stocks and commodity related stocks until I see a trend change in the SP500.

Energy sector is doing well and looks bullish for the next month. As for gold and gold miners, we feel they are entering a low risk entry point to start building a new long position. Risk is low compared to potential reward.

When the price of a commodity or index trade near the apex of a narrowing range or major long term support/resistance level volatility typically increases as fear and greed become heightened which creates larger daily price swings. So be prepared for some turbulence in the coming weeks while the market shakes things up.

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SP 500 “E Wave” ready to rally to Bull Market Highs

From guest analyst David Banister at Market Trends Forecast.com.......

In recent updates I have been projecting a series of ABCDE waves to take the Bull market to post March 2009 highs in the 1425-1445 ranges. The recent pullback was expected as what I was calling a “D wave” pullback, with an E wave to come. These final 5th waves or E waves can be extension waves or relatively benign, hence causing difficulty in forecasting the upper ranges.

In the case of the SP 500 index, we have had a strong rally from the 1267 lows in early June to 1409 highs so far (The C wave highs) and recently a pullback into the 1390’s (The D wave). This next leg up should carry the market indices towards the 1440 2008 interim highs which begat the last 5 wave down leg of the Bear cycle that ended at 666 on the SP 500. A case of down the mountain and up the mountain if you will since the 2008 highs to current pricing conditions at 1404.

Once this E wave completes in the 1425-1445 ranges (With an outside shot at an extension blast to 1495) we should expect a fairly significant correction of the entire move from March of 2009. This final rally leg could top anytime between Aug 13th and August 22nd as I last updated, with potential to spill over into early September.

A close over 1409 will confirm the “E wave” has begun in earnest and you may want to buckle up, as it could be the final blast before some rains begin to pour in the fall.

If you’d like to be up to date on the daily and weekly views of the SP 500 and GOLD and Silver, get a discount at Market Trends Forecast.com or sign up for our free weekly reports.

Can the Stock Market Reverse and Rally to Highs?

Do the Bulls still stand a chance to make another run?

That is the question this weekend after we saw the 1340, 1322 pivots crashed right through following the “SP 500 Bear Case” weekend report on May 13th I sent to subscribers with a chart last weekend (May 13th SP 500 at 1353).

We ended the week with the SP 500 falling from 1353 to about 1292 and the US Dollar having rallied 13 of the past 15 days to the upside. We also have The Mclellan Oscillator at extreme oversold levels as in the November 2011 lows and close to the August 2011 lows. The Sentiment gauges are running at only 24% Bulls as opposed to the historic 39% averages, and the Percentage of NYSE listed stocks trading above the 50 day moving average plummeted to 12%. That is about as low as it has been during this bull market, other than last August when we hit 5%.

So that means that the sentiment/human behavioral ingredients are actually in place for a marked rally to the upside. What we examine this week is whether that can still happen and what type of Elliott Wave pattern would we need to see to validate it.

We can still make a case that this correction of 130 points from 1422 to 1292 (about 9.1% similar to many Bull market corrections since 2009 lows) is a wave 4 correction of waves 1-3. Wave 1-3 rallied in total from 1074-1422 and a 38% retracement of that entire cycle would put us right around 1291/92 pivots.

So below we have the chart that the Bulls would hang onto as possible for a dramatic recovery to new highs past 1422 and onward to 1454 or so. This needs to begin very shortly though and much below 1285 we can wipe this idea off the slate in my opinion.

So, last weekends Bear View is now a 50% probability and the Bullish count below is also 50%. The good news is I think we will know which one is taking control very early in the week. This is probably not a good time to place a big bet just yet in either direction, we are at an inflection point.

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Gold Prices Are Set for Further Decline

In the not so distant past arguing that precious metals prices were setup to fall generally elicited a response which was not real pleasant. In fact, during gold’s infamous bull market rally on several occasions I called for pullbacks which regardless of the accuracy of my call generated hate mail that seemingly never ended.

Fast forward to the present and hardcore gold bugs remain transfixed on the idea that precious metals must rise. The gold bull market has ended, at least for now and those still holding the bag are looking at large losses from the all time highs set back in 2011.

These same gold bugs will cite a litany of reasons why gold should be moving higher from the unprecedented printing of money by global central banks to the deficit spending and eventual fiscal day of reckoning facing most Western nations. I do not disagree with the gold bugs that in the long run gold prices will rally above the all time highs, but in the short to intermediate term there are several forces which have the potential to drive gold prices lower.

