Forecast Follow-Up on SP500 and Gold


"Watch for a possible drop to 942 by the end of September."

In my last article a few weeks ago for Kitco, I was concerned that the market could have a hangover after the recent rally. Apparently, my concern was not unfounded as we dropped from a rising bearish wedge near 1130, to the 1070 Fibonacci pivot earlier this week. Although my subscribers were prepared for this drop by shorting the SP500 in advance of that move, we covered our short near 1070 on the SP this week.

Bringing things up to speed, the market rallied up from July 1st to near 1130, which was a maximum target I mentioned in my last article. This completed a 3-3-5 Elliott Wave pattern that I identified, and broke the rising wedge on cue. At 1130, the SP500 had retraced a Fibonacci 61% of the April highs to July 1st lows, and had completed that retracement over a Fibonacci five-week window. At TMTF, we believe that markets move in extremely reliable patterns and are not at all random. At the 1221 SP500 top in April, it landed exactly at a 61% Fibonacci upward retracement of the 2007 highs and the 2009 lows. At the 2009 lows, the SP500 had corrected 61% of the 1974 lows to 2000 highs right on the nose at 666!

What I forecast now is for a retest of the 1011 area on the SP500 to be completed likely by the end of August, and potentially a drop to 942 by the end of September and early October. I realize this is not a popular forecast right now but, at a bare minimum, we should expect the market to go back and bounce off the 1011 area where it bottomed on July 1st. What would negate this view is if the SP500 can rally past 1105 this week and hold into next week, then we may expect the bulls to retake control. Another interesting point is, when the market did in fact bottom at 1011, it was a Fibonacci Intersection. By that, I mean it retraced 38% of the 2009 lows to 2010 highs and, simultaneously, was also at the exact 38% pivot of the 2007 highs to 2009 lows. This gives pretty strong support for a 2010 market bottom, with the retest possible.

I expect gold to complete its "B wave” bounce at $1,225–$1,238 ranges and pull back to retest the $1,155 recent low, but possibly stopping around $1,177. That recent pivot low was a 50% Fibonacci retracement of the February lows and June highs of this year. Again, markets actually move in reliable patterns as they are largely controlled by the crowd's sentimental reactions to news and events—which tend to be the same over time no matter the conditions. The downside to gold is that we have had eight consecutive years of gold ending the calendar year in positive territory and, somewhere along the line, that trend is likely to be interrupted. The lower level projections I have for gold are a deeper retracement to as low as $1,040 by the end of this year, correcting a recent 21 Fibonacci month advance. The probabilities, as outlined on my chart below, are for $1,177—a 38% Fibonacci figure.


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David Banister

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