After a seesaw day, the Dow surged more than 400 points in the last hour of trading on the news of a new regulatory proposal by the US government. The Dow closed near previous support levels at 11,019 and the S&P at 1206. This is in keeping with my forecast that there would be a recovery rally later in the trading week. Friday may well continue the trend, although I doubt it will have any staying power. This may be the last chance for investors to exit the market above 11,000 since we can expect further deterioration next week and then accelerating declines after that. At this point, I expect we'll see 10,000 on the Dow by early October and then a sudden crash-like event probably in the second week of October, perhaps near the Columbus Day holiday that takes the Dow to 9000 or below. November's crash will likely send the Dow towards the retesting of the 2002 lows of 7500.
Gold continues to be the best safe haven in this market turbulence as bullion hit $900 early in the day before the government announcement and subsequent equities rally. It ended the day around $855. As predicted, volatility is the watchword here this week. There will likely be some more good opportunities to buy gold here at these levels, and there is a good chance it can climb back to $1000. Depending on how bad things get, gold could well go significantly higher than that. I'm expecting a big rise in the last days of September as there are a number of very favourable hits with benefic planets in the GLD horoscope. But I think the bulk of the rise on a percentage basis will occur by October 15th. It is important to remember that this explosive rally will be short-lived as gold is likely to drop precipitously in November and after.