Gold prices cannot rise continually,regardless of the macro-economic backdrop. Nothing, not even Apple Computer (AAPL) or Priceline.com (PCLN) will rise forever. Eventually prices will come back down to earth and revert to the long term mean. It has happened in gold and it will happen to Apple Computer and Priceline.com at some point in the future, it is simply a matter of time.

Before I discuss my reasoning as to why gold and silver are likely to pullback in the intermediate term, I need to remind readers that I remain long term bullish of precious metals. While the long term remains bright, the short term is especially murky and dark.

The first primary concern for gold bugs should be the price behavior of the U.S. Dollar Index recently. The Dollar has rallied sharply higher after carving out a higher low on the daily chart (bullish). The Dollar is on the verge of breaking out above a major descending trendline on the daily chart. Once that breakout to the upside has occurred it will become likely that the recent highs will be tested and possibly taken out. The daily chart of the Dollar Index is shown below.

Dollar Index Daily Chart

The U.S. Dollar’s price action shown above is not indicative of bearish expectations. In fact, I would argue that the Dollar is, and likely will remain in a bull market in the short and intermediate time frames. However, it is important to recognize that strong periods of volatility will persist as Ben Bernanke and the Federal Reserve will continue to try to break the Dollar’s rally as it tries to grind higher.

The Federal Reserve hates deflation, and a stronger Dollar will push risk assets like equities lower and right now that is not part of the Federal Reserve’s election playbook. QE III will likely be announced at some point in the future as an attempt to break the Dollar’s rally and to put a floor underneath stock prices.

The Federal Reserve has used QE I and QE II to help prevent economic disaster. Recently “Operation Twist” has also been used to increase liquidity while keeping the bullish game going. Low interest rates and additional easing adjustments have staved off disaster before and they will likely be utilized again by the Federal Reserve.

Ultimately the free market and cycles will exert their will and the Federal Reserve will be left helpless. The day where monetary easing has no major impact is coming, but we are not quite there just yet.

In addition to the strength in the Dollar Index, the gold miners have been under major selling pressure. In fact, the gold miners have recently broken down out of a major consolidation zone that will likely lead to lower prices in the near term.

Unless gold miners can regain the breakdown level on a major reversal this coming week, the most we can hope for is a backtest of the support trendline sometime in the near future once the miner’s become significantly oversold. The weakness in the miners is just another example as to why lower prices for gold appear to be likely in the short to intermediate time frames. The weekly chart of the gold miners ETF is shown below.

Gold Miner’s (GDX) Weekly Chart

The gold miners are likely to lead equity markets lower in the near term, but lower prices for gold miners is certainly not positive for gold either. Obviously there are several economic factors which could still see gold prices working higher such as a collapse of the Eurozone, however at this moment the likelihood of that outcome in the short to intermediate term is not likely.

The European Central Bank and the Federal Reserve are not going to give up that easily. The process of admitting defeat will take time and global central banks will print money until they feel they have papered over the issue. It is the culmination of either QE III or other monetary easing around the world that will eventually move gold back above the all time highs. Unfortunately the short term price action of gold will most certainly remain under selling pressure barring any major unexpected announcements. The daily chart of gold futures is shown below.

Gold Futures Daily Chart

As shown above, I believe that short term targets to the downside are likely somewhere in the 1,475 – 1,525 price range. I think gold will find a major bottom near these levels and a strong bounce will play out. For long term buyers, I would take advantage of the forthcoming pullback. However, I would be mindful that further selling is quite possible before gold finds a major bottom.

As I said before, the longer term is bright for gold. However, the short to intermediate term will likely see more selling pressure. Until either the Dollar tops or some form of major quantitative easing is announced, I would anticipate lower prices in the yellow metal.

In the near term gold does not look attractive, but the longer term the catalysts for a major move above recent highs are present. The real question has become when and where will the Dollar top? When the Dollar tops and gold finds a major bottom, the potential for a monster move higher will become likely.

Until then, risk remains high.

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What To Expect in the Final Week Of February for Precious Metals, Gold Stocks & Dollar

This morning we are seeing the US Dollar index move higher retesting a short term breakdown resistance level. What this means is that the dollar fell below support and is not slowing drifting back up to test the breakdown level. As we all know once a support level is broken it then becomes resistance. So if that holds true with the current move in the dollar we should see stocks and commodities find a short term bottom and continue higher today or tomorrow from the looks of things.

Gold has been pulling back the past couple trading session on light volume which healthy price action. It has done the opposite of what the dollar did above. Gold broke through a key resistance level and is slowly drifting back down to test the breakout level to see if it is support. If so then gold should continue higher in the coming days.

