may not seem like much happened yesterday, but a very important event
occurred. Yesterday the dollar index breached 78.65. The reason that is
significant is because 78.65 marked the intraday low of the prior daily
cycle. A penetration of that level indicates that the current daily cycle has
now topped in a left translated manner and a new pattern of lower lows and
lower highs has begun. Any time a daily cycle tops in a left translated
manner it almost always indicates that the intermediate cycle has also
In this case it would indicate that the intermediate dollar cycle topped on
week two and should now move generally lower for the next 10-12 weeks,
bottoming sometime in late June or early July, about the time Operation Twist
that we have confirmation that Bernanke has broken the dollar rally I'm
confident in calling April 4th an intermediate bottom (B-Wave bottom) in the
gold market. Gold should now be entering the consolidation phase of the next
C-wave. I expect a test of the all-time highs sometime this summer as the
dollar moves down into its intermediate cycle bottom.
being said I have no interest in a 15% rally in gold. The real money will be
made as the mining stocks exit their bear market, re-enter the consolidation
zone between 500 and 600, and move up to retest the old highs. It's not
inconceivable that we could see a 30-45% gain in mining stocks over the next
2 1/2 months.
Sentiment in the mining index has reached the same levels of bearishness that
were seen in the fall of 2008. That black pessimism drove a 300+ percent
rally over the next two years. I have little doubt this time will be any different.
Now what we need to see is a change in character. We need the mining stocks
to stop generating these sharp bear market rallies and transition into the
wall of worry type rally that characterizes a bull market. So far that is
exactly what is happening. The miners are rallying very hesitantly, and as
long as this continues it will camouflage the move and keep sentiment
depressed. That's exactly what we need to happen to drive a long sustained
rally back up to the old highs.
The problem with the rocket launch type rallies we've seen over the last year
and a half is that they swing sentiment very quickly to the bullish side and
we run out of buyers.
As long as the bottoming process proceeds gradually I think there's a very
good chance the HUI could break back above the 200 day moving average, and
possibly test the 600 level by mid-July.
far all of the pieces are starting to fall in place to initiate the very
early stages of what I think will eventually become another huge momentum
move similar to what happened in silver and gold last year. This scenario may
well culminate in a parabolic blow-off top sometime in late 2014 as the
dollar moves down into its next three year cycle low.
is the time to invest in this sector as it struggles to transition from a
bear market back to the secular bull trend. The time to enter is at the very
beginning when no one believes. This is when the really big money is made. If
you wait till your emotions give you the all clear, half the move will be
Most traders are going to jump back into the general stock market or tech
stocks. You have to be smarter than that. The stock market, including tech,
have already generated a massive move out of the October bottom. That kind of
move usually leads to a multi-week, or month, consolidation. The odds of
another 20 to 30% rally in the stock market are very slim.
The odds of a 20 to 30% rally as the mining stocks resume the secular bull
trend are extremely high.
The combination of extreme downside momentum and irrational human nature has
created the kind of oversold conditions and extreme undervaluation that
generates an opportunity that only comes around once or twice a decade.