Welcome back, one and all. We hope you had a great weekend, but it's back to business now. Just to get the party started this week, we want to remind all of you we read every question you guys (and ladies) send in. We respond when and where it's appropriate, and in cases where the response is something we feel everyone should hear, we'll throw it into the newsletter. Well, we got such an e-mail late last week, in response to several of the recent editions of the newsletter. Wayne writes: Gold market. There are calls of a bottom here. The contrarian in me, which is most of me, says it can not be a long term bottom if it is being called on Yahoo Finance, etc. But then again, it seems that the majority are calling things right these days. Personally, I am pretty sure we are seeing a bounce of the lows set so far in gold/silver and the XAU. After that and many will call this the bottom long term, I think the real pain will occur. It would not surprise me if the XAU gets down close to 40, setting a double bottom with late 2000, or setting a marginal new low. This might go along with a complete crash in oil. Many are calling a bottom in oil also now. I think spot gold of 1000 even might be quite interesting. I am waiting to buy a few junior miners when I personally think it has actually bottomed long term. Overall stock markets. Russell 2000 is probably the key. It is not setting new all time highs and probably will not, not before a real, painful correction. Russell 2000 may hit 1000 even also before the actual correction is over. Russell 2000 has been the leader and still is, for better or worse. I think the majority who believe the stock market correction happened and is complete will be wrong. I expect the markets to turn down, and down hard, to complete the correction, soon. I don't see many calls for that scenario, so could happen. Might actually be a bear market instead of a correction, or maybe a 21% correction so some will turn completely bearish before she roars up out of the pits. But this is me, always the contrarian. If the markets continue in this euphoric move up, there WILL be a crash to clean things up. But after that, up up and away. Long term economic fundamentals look pretty good. Earnings and even sales look pretty good. Thanks for the note Wayne. And, in case you were wondering, yes, this is the same Wayne who wrote the e-mail we addressed back on November 3rd. I know it wasn't a question per se, but we've still got a response that may be worth a look for everyone. Just to give you the nickel tour you didn't ask to take, I'm also a contrarian at heart. Most of the folks here at the SmallCap Network are, at least to some degree. That's not all we are, but it's one of the things we are. I'm probably the biggest contrarian of the bunch though, and like Wayne I have to think there's a much bigger shoe that's yet to drop. For perspective, I really became a fan of contrarian-thinking [which just means you bet against the crowd when crowd is most certain it's right] in the late 90's. There was a long, multi-year stretch there when you bought stocks when the VIX was at 40 (when the crowd was most fearful) and sold stocks when the VIX was at 20 (when the crowd was most confident), and you could reliably make a fortune just doing that. That was when internet trading was still new and you could still count on the masses swinging from a state of panic to a state of euphoria - and vice versa - because most traders were relatively new and bounced around between fear and greed about as often as the weather changed. Honestly, it was despicably easy to spot the major highs and lows. Things have changed over the last, oh, six years or so. I don't know if the average investor and the crowd as a whole is more sophisticated and savvier than they were then. There are times it seems this is the case. There are also times, however, when it seems the herd and most individuals are actually less sophisticated and less savvy then they were a decade ago... so painfully out of touch that crazy things can happen because the crowd collectively doesn't seem to know any better. Thing is, it doesn't matter which is our current reality, as both possibilities make it almost impossibly difficult to spot the market's major turning points using sentiment tools like the VIX. What's changed? I suppose the best analogy would be to explain that before 2008, the dog wagged his tail. That just means investors and traders had to respond to what the market was doing, and we had to predict those moves accordingly. After 2008 though [and bear in mind it actually took a few years to make the full transition], it seemed like the tail started to wag the dog. Case in point: It's never been the Federal Reserve's mandate to prop the stock market up. The Fed's role is to keep the economy hopping, and the free-market stock market is supposed to let investors determine the value of stocks in any certain economic environment. Beginning in 2008 though, the Fed started to respond in earnest to the stock market's protests to economic policy or economic data