No one knows the future, but we must often try to make an educated guess. Like it or not, every trader/investor has to make a guess as to what will happen – otherwise, how does one take a position? I look at how the current situation relates to historical patterns, and go from there.

From last year's guess - “According to my crystal ball, 2011 is shaping up to be somewhat similar to 2010. January should see the start of a 4-5 week correction lasting into mid or late February. Bears will roar, then the market will start a powerful rally into May-June. Gold stocks should do well, but non-gold rescource stocks should do even better.

When the spring rally ends, it will be time to get out of stocks. Mr. Market should start a major correction which could last into September-October. We might even get one of those classic panic bottoms in October. Then we would be set up for an end of year rally.

The main difference between last year & this year is that this year the spring rally and the summer correction should last longer, and the fall rally would then be much shorter. It's also possible that the high for the year will be made in late spring - the summer correction and fall rally essentially canceling each other out.”

Turned out to be a fairly reasonable road map for the major markets, but I didn't anticipate the incredible volatility. Also, I expected a correction in the juniors, but not a 35% crushing. Venture peaked in March and as usual, led the rest of the market – this time down. Venture wound up giving back the entire gains of 2010. So once again, the juniors prove they're stocks meant for trading, not holding. Other things I did not anticipate - XAU losing 20% despite gold gaining 10%. Who'd have thought that US home builders would be a far better investment than gold stocks?

Crystal ball reading for 2012:

First half very cloudy indeed. Everything depends on the mess in Europe. The resolution is obvious – the ECB must buy PIIGS bonds to keep interest rates low enough for them to be able to service their debt. But that involves treaty changes and approval by Germany. Germany is holding out for PIIGS austerity. World markets are hostage of this brinksmanship game. Judging by past experience, it gets resolved, but it won't be pretty. After that, the market could be hostage to the US presidential election. Until the outcome of that is clear, the market could struggle.

So best guess is a mirror image of 2011 - choppy, volatile, & difficult markets continuing through the first half of the year - but no crash. Major rally should start in the second half of the year, but the timing depends on the perception of a probable outcome in the US elections. It doesn't matter who wins, just that the outcome is fairly certain. So, if the election appears close, the rally won't start until just before election date. If one of the crazier Republicans wins the nomination, or Ron Paul runs as a third party candidate, it will be obvious that Obama wins - rally starts early. The Republican Convention might be worth a little attention this year.

Regarding the juniors, I look at them as high beta plays on the market. I own a large number of the beat up names and simply plan to sell anything that moves in order to raise cash. When conditions warrant, I'll pile back in - there could be a monster move once the risk-on/greed trade comes back later in the year.

Whatever happens, I wish everyone a good 2012!