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Gold Rally & T-Bond Tap Out

Morris Hubbartt
Weekly Market Update Excerpt
posted Jan 18, 2013

TLT (US T-Bond Proxy) Tap Out Chart

  • A weak-volume rally has taken TLT close to resistance at $126. Aggressive investors can add to short positions on any 2 day rally.
  • I don't believe much investment capital should be held in bonds. The dollar is being diluted, to the tune of $85 billion a month of quantitative easing. Rates are artificially low. The payout is small, and the currency it’s paid in, is also under pressure.
  • If QE comes to an end, bond prices could collapse, ruining the savings of millions of investors.
  • Technically, I see more downside action coming before there is a bounce. Volume patterns show distribution, indicating underlying selling by professional investors.
  • Investors could incrementally cover profitable shorts on a decline down to the $107 area.

Euro Power Uptrend Chart

  • The breakout in the Euro that I discussed on Dec 21st has completed the neckline pullback that I projected. It may now be forming a power uptrend channel, which is extremely good news for gold investors!
  • There is a massive inverse head and shoulders pattern in play, with an upside target of 146. My timeline analysis suggests the target will be acquired by early summer of this year.

Dow Funny Money Chart

  • My short term target for the Dow is 14,000, and we are getting close to it now.
  • The healthiest thing for the stock market would be a 3-5% pullback now, but I don't see that happening.
  • Instead, I see a significant reversal occurring in the 14,000 area. The market could decline quite hard from there, or even crash. 

Stock Market Sentiment Chart

  • This chart is from www.sentimentrader.com, and public sentiment statistics are becoming quite a concern. Further upside movement from here could make the market ripe for a huge speculative blow-off.  
  • The Dow’s rise has been fuelled by “funny money”. The Fed has printed a sea of dollars, and a lot of it has been invested into the stock market.
  • Now the public is getting involved. This is a dangerous situation. Avoid the stock market, or short it in the 14,000 area. I see the market topping on or about February 2, 2013.

Gold Cup Of Profits Chart

  • The fundamentals for this gold bull market are likely much stronger now, than when it started. Debt is higher, more people are on welfare, and quantitative easing is spreading to other countries.
  • Technically, several important things are happening. Gold came down to solid support. From there, an encouraging display of long tail candlesticks occurred.
  • My oscillators suggest higher prices are coming. Note the slow Stokes, on the bottom portion of the chart. This indicator is predicting a quick move to $1705 will be followed by a bigger one, to $1730.

Gold Public Opinion Chart

  • Public participation in gold is near the lowest levels of the bull market. This is a good sign that higher prices are coming. My upside targets are $1850, $2350, and $2750. At $2750, I’m projecting that the public will become eager to own gold again, and the next major consolidation will begin.

GDX Bull Divergence Chart

  • GDX has moved back up to the upper channel resistance line, near $45. Volume has softened in the last few days. To ignite a momentum-based rally, I want to see a move through the upper channel with convincing volume, and hold that level for two days.
  • There is a big positive divergence on this chart. Once gold trades above $1800 for 3 consecutive days, gold stocks should have their technical shackles removed. At that point, I will be looking for an enormous 100% rally in most gold stocks, from the double bottom that was established in the $39 area on the GDX chart.

GDXJ Target Zone Chart

  • To identify key turning points in junior gold stocks, I look for Doji candles that occur below the lower Bollinger band. The one that I’ve highlighted in green sits in a price area that is now the head of a crisp h&s bottom pattern!
  • I’m projecting a quick rally to $22. Money flow indicators point to higher prices. An “overshoot” to $24 is easily possible, before a light consolidation takes place. 2013 is looking like it will be a great year for the junior sector.

Silver Versus Gold Chart

  • As with GDXJ, I used the Doji-Bollinger band tool to identify a turn in silver prices. This ratio chart suggests higher prices are coming, over the next 2 weeks.
  • I’ve highlighted some of the technical indicators with a yellow circle. That’s like an amber traffic light; book light trading profits, and hold your core positions, for a momentum-based rally!

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Jan 18, 2013
Morris Hubbartt

321gold Ltd