Both silver and gold miner stocks are lagging the price of gold. They have yet to break through their key resistance levels. That being said it could happen an day now as they have both been flirting with that level for a couple trading sessions now.

Crude oil continues to hold up strong and is headed straight for its key resistance levels without any real pullback. Chasing price action like this is not something do often because risk reward is not in your favor. I am staying on the sidelines for oil until I see a setup that has more potential and less risk.

The equities market remains in a strong uptrend at this time. I do feel a 1-3 weeks pause/pullback could take place at any time but in the grand scheme of things we could be only half way through this runaway stock market rally as noted in the video.

The equities market is going to gap down this morning which is typical in a bull market. Remember. in an uptrend the stock market tends to gap lower at the open and close higher into the close. And it’s the opposite in a down trend with stocks gapping higher and sell off through the trading session.

Watch Chris Vermeulens detailed video analysis for this week at The Gold and Oil Guy Videos

Chris Vermeulen
The Gold and Oil Guy .Com

How Long and How High for Gold, and How to Play It

From David Banister at Market Trend Forecast.Com......

Regular readers of my articles on Gold over the past few years know that I have a theory on this Gold Bull market. In summary, it’s that we are in a 13 Fibonacci year uptrend that started in 2001, and now we are in the final 4 years of that uptrend. It is in this last 5 year window that I theorized started in August of 2009 that investors really get involved. As the crowd comes in, prices push higher and higher, and then more and more investors come in and so forth.

The very recent rally has pushed us up to about $1,420 per ounce, on the way to my projected $1480-$1520 pivot highs on this leg from the $1040 area in February of this year. Subscribers to my TMTF newsletter have learned about Elliott Wave Theory and how to properly apply it to benefit from both the ups and the downs in various parts of the markets, as well as commodities and precious metals. If I am correct, we are in the 3rd wave up of 5 total waves from the August 2009 $900 per ounce levels. The first leg went from $900 to $1225, the second leg was corrective to $1,040, and now this 3rd wave should complete at around 150% of the 1st wave’s amplitude. In English, the probabilities are for Gold to continue higher to about $1527 per ounce, possibly a tad higher if the typical Elliott Wave patterns take hold, and also assuming again that I am correct in my read of those patterns.

One of the better ways to play this next 4 years of upside with intervening corrections is to look at prospect generator companies. These are Gold, Silver, and Copper explorers that do the early field work in identifying prospects for drilling. They then farm out these projects to willing partners and retain equity stakes and /or percentiles of the project itself. This reduces their need for capital while retaining nice upside for shareholders, and diversifying. When you are a tad long in this current wave pattern’s tooth, this is way to stay onboard, but not go overboard. I have personal ownership positions in a few of these types of companies, and my subscribers are aware of the few that we really prefer. Should one of the projects not pan out, you are not placing your entire shareholder bet on one drill project, and yet if they hit on a few, the upside can be substantial.

In the meantime, below is a chart pattern of where I see this rally peaking out and where I forecasted recent pivots. As we approach these levels, ($1480-$1525), it may be a good idea to pull back on some of your positions whether it be the metal itself or individual stocks.

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Hot Markets and Commodities, Yet the Small Investor Continues to Miss The Run!

From guest analyst David Banister at Market Trend Forecast.Com.....

All investors can recall the horror during the five months from October 2008 through early March of 2009 as day after day the markets continued to make new lows. That type of catastrophic drop leaves many psychological scars and probably spooked millions of investors out of the stock market for good. To wit, since the March 2009 lows and throughout this new Bull Market Cycle, Investors are pulling money out of equity funds in droves and piling into Bonds. This is the fight or flight mentality taking hold of the herd, and as they continue to disbelieve in the new bull cycle in stocks, the market continues to power higher.

I’ve long been a believer in Elliott Wave Theory, which was developed in the 1930’s by R.N. Elliott. He was a man decades ahead of his time, and to this day his work remains revolutionary in tracking and forecasting market and commodity trends and cycles. This theory forms the basis of my work for market forecasting and trading and investing. While the crowd continues to wait for the next crash, the Elliott wave patterns I’ve been outlining have continued to foretell a bullish move possibly of historic proportions. Taking advantage of this type of move means you need to tune out the noise from CNBC, all of the jobs data, and the negative mantra. Everyone knows that stocks climb a wall of worry, but you have to have a method to let you know to stay long and where best to invest during a super cycle Elliott Bull Wave pattern as we are in now.

