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Mainstream
media tells you that the Dow soared yesterday. Maybe it did, against the
dollar. Against gold, the Dow fell. Please click here now. Gold is potentially set to outperform both the
dollar and the Dow, in a very big way, in a very short amount of time.
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The same is
true for silver. I talked yesterday about what I’ve termed the “wedgification” of the gold chart. Wedgification is not a real word. It is a term I coined,
like “head and shouldering”, to describe the process where
one chart pattern displays fractal-like action, morphing repeatedly into
ever-larger patterns of the same type.
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A small head
and shoulders pattern can become the head of a larger head and shoulders
pattern. Likewise, the initial and very bullish gold wedge has just become
overpowered by an even larger wedge.
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In the case
of silver, there is a process going on that I’ve termed “rectangularization”. Please click here now. Note the black supply line that I’ve
highlighted at point “A” on the chart.
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Now look at
point “B”. That’s the price area that was rightfully called
a “breakout”
by most silver investors. Breakouts should never be bought by anyone other
than gamblers. A breakout indicates the potential coming profits on positions
already bought at much lower prices.
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The breakout
at point B was a very positive event for the silver market. Now, make note of
point “C”. That’s the point where silver suddenly declined
as the bond market began to fall. Now that the silver price has spent some
time well below point C, you can draw in a new supply line across that point.
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You can now
see the “rectangularization” of
the silver chart in play, as an even bigger drifting rectangle is now visible
on the chart. Bigger price patterns have bigger price targets.
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The reason I
push the gold community so hard about building emotional strength to manage
growing volatility in the gold price is because the upside is so enormous.
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In this epic
crisis, if you can’t endure gold dropping a few hundred dollars an
ounce you’ll likely never make it to the “honeypot
zone”.
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The t-bond
has been put onto the radar screens of most institutional money managers.
Rising interest rates can negatively affect gold in the short term.
Yesterday, you received some good news, in the form of statements made by Ben
Bernanke about the need to maintain “accommodative” monetary
policy.
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I’m not
sure how many investors looked at the bond chart as Dr. Bernanke made those
statements, but there was not much in the way of celebration, and that
remains a concern. Please click here now. You can see that the bond did not exactly cheer as
the head of the Fed spoke.
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Note the
price resistance in the 139 area on that chart. It’s going to be
important to watch how the bond price acts if there is a rally towards 139.
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One of the
most bearish charts I see in any major market right now is the monthly bond
chart. To view a veritable “landslide of sell signals”,
please click here now.
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How do you,
the investor, reconcile the horrific picture on the bond chart against the
ultra-bullish picture on the gold chart? You start by strengthening yourself
emotionally to deal with the fact that surprise, not prediction, is the theme
of this crisis.
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Another “chart
of horrors” that I’d like you to focus on is the US
dollar monthly chart. Please click here now. The 14,3,3 Stochastics
series has done a very good job of indicating tops in the dollar, and one
such “top call” is in play now.
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Bond market
players appear to be very negative about the prospects for QE3, while gold
market players seem to believe that a collapse in the bond will be quickly
followed by an even bigger collapse in the dollar.
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The
appearance of both the gold and bond charts seem to indicate this is an
accurate picture of the “liquidity flows posturing” of
the largest major market players.
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To view the
“gold wedgification” chart,
please click here now. Look at how the supply line drawn through high
price of point “A” and the demand line combined to create a
powerful wedge pattern.
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Within the
wedge there is head and shouldering action, but the overall picture is that
of a wedge, not a head and shoulders pattern.
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Now, make
note of the supply line drawn through point “B”. Coupled with the
same demand line, there is now an even larger wedge pattern in play, which
I’ve termed a “super wedge”.
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Investors
need to understand that the gold price can move hundreds of dollars in either
direction and all that movement may do is create an even
larger wedge pattern.
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Generally
speaking, gold stock investors were a little glum yesterday, as once again bullion
blasted higher while their stocks mostly meandered or failed to perform. I
talked yesterday about the need to be selective in your stock picking.
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Please click here now. That is the GLDX-nyse
gold juniors fund. Many investors were disappointed
that GLDX failed to perform to the degree that GDXJ-nyse
did yesterday. Patience is required in a super-crisis, but I think your time
to shine is finally here.
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The GLDX
chart looks extremely bullish. Almost every indicator and oscillator is
flashing light or heavy buy signals, while price itself coils into a fabulous
wedge pattern, like a king cobra poised to strike at the hearts of your dollarbug foes!
Thanks!
Cheers
St
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