This is a time where your senses tell you to sit up and pay attention. Bulls burned on the last 2 year down from 2011 are generally unlikely to jump in both feet at a rally. However if we look at the Summer rally that starts every year about the July 4th / Canada Day weekend, it is an expression of the strongest seasonal rally in both Specie metals and their miners, for the entire year. So, it is then, my opinion that if not both feet perhaps a couple toes or one foot should be used to test these waters.
Bottoming has not been invisible, unless your swamped by all the Main Stream Media’s drum beating and the FED’s sword rattling concerning the supposed death of the Gold Bull. Again, in my opinion, the Bull rests, nothing more. Its quite clear so much fundamental damage has been done to the economy and financial infrastructure that it must express itself no matter how camouflaged.
While we talk of the Gold Bull at rest, as to the death of the recent Gold Bull, when the MSM have no CLUE #1, as to what gives here. The 4.3 year cycle has been folded, spindled and mutilated by various alphabet agencies and reps, IMO, like the ESF run by JPM, but the cycle is still whole, extended perhaps but nowhere near done. Typically we see 17+ yr up cycles in commodities and other items, quite related to Armstrong’s 8.6 yr cycles.
Without the extension imposed on this latest cycle by the antics of the current regimes, a Death or Cycle Switch would require the 17.3 yr cycle to end 25% early, which does not happen to my knowledge. Inversions happen, but not a cycle slice off by 25%, IMO. Since the timing and position are right in their true windows, the ODDS then say, the Cycle will reassert itself, probably by end of Summer if not before. Thus the validity of this rally.
The question everyone thinks about but really does not express is “ Is it a real rally?
Is it worth my involvement for the Risk entailed. Let’s look:
Easily enough we see that each of the last four years, the July 4 / Canada North American Summer Rally has boosted the Gold Bugs Index about 160+ pt on average and lasted about 90 calendar days. Two big rallies of 175 pt up in 2009, and 2011 and a crest rally of 150 points in 2011. Last, as if it snuck up last summer but really was more or less on schedule a rally ending Sept 28 of 150 points. As to repeatable, that’s good enough for me to look for similar behavior for this rally.
If you give the HUI, the Gold Bugs Index, Point & Figure Chart (below), you see, that it estimates a potential upside target of 360 from a low of 208, which would of course, would be 152 points more or less.. OK.
Now, other than throwing dice, what validity do Point & Figure charts actually have? I use them as estimating tools. Whether 1 minute charts based on Break-Out measuring or Monthly Charts based on Reversal measuring, I use them for estimates. The shorter the time measure, the shorter the lag time, based on the filtering of non-meaningful moves.
They can be a useful tool. The daily charts can get old quickly and need to viewed skeptically.
In Bull moves the real prices overrun to the upside and the opposite in Bear moves.
Point & Figure charts are easily computerized and available free on Stockcharts.com, and, IMO, useful if you understand their limitations and application as tools. LINK > StockCharts Free P & F Charts
Based on my estimate of probabilities, I think the rally completes in end September. Operationally speaking, the correct approach then is Tactical, finding the bottom of any correction, and assessing whether this Rally becomes the first leg in a resumption of the Gold Bull. My bet is the Gold Bull does this Rally and turns into something bigger, with this rally completing and becoming the Reversal off the Jun 206 HUI low, that carries above the 362 resistance. So far it has crested the 10 week / 50 day moving average.
Thus, this is part of my supporting reasoning that the Rally continues to Sept and then can resume.
Check my blog, www.denaliguidesummit.blogspot.ca, for updates. See my tactical approach to using Technical Analysis can benefit trading, and preserve profits in up and down markets. Drop me an email at firstname.lastname@example.org.
(SRSrocco) EDITORS NOTE:
I have stated several times that I do not believe technical analysis works in a rigged market to determine short term moves in stocks and commodities. However, I do believe charts can reveal changes in long term trends. Here, Nick does a good job showing just how much the HUI Index is oversold as well as its four year cycle.