Precious Metals Market Timing
Draftsmans Tools

Ron Rosen
Sep 20, 2005

"Time is more important than price; when time is up price will reverse." W.D. Gann

Not having the accuracy of a draftsman I clearly put the trend line on the quarterly gold chart in the wrong place. The trend line today appears more accurately placed then the chart I posted yesterday. Break out will be a closing price over $470 to allow for the fact that I don't make good micro measurements. I have been using the continuation chart which uses the most active nearest contract. It just so happens that the most active nearest contract is the December contract. The December contract reached a high of $ 468.30 today and closed at $463.30. This chart shows the high price for the day not the closing price. Spot gold closed at $459 in New York City today and that is the price I mentioned yesterday. So we have not closed above the $458 to $460 spot price area.

ac·cu·rate
adj.

Deviating only slightly or within acceptable limits from a standard.

The gold bullion and gold share complex have reached a point that will, most likely and soon, provide us with the answers we want and need.

If spot gold bullion and the HUI close at new highs for this 5 year old bull market, that will be our signal to get aboard. The ride to heights unknown will have begun.

Since the quarterly chart I am posting is using December gold futures, the break out point is over $468.30. Let's give it a few dollars more and say a close for the December gold contract over $470 is a 23 year break out.

The top for the HUI was 258. Let's give the HUI a few more points and say a close over 260 is a break out.

If both Gold and the HUI close at new highs for this bull market it will be a signal that the next bull phase has started. The second phase is usually much more powerful than the first.

We should enter and reenter at that point. For those who have held on through this entire two year correction, your doubts and pain will be over. Well, let me put it this way; as prices rise you should start to feel better.

I believe jumping into this market before we have both of the break out signals may be a mistake.

Based on the technicals, as I interpret them, there is a high probability that Friday's high in the HUI completed the fourth wave of a descending triangle. If true, that means there should be one more wave down. That fifth wave down may break the horizontal bottom line of the descending triangle. The part that is descending is the top trend line. The bottom is level. If the bottom line of the triangle, pictured on the Delta HUI chart, is broken, I would expect price to retreat to at least the area of the previous fourth wave. That area begins at 150 on the HUI. That is the obvious support area on the chart. If our target points for a break out hold and don't break out, this interpretation becomes a very high probability. As of Fridays close the HUI and gold bullion appear to have completed their upward moves. The Delta turning points will be well aligned with this interpretation.

The 30 year Gann cycle calls for a bottom in gold bullion in early to mid summer 2006. One factor that really bugs me and keeps me from believing this is the beginning of the next bull phase is the fact that gold bullion is leading the way. When this bull market started, the HUI led the way up. Gold bottomed and started up about four months later. Three years later, the HUI topped first and gold bullion topped later. It appears to me that gold is having a weird, undecipherable type of correction. If my interpretation is correct the shares will bottom first and gold will bottom later. This would mean that the shares will once again assume their normal, predictive function. They would be predictive in that they normally lead the way and tell us that gold will soon be bottoming and moving up. In 2003 the HUI topped in December and warned us that gold would be topping soon. If gold breaks out before the HUI, they have reversed roles and that would be unusual.

We are in a fortunate technical position. If gold and the HUI both break out to new highs, we can assume that the highest probability is that the next bull phase of the Precious metals complex is off and running. We can enter or reenter the market at that time. We should expect to immediately be met by a correction of sorts to test the previous highs and probably a break below those highs. This will get any sell stops that have been put too close to the line. So, be emotionally prepared for that. I would not wait for the test of the previous lows because these may be unusual times. The times we live in are unusual in the sense that the National Debt of the U.S.A. appears to be headed for a googolplex destination.

"A googolplex is the number 10 raised to the google power: 10 (googol) or 10 10 100 (1 followed by a googol of zeros). A googolplex is much larger than the number of atoms in the Universe."

***

People used to laugh about how worthless Confederate paper money was. If the Confederacy was still alive and their money was backed by bales of cotton it might have greater buying power than our current Union Dollar. Cotton is on the rise!

We are indeed in a most fortunate position vis a vis which way the gold complex will go.

If my "techie" analysis is wrong and the gold complex breaks out to the upside, "Old man techie" will have served us well. "Techie" will have provided us with an alternate view of the gold complex that calls for another decline to a bottom. This is in contrast to the current hysteria of the gold "bug" community. "Techie" will have kept us from being over confident.

If "techie" turns out to be correct and the gold complex heads down from here I guarantee you he will be feeling smarter than warranted. However, as soon as those feelings are under control, he will recognize that he was in the techie "Zone" and will give thanks to the powers above.

I can think of no better way to mitigate a potentially wrong technical based opinion than to call it a very low probability. Unfortunately, I can't do that because I think it is a high probability. The really fortunate thing is that it makes only an intellectual difference if my "techie" opinion is wrong. Financially we will make money if the market tells us to get aboard or save money and avoid anxiety if it tells to stay on the sidelines. Since the market knows more than I do, we had best listen to it.

My ego keeps whispering in my ear, "Rosen, you are the greatest. Stand up and take the cheers and applause because you are going to be right." I have learned the hard way to tell my ego to shut up, put on the Dunce cap, sit on the stool in the back of the room, and face the wall until this is over.

So, to sum it all up, if I'm right we save money. If I'm wrong, we make money. That's not a bad position to be in. I haven't often found myself in that position.

I will admit that, in view of the dynamic moves in the gold complex, my position sounds like it may have been written by the Twisted Sister group.

"Twisted Sister is an American heavy metal music group specializing in the theatrical shock metal genre popularized in music videos on the television channel MTV in the 1980s. The group fused the shock tactics of Alice Cooper, the rebellious mood of the New Wave of British Heavy Metal, the chains and leather image of Judas Priest, and the extravagant makeup of KISS. The group's hit songs include "I Wanna Rock" and "We're Not Gonna Take It".

I don't like heavy metal music, but I do like the position we find ourselves in.

If I'm right, we save money. If I'm wrong, we make money. My kids used to call that, "Good show, Dad."

click image to see chart

The XAU appears relatively similar to the HUI. However, the XAU seems a lot closer to an upside break out than does the HUI.

click image to see chart

click image to see chart

The commercials have increased their short positions by a net 10,000. These figures are as of Tuesday Sept 13. They do not include the activity of September 14th through the 16th.

We are getting closer and closer to the pot of gold at the end of the Rainbow. There is only one more thing required.

Stay Well,

Sep 17, 2005
Ron Rosen

email: rrosen5@tampabay.rr.com

Tee charts reproduced courtesy of The Delta Society International.

321gold Inc