What Elliott Wave Predicts for the Stock Market and Gold

12/09/2010 12:01 am EST

Focus: STRATEGIES

The Elliott Wave patterns that I use to forecast movements ahead of time in the S&P 500 and gold have been textbook perfect for quite some time. We can go back to the March 2009 lows and clearly identify five waves up to the 13-month initial rally high in April of this year. This was followed by a clear ABC wave two pattern to the 1010 lows on July 1.  Right now, the S&P 500 is in wave five up since July 1, and that means this is a terminal wave underway before a good-sized correction ensues.

Traders should expect the S&P 500 to rally up to 1285 as a minimal upside target, with the market likely peaking in the mid-January 2011 period prior to a new correction pattern. That correction will take the markets down to the 1150-1180 range more than likely from the January highs and knock the sentiment levels back to bearish before the next big advance. Below is where I see the current wave patterns, and as you can see, this is the fifth and final wave stage of the advance. My advice is to ride it up, but lighten up as we approach my figures. We have been riding this stage of the bull long since early July.



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Gold has also completed its fourth wave corrective pattern at $1331 per ounce recently, and as I have forecast, it should continue it's upward trajectory to about $1480-$1525 before a good-sized correction will ensue. Gold bottomed this summer in a classic wave two correction at $1155 per ounce, which was a 50% Fibonacci retracement of the rally up to $1225 from $1040. My objectives are for this pattern to complete around the same time as the S&P 500 peak in mid January as well. Downside objectives from there are likely to be to the $1310-per-ounce range from the $1480-$1525 peaks, but more on that as we approach. I do not like to get too far ahead of myself in my projections, taking it one leg and pivot at a time instead.



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By David Banister of TheMarketTrendForecast.com

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