During the past year, there has been very little talk about gold, silver, or gold stocks in the media. Yet the year before it was all the media could talk about; various outlets even had the price of gold streaming live all day in the corner of the TV monitor.
I am always amazed how the media and the masses can be so off in their timing of the stock market and commodities in general. For example, when Greece was having issues in 2012, everyone was avoiding investments in that country like it was the plague. Looking back now, Greece is up, and only recently have investors been confident enough to put money into the Greek stock market again.
But the truth is, that big move has already happend, and the US and global markets are in rotation (changing trends). Money is slowly shifting from what has been hot during the past year or two, to new investments that have a lot more room to rise in value. This is what leads us back to my gold forecast.
If you're at all familiar with Stan Weinstein's work
, then you understand the four market stages. Through stage analysis we can predict the type of price action we should expect and have a rough idea just how long a move (new trend) is likely to last. It's important to know that Weinstein's stage analysis works on any time frame -- from a one-minute chart to a monthly chart. If you don't know this, then you're probably trading almost blind.
According to current stage analysis, it looks as though the US stock market may be starting to form a stage-three top. There are several indicators and market behaviors that are telling us (screaming, actually) to trade with caution to the long side. But the masses don't see this or hear what's unfolding in front of their eyes.
In short, the market is showing some signs of distribution selling in stocks, and the former market leaders are now getting completely crushed with heavy selling volume, as we've seen with biotech stocks, social media stocks, and other momentum stocks. This is bad.
So where will investment capital go during the next bear market in stocks?
One of the places is precious metals. Below are some reasons why; I elaborate on each in my gold forecast
Gold Forecast Cheat Sheet: 3 Reasons Investors Should Expect a Rally This Year
1. The US dollar index has set up a massive stage-3 topping pattern on the weekly chart. A falling dollar will send the price of gold higher naturally.
2. Bullish gold forecasts by the media have dropped substantially, meaning everyone is bearish on gold.
3. Gold stocks are already showing signs of massive accumulation. I always use the price and volume action of gold stocks to help create and time my gold forecasts, which are starting to look bullish.
Gold market traders should understand that precious metals in general are still months away from breaking out to the upside and starting a new bull market. Don't be in a rush to buy gold or gold stocks yet. There will be plenty of time, folks.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
No positions in stocks mentioned.
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