Gold Stocks & The Market Forecast for 2010

Gold Stocks & The Market Forecast for 2010

Jan 7th, 2010

I wrote a post here for ATP called “The bull case is not dead yet”. This ended up as an article on 321Gold.com, which you can review here: Bull Not Dead Article- Banister. I stuck my neck out, which I love to do once in awhile when the contrarian mood strikes me. I wrote a Feb 25th article this year going very bullish on the markets when everyone was bearish. I wrote an article in early August going very bullish gold and gold stocks, when they were not in bull mode. Obviously, if you stick your neck out enough you’ll get your head chopped off, but I only write these every 3-4 months or so… so far, so good.

In regards to my update on Gold, I have Gold moving to $1325 or so in the first 3-4 months of 2010. This should be followed by a spring-summer correction and consolidation that will last into the late summer. By the end of 2010, I’m looking for Gold to get as high as $1625 an ounce, and the Gold stocks will be enjoying another large leg up. My article on 321Gold.Com in early August predicted a 5 year massive bull market in Gold stocks, and we are sticking with that prediction. There will be pullbacks along the way, and we will trade around those as best as we can. I recently picked 3 stocks under $5 for 2010 on TheStreet.Com interview with Alix Steel.

You can view that here if you’d like:

In regards to the SP 500 and the broader market indices: In the recent bullish market November article, I noted how many bears were growling and how some noted Elliott wavers were calling for a hard wave pattern down. What I was trying to outline was that the Bull case was still alive, and we needed to watch the price action and wave patterns to confirm. I was watching the IWM (Small Caps) index to confirm the Dow etc. This has confirmed and pushed above my $63 IWM targets, and this now indicates to me a 5th wave up is confirmed since March.

What does it mean in English? In the world that I am in for Market forecasting, it means a bullish impulsive pattern since March 9th lows is confirmed. This means, instead of a “corrective a-b-c” pattern since March, we are moving impulsively higher. If you have a clear 5 wave pattern up, normally it indicates the strength of the trend is bullish and not just a correction to the upside. The next shift will be an A B C market correction, but not until the 5th wave has run it’s course. Back in early February, I made the case that the bear market was ending since 2000 with an 8 Fibonacci year decline into late February 2009. I showed an SP 500 index chart making that case as well. Here we are 10 plus months later and you still have people bearish who don’t get it. Markets move on sentiment, not on fundamentals… markets predict a shift in fundamentals obviously… but they move first on sentiment.

The 5th wave is tough to predict, because they can be extension waves or they can be truncated and short. IWM could climb to 78 easily from 64 ranges here (IWM is an ETF). This means you want to keep riding the bull for now, and focus on the best sectors and stocks within those sectors. Inflation is friendly to stocks, and deflation is the enemy of stocks. When I wrote my Feb 25th article going bullish on the markets, I talked about moving from deflationary trends to inflationary trends. The market anticipated this as I predicted then, and we have moved much higher.
Look for the Market to continue higher in this 5th wave, and then we will try to be prepared for the A B C correction that will ensue afterwards.

Dave Banister
Active Trading Partners, LLC

Disclaimer: David Banister does not own any of the stocks mentioned in the video link listed above.

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