My theory back in late February 2009 was that the market was about to bottom and nobody knew it. I wrote an article on 321Gold.com at the time to outline my reasoning and had a chart showing 1200 on the SP 500 as a likely target. At the time the SP 500 was trading around 720 and had not yet completed it’s drop to 666, but was within a few weeks. Interestingly to me anyways, at 666 the SP 500 bottomed and not randomly at all! That 666 figure was an exact 61.8% Fibonacci re-tracement of the 1974 lows to the 2000 highs Bull Cycle. Often crowds act in patterned behaviors that are formed around Fibonacci mathematics. Typical re-tracements are 38%, 50%, 61.8%, or even 78.6%. Combining Elliott Wave patterns with Fibonacci sequences allows me to confirm or help firm up a forecast. That drop over five Fibonacci months completed a multi year cycle from the 2000 highs to the 2009 lows, and it did so right at a clear Fibonacci pivot point. This is why I believe the next many years will be very bullish for stocks, and most investors will not be on board.

Those Fibonacci and Elliott Wave patterns gave me the heads up to start turning bullish, coupled with the sentiment readings which were equally as bearish as the October 2002 bottoms. In addition, there was way too much discussion about deflation. The rubber band in essence was stretched so far to one side on the sentiment gauges and deflation talk, that it would only take a slight shift towards inflation to move stocks much higher.

Fast forward to October 2010, and we now see the ravages of inflation becoming very apparent some 18 odd months later. Gold is at $1350 per ounce, Silver is at $24, the SP 500 is heading back to 1200, Corn, Sugar, Coffee, Copper are all at huge highs. What investor’s don’t understand is stocks are one of your best asset classes in the earlier periods of an inflationary shift, what I would call an inflationary period of prosperity worldwide. Elliott Wave patterns most recently that I outlined on my market forecast service alerted my subscribers to prepare for a massive bull run once the 1094 area on the SP 500 was crossed to the upside.

Given the understanding that inflation would become the new trend, we took multiple positions in Gold stocks and Rare Earth metals stocks ahead of the curve. Some of our recent picks included Hudson Resources at 63 cents in August, now trading at $1.30. Others include BORN at $8, a Chinese Corn based producer of Alcohol that ran to $19 within 7 weeks. We were investing in Rare Earth stocks almost 12 months ago, including REE at $1.80, and it’s now trading over $13.00 a share! Even up to the present time, my ATP service has been positioning our subscribers into Tasman Metals at $1.54, now $2.28 and Quest Rare minerals at $4.10 now $5.50. These moves are happening in stunningly quick periods of time, so being positioned ahead of those moves is crucial.

Gold and Gold stocks have obviously had a very strong move to the upside. Back in August of 2009 I forecasted a massive five year advance in Gold and Gold stocks. This again was entirely based on Elliott Wave patterns I recognized and crowd behavior. Investors will recall the 13 year bull market in tech stocks that started in 1986 when Microsoft went public, and ended in 1999 when AOL was sold to Time Warner for 150 billion. Well, the first five years of the Tech Bull nobody participated except the early investors. Intel and Dell also went public, along with EMC and others. By the time 1991 rolled around, investors kind of woke up and start buying. The problem was they were late, missing the first five years. At that point Tech stocks bucked and kicked up and down with no net gains for three years. Investors gave up again in 1994, and then we began a torrid 5 year rally to 1999. It was not until the last 12 months of that rally that everyone piled in, herd behavior in it’s finest form. Well, we are seeing the same patterns now in the precious metals areas of the market. The final 5 years started in August of 2009, kind of like 1994 in tech stocks. The first 5 years were 2001-2006 where Gold funds returned 30% compounded per year, by the time everyone got on board the funds did nothing for then next three years. Everyone gave up and lost interest, and that was the August 2009 buy signal.

Bringing us full circle, investors continue to shy away from this stock bull market following the five month crash of nearly two years ago. This is exactly the psychology present in an early stage bull market. Going forward from here, I look for the SP 500 to hit 1220 at the top of an Elliott Wave three from the 1040 lows in the summer. That will be followed by a correction pattern and then we will resume the advance to new highs on this bull market stretch from March of 2009. Gold should work it’s way up to $1480-1520 if I’m right on it’s bull move from the $1155 lows this June. Below we have a chart of the SP 500 on a long term basis, and it is currently in the third wave up from the 1010 lows on July 1st. This wave pattern is powerful and should run to at least 1220 intermediately. In time, this multi-year bull market could power to all-time highs and really upset the Bears.

Inflation is taking hold around the world, and stocks are one of your best asset classes to participate. You can follow along by registering for free weekly updates at Market Trend Forecast.Com.




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