it didn't like. Most QE efforts should have ended long ago, but the Fed - terrified that investors would drop out of the market altogether if they didn't completely get their way - acquiesced. It's not the only example of a fickle and (frankly) spoiled market, but it's a good example. Great, but what's this got to do with Wayne's thoughts or being a contrarian? Glad you asked. In a nutshell, we think Wayne's right. The tricky part has been timing the corrections. A decade ago they materialized when they were due. Now they can be overdue for months on end and nobody cares. Were this anytime before 2008, stocks would have already severely corrected (maybe a couple of times) and we'd be back on the road to recovery. The trailing and the forward-looking P/Es we see now would have just been intolerable at that time. Traders have gone three years without a correction of more than 10% though, and have errantly started to assume valuations don't matter while also errantly assuming the Fed is always going to step in and save the day. Trust me when I tell you though, a day of reckoning is coming. It always does, because when all is said and done, it's human nature to swing back and forth between hysterical fear and obscene greed. Again, Wayne's right. The economy is in pretty good shape. Revenue continues to rise. Sooner than later though, the vastly unexpected is going to happen largely because nobody thinks it will. Nobody's talking about a more severe correction, which means we should start planning on one unfurling in the foreseeable future. I doubt we'll see it before the end of this year, as investors seem to have already made up their mind 2014 is going to finish strong. I can see it happening in early 2015 though. And as usual, I'm more interested in the "how" than the "where" when it comes to spotting the top and the bottom. I'll also be a big buyer on any strong dip. OK, getting off my soapbox now. There's too much other business to take care of to prolong my sermon. We just wanted to plant a seed. Running Out of Steam Speaking of the VIX, it notched another lower low on Monday, in step with the broad market's tepid bullish effort. I know the uptrend is still technically alive as long as the S&P 500's former ceiling at 2020 continues to serve as a floor. There's no doubt the bullish effort is fading though. I'd be shocked if a decent-sized correction isn't looming large. The biggest red flag for me is once again ever-weakening volume on the way up. Today's volume was the lowest in a long while. Where'd all the buyers go? That said, the VIX's approach toward the floor around 12.0 is also cause for concern. I zoomed out today's chart of the S&P 500 to really give you some perspective. I think at one point I hinted the upper band line at 2060 was a natural top-out point (and rollover point) for the S&P 500, and we'd probably hit that level around the same time the VIX hit a major support level. The more we look at this chart though, the more I'm thinking we won't even be able to test 2060... at least not without a sizeable pullback first. I'd be shocked if that entanglement of moving average lines at 1970 doesn't act as support for any pullback, but if it doesn't, there are still several places not too far below there the S&P 500 could find a floor. And yes, I still contend the glass ceiling here is a valuation-based one, even if the media's talking heads are saying prices aren't an issue. The market collectively knows where to draw the line, even if it doesn't know it knows. We'll end the market discussion right there for now, as we're going a little long and we've got one more thing to take care of in this edition. Did You Get It? Did everybody get their introductory e-mail for our new - and free - stock picking service? Mine came today, and everyone else's should have too. If you have no idea what I'm talking about, buckle up, 'cause this is really good. In an effort to make things easier/better/faster for our readers, we've opted to separate the commentary portion of this newsletter from the stock-picking arm of this free newsletter. We're certain this will allow us to do an even better job of both. The registration for the free stock pick text alerts and e-mail began last week, and we got our first e-mail (and introduction) this afternoon. If you didn't sign up for the free stock picks service then, it's not too late. It'll never be too late actually; you can always sign up. The sooner you sign up though, the sooner you'll start getting new trading ideas from the same team that publishes the Elite Opportunity newsletter. If I had to guess, a new pick is around the corner, so sign up ASAP. And remember, you don't have to have a mobile phone to get these stock picks, but it sure helps if you do. The phone-text alerts will be sent well before the e-mail alerts are, so if time is critical to you, then you may want to make sure you do the full sign-up with your phone number. Your call. Just go here to start the free registration process. Or, cut and past this link: http://www.smallcapnetwork.com/pages/SCNEOL/v1/