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Ten Bold Predictions and Big Trades for 2010: An Update


What's going on in oil, commodities, bonds, China, and more.

In December, I took a stab at predicting the market's New Year in Ten Bold Predictions and Big Trades for 2010 -- let's see just how far my foot is stuck in my mouth.

Prediction 1: The US dollar won't crash in 2010 but instead make a giant double bottom on the weekly charts. The Grail indicator -- my and my partner Denny Lamson's powerful propriety timing indicator that confirms, validates and times entry and exit points -- is setting up with bullish divergence and is painting a long string of dots just like it did in March of 2008. The dollar hit lows in March 2008 then went sideways until it broke out in August 2008 at 75.60 -- when the indicator gave us a buy signal. The dollar continued to rally all the way up to 91.47 in March 2009.

It seems the dollar is setting up now for a powerful short covering rally accelerating into the first quarter of 2010, but -- we don't have a weekly by signal yet. With both individual investors and professional traders raging bears, why wouldn't the dollar rally? Everyone and their mother is short the dollar, so we look for the unwinding of this Fed-created carry trade to take the dollar higher. Intermediate and long term, by the way, I'm with the crowd and become very bearish on the prospects of the US dollar. In fact, I can see the dollar getting cut in half after the short covering rally ends in 2010. (See Ben: It's All Part of My Master Plan from Nov. 19, 2009.)

Update on Prediction 1: Funny enough, the Grail gave us a buy on the dollar just a few days later and the dollar in fact did a giant double bottom like I predicted. I'm sticking with my forecast: Once this short covering rally is completed, the dollar will go down and make new lows.

Prediction 2: Gold in 2010 will be looked upon like the 1999-2000 NASDAQ. When Alan Greenspan flooded the economy with easy money in the late 1990s, the world went into a wild frenzy buying US technology stocks in 1999. Gold and gold stocks will make a blow-off explosive final run in 2010 just like the NASDAQ run from October 1999 until the March 2000 blow-off top.

Today's Grail weekly chart on gold looks a lot like 1999 NASDAQ. We're also set up just like when gold crossed 1000 in March of 2008, so gold could have a nasty correction before that giant dot-com move up. Again, we see a long string of dots and giant divergence on the Grail indicator. By October 2008, gold got trounced to a low of 692 an ounce. Denny Lamson and I believe this next crash in gold will also prove to be a wonderful buying opportunity again. The likely catalyst for a gold crash could be a powerful short covering rally in the US dollar as the dollar carry trade unwinds. When there's 99% bears on the dollar, there's an inverse correlation with 90%-plus bulls on the gold. I have a whole chapter on gold in my book (published by John Wiley & Sons) if you want some specific small- and large-cap gold stock picks.

Update on Prediction 2: Gold had a very orderly correction. Gold and the gold stocks have basically gone sideways. If gold can move up against a rising US dollar then it will reestablish itself as a global currency versus a "barbaric metal." So far, gold is holding up very well against a rising dollar and additional IMF sales. The FIAT money system will ultimately turn out to be a dismal failure once again and gold will double over time. And, all corrections are buying opportunities. I'm a long-term bull on gold, but gold and the gold stocks need to consolidate and compress before they make any big moves higher.

Prediction 3: The Dow Jones Industrial Average will have completed the right shoulder of a giant head-and-shoulders top on the monthly chart and start to head south. The Grail is still on a buy on the weekly charts since the 4/10/09 weekly buy signal. However, we're building big divergence and a long string of dots. In fact, the grail is a mirror image of the bottom in March 2009. Then, we had a long string of dots and giant divergence as well. The bottom hit in March and the top should come sometime in early 2010. Hopefully the DJIA will stop repeating the 1929-1932 sequence of events where 2008 was 1929 in slow motion and the 2009 rally similar to early 1930 rally. After the 1930 rally, the DJIA collapsed 86% -- which lasted two more years. If history repeats, that puts us at around 5000 in 2010 and 1400 by January 2012, and it will feel like the end of the world -- just like the Mayans predicted. (See Finding the Upside of the Approaching Down Markets from Dec. 4, 2009.)

Update on Prediction 3: It looks like the top did arrive at 10,729 on January 19. The DJIA is now forming a right shoulder on a head-and-shoulder top on the daily and monthly charts. If the daily head-and-shoulder top completes, a test of the July 2009 lows will be the next target. If the March 2009 lows break over the next 12-18 months, the odds of a 1932 89% total collapse in the DJIA will rise substantially.

Prediction 4: Natural gas will put in a historic bottom in 2010.The Grail on the weekly charts looks like it did in December of 2007. Natural gas made a run from $11.16 to $17.41 in July of 2008. Seasonally natural gas is setting up well right now for just such a repeat. Nobody is bullish on natural gas as the fundamentals have never looked worse. Of course, that's how bottoms are made.

Update on Prediction 4: No change here. Natural gas is in the very early stages of forming a base on the weekly charts. I believe this base will be completed sometime in 2010 and higher prices are ahead for natural gas. Energies are entering a very strong seasonal period for the next few months so let's see if natural gas prices follow oil and gasoline.

Prediction 5: Oil will either crash to $10 or explode higher to $100-150 per barrel. I say this because our Grail timing indicator in compression can break hard either way. Right now, oil is on a sell on the daily charts. (Subscribers to our ETF timing program know this as we put out a buy of the anti-oil ETF SCO when oil was around $80.00 a barrel.) On the oil weekly charts, we're getting our favorite grail set-up: compression. It appears this will resolve itself to the upside and explode to triple digits. The catalyst will likely be fears of a coming surprise attack on Iran's nuclear facilities by Israel. Either way this Grail weekly signal goes, we're excited about the Grail compression set-up. (See ETF Picks: Consider This Diversified Partial Portfolio from Nov 10, 2009 and Rising Oil Prices May Be the Forerunner to War from Oct 16, 2009.)

Update on Prediction 5: Oil continue to compress. The Iranian nuclear issue is really starting to heat up right as oil enters its very bullish seasonal period. This leads me to believe oil prices could erupt. Compression on the Grail is explosive -- so look for some exciting moves on oil over the next six to 12 months. If this compression resolves itself on the upside then look out above. If it resolves itself on the downside then look out below. It's simply just too early to tell.
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