In response to the Fed’s QE2 plan, today gold made its biggest surge since March 2009. The bull market in gold and gold stocks keeps chugging along leaving many investors behind, standing on the platform watching those dollars they could have made head off into the distance. And those investors still at the station are precisely why it will continue.

In August 2009, I predicted that we would enter a five-year period of a massive move up in gold and gold stocks. Gold was $900 an ounce at the time, and is now at $1,360. In addition to Elliott Wave theory, which is the linchpin for all of my short- and long-term market predictions, I based my forecast on human behavioral patterns that go back centuries, namely the crowd mentality.

Everyone hates stocks or sectors when they are down, and loves them when they are up or going up. Investors like to chase stocks and sectors when they are up high and running near parabolic, but they don’t like to buy large dips or consolidations ahead of moves. This is why I use Elliot Waves. Elliott Wave patterns and a few other indicators sprinkled in can give you a heads up on when the crowd is about to jump in, so you can basically front-run the crowds.

But back to the gold bull market. The reason I knew in August 2009 that from $900 gold we would enter a massive five-year bull run was due to crowd patterns. To refresh, I see gold as being in a Fibonacci 13-year cycle up that started in 2001. For the first five years, only a few investors participated in the bull run, because for the prior 20 years, gold had not been a lucrative investment.

By the time everyone realized in 2006 that gold mutual funds had compounded 30% a year for five years, it was too late. Of course, that is when everyone started buying gold mutual funds and stocks. The problem was the first move was over, and we had three Fibonacci years of chop with no net gains. The crowd gave up around the summer of 2009, and that is when I forecasted a huge five-year move to come.

So far, gold is up over 50% in 13 months and gold stocks are up considerably more. The junior stocks started expanding in volume and price months ago, and that should have been yet another wake-up call to investors.

Near-term, I’m looking for this current power Elliott Wave to land around $1,485-$1,492 an ounce before we get a strong correction, and the recent pivot at $1,312 was yet another short-term bottom, which will be followed by the last leg up since the $1,155 lows this summer.

Investors are now waking up and buying gold and gold stocks, and this is part of the recognition period during the last five years of the 13-year cycle when more and more participants get involved. This is why I say this gold bull is just warming up, and by the time it peaks out, it will be like 1999 in tech stocks. The demand for gold overseas, especially in China, is likely to continue for many years to come, so don’t be fooled by the various wave dips in sentiment.

The Overall Bull Market Ain’t Over Yet Either

The broader market’s story since the March 2009 lows is similar to gold’s. The bears have continued to focus on jobs reports and other ephemeral data and not the big picture.

My opinion is the great bear cycle ended in March 2009, at 666 on the S&P 500, at least for a multi-year cycle up. When we hit 666, it was an exact 61.8% Fibonacci retracement of the 1974 S&P 500 lows to the 2000 highs. It took about eight to nine years to correct that 26-year move, and the pattern fits with a “Wave 2” pessimistic Elliott Wave bottom. That is why the move since 666 has been stunning — because nobody saw it coming.

The correction we had this summer, which I forecast in mid-April, ended on July 1 at 1,010 on the S&P 500. The 1,010 level was a 38% Fibonacci retracement of the March 2009 to April 2010 Fibonacci 13-month rally, and a 38% retracement of the 2007 highs to 2009 lows. Those types of patterns are not random and, in fact, are big clues to get long the market. The problem is those patterns are hidden amongst the noise of the markets, CNBC, and all of that useless data.

Currently, we are in a third Elliott wave up, which began at the 1,040 S&P 500 pivot, and my forecast since has been for 1,205-1,220 before a corrective fourth wave down. Before it’s all over, the S&P 500 may well test the 2007 highs on this new cycle up from March 2009.

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