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Funeral For A Bond

Morris Hubbartt
Weekly Market Update Excerpt
posted Jan 27, 2012

UUP(US Dollar Proxy) Failed Uptrend Chart

Analysis

  • I have been warning you about serious technical divergences on the US dollar chart. With commercial traders carrying near-record short positions on the dollar, the uptrend has now failed.

  • Under-capitalized retail traders are carrying giant long positions, and they could soon be in very deep trouble, because the Fed just announced that they could keep rates low until 2014, and because of a horrific technical development in the bond market. I’ll cover that development in detail today.

  • Some private consulting firms believe that if 1980 is used as a base year for calculations, inflation in the United States could be running as high as 10% right now. Pensioners and savers complain, but the US government doesn’t appear to be listening.

  • Our government’s debt is projected to rise to about $16.4 trillion by the end of 2012, a 60% increase in just four years. Inflation statistics that affect pensioners may be getting “swept under the rug”. These are fundamental issues that could put pressure on the US dollar for a long time.

  • There have already been six volume distribution days since Jan 1, 2012. The uptrend has failed with distribution volume. The bottom line is that the technical situation for the dollar is dire.

TLT (T-Bond Proxy) Death Chart

  • I have been warning my readers that the US bond is in a major topping process. There is a major double top in play now, as well as a head and shoulders top on the right side of the chart. Look carefully at this chart. The h&s formation is targeting $108-$109, and that is likely just the start of a much larger decline.

  • Gamblers can short the bond immediately. This bond chart is indicating rates are going higher, regardless of what the Fed says, and higher rates could mean enormous volatility is coming to the gold market, which is great news for traders!

  • The target of the double top is the low $90 price area, and that is just the minimum technical move. A double top like this can be the beginning of a multi-year or even multi-decade bear market.

  • Note the strong distribution taking place on the volume bars. US Treasury agent “James T. Bond” may have just flown his last “growth with safety” mission!

Gold Short Term Target Chart

  • One of my biggest technical themes is gold market sentiment. Negativity has been so great that it has driven even large and long-term players out of gold in droves.
  • This type of sentiment situation has made the gold market ripe for price explosion to the upside. It’s as simple as understanding that once the gold market money is out it really has only one direction to go eventually, and that’s right back into gold. That’s what happened Wednesday, as the Fed announced their extended ultra- low interest rate policy.
  • I am looking for gold to move towards $1804.40 based upon sentiment analysis and superior volume performance since the Fed’s announcement. There is also strong potential for an inverse h&s pattern to be completed. My bigger target for gold this year is $2300, likely acquired in December.

GDX Short Term Target Chart

  • The washout of GDX and the action of my fuel cell buy indicator probably spells a changing of the guard. Tax selling late last year and “throw in the towel” sentiment indicated a big buying opportunity was at hand.
  • Hold a large core position, waiting for the major move that I am projecting. On Wednesday morning as gold stocks were down on light volume, I issued a new trading position buy on GDX at a price of $51.54. From there, lady luck arrived in the form of the Fed, and GDX closed out the day at $55.23, up dramatically.
  • The longer term is where I would like you to focus the bulk of your gold stocks capital, and I am targeting $133, within a timeframe of 18-24 months.

GDXJ Short Term Target Chart

  • A key driver for all sectors of the gold market is sentiment. People have been flushed out of their positions due to their fears that lower prices were going to keep coming. The trade has gotten so lopsided that just one event was enough to cause an about-face in gold market sentiment. In this case it was the Fed announcement on Wednesday that did it.
  • I see a slightly higher move in GDXJ followed by a shallow pullback, setting up the inverse head and shoulders pattern, which should ultimately send prices dramatically higher. I’m being very stingy in what I sell here. I’m waiting for higher prices because this sector is grossly undervalued.

GDXJ Flag Pattern Chart

  • Note the bull flag pattern that has appeared on this very short term chart. It indicates a fast run as high as $32, which is very good news for junior gold stocks investors.

Silver Wedge Chart

  • My commentary here for several weeks has been, “silver is my asset of choice under $30”. The opportunity has been there to get more silver at a great price. Price has started to move above $30. I am now targeting $36 in the shorter term. Longer term I’m looking for $60 by the end of the year, and at least $90 within 18-24 months.

Silver Short Term Target Chart

  • Silver has a long way to go. I see $36 in the short term, where you should take some profits. I expect a pullback from that price area. I am projecting the completion of an inverse head and shoulders formation that will take silver straight back up to the $44 area, where you should do some more profit taking.

DIA (Dow Proxy) Chart

  • I have been targeting higher prices in the Dow since the lows of last fall. My current inverse head and shoulders analysis targets 132 for DIA-NYSE (about 13,200 on the Dow itself), but not before a nasty fall that looks like a great short trade for gamblers.

  • I’ve broke the move to the 132 target down into two steps. The first step called for a solid move to 126, which was a good place to take profits. That target has been acquired, and I now see a tradeable pullback before the final upside target of 132 is acquired, likely by late April.

  • More importantly, the positive moves for the Dow’s main trend will be a continued benefit for gold, silver, and resource stocks. The so-called risk assets are on the rise!

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Jan 27, 2012
Morris Hubbartt

321gold Ltd