With yesterday's historic Fed move and the wild action we have seen in gold the past few months a lot of people have been asking about gold stocks. Since 2002 I have been in and out of the gold market, catching some of the great moves we have seen in the past few years and becoming known as a big believer in the long-term secular bull trend in gold. I also have had a reputation for being objective when it comes to gold, because at times I have taken profits in gold and have sat on the sidelines. Let me tell you what I see now.

In August and September I tried to buy gold stocks only to get stopped out a few days later when they broke through key support levels. I last tried to buy gold stocks when the HUI was around 300. After getting stopped out it then fell all of the way down to about 150, for a 50% drop. It has since rallied about 80% from that low and people want to know if it has bottomed or if they should buy now.

First of all I have no idea whether they put in an ultimate bottom. I think they have, but I won't be able to say that with certainty until I see how things play out a bit more. You see back in the summer I thought Fannie Mae and Freddie Mac were going to go broke and cause a collapse of the stock market. I also thought that the Fed would lower rates and print money like mad as a result and that would propel a new bull move in gold. I went short the market and long gold stocks. I made money on the short side and got stopped out for a small loss in my gold position. Obviously I was right about much of this, but wrong when it came to what gold was going to do.

When I got stopped out In September I took my loss and admitted to myself that I was probably wrong about what I thought gold was going to do. If I was correct then the gold stocks would not have done this. The fact it did proved to me that something was going on with gold that I did not expect. Making money in the market isn't about being right all of the time, it is about maximizing your gains when you are right and taking a small loss when you are wrong.

I still believe we have a new gold bull market ahead of us at some point, but I do not know when it will start. Gold stocks have been hit so hard on this correction that they will have to spend some time recovering from their big drop - even in the face of their big move off the low. People are excited about the 80% gain in the past two months, but to reach their highs they need to rally an additional 80% plus from here. It is very unlikely that is going to happen without gold stocks first pulling back.

The way I see it gold stocks are below a key resistance zone of 295-325 for the HUI. This area marks the 1/3 retracement level of the March high and October low and the HUI's 150-day moving average. I see a pullback starting at a point below this zone or inside of it within the next few weeks.

What I want to see is how the next pullback in gold stocks plays out before drawing any solid conclusions about the meaning of this rally. So far the charts have been bullish for gold stocks. Gold stocks have outperformed both the metal and the S&P 500 during the past few weeks. I would like to see the relative strength in the stocks continue over the next month. I would expect the HUI to take back at least half of its recent gains. From here that would mean a correction down to the 215 area.

The key though is if the strong relative strength of the stocks versus the metal continues on the next pullback or correction that would be a positive sign that a long-term bullish move in gold and gold stocks is developing. Next year could then prove to be a great one for gold stocks investors. I may be a buyer on the next pullback.