  Dots, Dots and more Dots
Joshua Fritsch
Dec 1, 2005
This review is based largely
on a buy/sell signal I discussed
back in July in a piece titled "Connecting the Dots."
As I stated then, when the
price of gold is making new highs, it seems to be a good time
to sell gold stocks - - and when gold has tumbled back down to
the breakout level it is a good time to buy them. In July, it
was time to buy - - now it appears time to sell.
Let's look first at the price
of gold:
The vertical red lines show
the peaks and their respective technical conditions. The horizontal
blue lines show the Confirmation Low (c-low) levels, with the
red horizontal line and blue circle marking the anticipated c-low
for the next cycle. The red circles are there to emphasize that
we are in dangerous territory as far as technical indicators
go. Could gold continue on upwards? Of course! But we are playing
odds and the odds are not in favor of much more
upward movement. Several times in the last year I have stated
my expectation that gold would reach $520 in 2005. I still think
it will, I just don't believe it will stay long at the party
before correcting!
Let's take a look at the HUI:
The vertical blue lines correspond
with the vertical red lines in the previous chart. Had we sold
at those times we would have been happy indeed! It's hard to
do when every drop of your golden blood being seems to be screaming
"THIS IS IT! YOU'RE GONNA MISS IT IF YOU DON'T BUY AND HOLD!"
But as I said before, we're playing the odds, and the odds favor
a substantial correction. This is a good time to reduce to your
"core" position if you have one.
There is one more factor to
consider, and that is that gold has now broken out in all
major currencies. This is no small bit of news! The breakout
heralds a shift from a US Dollar based bull market in gold to
a global bull market in gold - - or, as many analysts are calling
it, "Stage II." Whatever you want to call it, every
gold (and silver!) investor should pay attention to this event;
it is of huge significance. So, with this fuel added to the bull,
perhaps the correction in gold stocks will take a different form.
Let's zoom in on the HUI:
There is a year-long Inverted
Head & Shoulders pattern that bodes very well for long-term
investment in the gold stocks. The only real question now is
whether we have already formed the right shoulder, or is a dip
to the 200 area in our future? I think with the global currency
breakout we may see more of a running correction than a steep
drop. This has the potential to develop into a freaky hybrid
between an Inverted Head & Shoulders (12/04-12/05), an ascending
triangle (08/05- January? February?), a Cup & Handle with
the ascending triangle as the handle AND the double bottom hits
in 05/04 and 05/05! I must emphasize that this is speculate -
- and "obvious" patterns have a habit of being deceptive
- - still, it would be truly fantastic to see all that come together
and then serve as a massive launch point up towards the 350 level!
Only time will tell - - I will remain on the sidelines until
gold hits the anticipated c-low, or breaks out to such a degree
that it becomes obvious I was completely wrong. I sure hope it's
the former!
Dec 1, 2005
Joshua Fritsch
email: jmf@jmf.name
Fritsch archive
Disclaimer: The information contained
in this article is believed to be factual, however, the author
cannot be held responsible for mistakes or intentional deceptions
on the part of the sources. Price targets are a matter of opinion
- trading in the market entails risk, and that risk is assumed
solely by the trader.
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