The forecast now.

Let me state first that I am NOT a profesional investment advisor, though I read the recommendations of others and do some charting myself. So, let's look at my previous prognostications. I have predicted the following before: 1. that the DOW will continue to rally; 2. that the dollar will continue to fall and 3. that gold will not fall back any time soon. Now, let's look at some details in the charts. The S&P continues to rally and the 50 Day moving Average is still moving away from the 200 day moving average, albeit slower. Investers who like to see stiff corrections once in a while should be assured that the short-term MACD of the S&P 500 had run below the long-term MACD a couple of times, while the long-term MACD actually decreased. IMO, this is not a weakness in the Market, but reflects the two corrections.

I continue to follow the chart of the dollar and gold, because I think that from this point on the weakness in the dollar will become a driving force for both the S&P 500 and gold. Countries with a lot of dollars have a choice of either holding dollars and continue to lose value or buy into the S&P 500 or gold. So, while the dollar will continue to head down, gold will continue up. Look at China's dollar reserves and you can see a huge pool of cash that needs to be invested to preserve its value. I do not think the Chinese government will buy into the S&P 500, so they will buy gold and push up its price. Everyone is waiting for gold to close above $1037 and when it does, gold will advance rapigly. Th what level? The size of th reverse head and shoulder would indicate a move to $1,300. In reality, it is not gold moving up so much as the dollar sinking.

In case of the DOW, we do not have a convenient graphic formation that would tell us how far it will go. My estimation is that the rally has not expanded a good bit of its force, though the best forecast for the DOW is to top out at 12,000 or around.

Timing will be important. Gold will now begin to rise along with the DOW. At some point, the DOW will begin another dive, most likely after Christmas. Money will then flow from stocks to gold and gold will hit a top in 2011.

These are predictions from cycle theory.

Part of the future crash is predicted from the second round of housing troubles that will come due in 2011. Whether the DOW will go into one long Bear Market or a smaller drop that in 2008 remains to be seen. There are two unknowns that the country faces: the Cap and Tax bill on energy and the socialized medicine fiasco. Passage of either one or both will set off another Bear Market as people will have to tighten belts to survive. It does not matter how low interest rates go as people will be too scared to borrow. After all, the future of the country under the Obama regime is anything but assured.

I leave you with this: expect higher stock and gold prices and further erosion of the dollar.