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Weekly Market Update Excerpt
posted Apr 13, 2012
UUP (US Dollar Proxy) Volume Chart
- A strong dollar rally? Sorry, but that’s not likely to happen.
- The latest unemployment report released last Friday was a complete disaster. The US now has 88 million people outside the workforce. This is about one quarter of the entire American population. It is a number that will continue to plague debt, deficits, and the value of the dollar.
- Some private surveys suggest the permanent unemployment rate is now above 20%.
- I continue to be a strong advocate of removing money from the banking system. Gold & silver bullion are the best vehicles to achieve this goal.
- Note the enormous head & shoulders top pattern on this dollar proxy chart. When an h&s top is near completion, the volume can taper off significantly after a lot of distribution, and that is clearly happening now.
- The UUP dollar proxy fund is sitting right on the neckline now and a breakdown appears imminent. Commercial traders have built a massive long position in the euro currency. They are also carrying a large short position in US dollar futures. The biggest traders are clearly very negative on the dollar.
- I expect the dollar to begin a rapid decline within months, and the h&s top pattern suggests it could happen within days. A move down to $21.10 on the above chart is about 10%. I think this phase of the dollar bear market will see the dollar decline by 20% or more.
Gold 2012 Roadmap Chart
- There has been a substantial battle going on in the gold market, and finally the bulls are starting to overpower the bears. Highly leveraged traders have been knocked out of their positions in recent weeks, as volatility has dominated the precious metals markets.
- My technical analysis continues to indicate that the gold market is ready for an explosive rally. I am going to do another COT & gold stock video analysis this week-end for the general gold community. I expect that tonight’s COT report could be a complete game-changer for the gold market. If you’d like to receive the two-part video, please send me an email at firstname.lastname@example.org and I’ll send it to you. Thank-you.
- There were two sharp moves to the upside this week, and it feels to me that the tone of the gold market has changed. If you look at the roadmap chart above, you can see that a clear pullback to the wedge pattern occurred.
- The gold price is now rising up from that wedge. I believe a very powerful move has just begun. My projected rise to $1850 could happen very quickly if the dollar breaks down from the top pattern in the manner that I anticipate it will.
- Also, please note the 3 bands of active commercial buying highlighted in blue. Historically, this type of relentless buying has been followed by much higher prices.
- The statements made by William Dudley of the New York Federal Reserve yesterday came right on the heels of a terrible unemployment report, and he is clearly advocating more quantitative easing.
- If it happens, QE3 could cause a huge surge in the gold price. The gold market is set up right now like a race car on the starting line, and it feels like the New York Fed is saying, “Ready, Set, Go!”.
GDX Set-Up Chart
- I have issued a capitulation alert for gold stocks. A move by GDX to the small gap $48.35 was what I was looking for, and GDX rose to $48.33 yesterday. From here, there may be one sharp move lower, but the odds of that possibility are fading quickly.
- Pieces continue to fall into place for a major advance in gold stocks. These quality money-making stocks are tremendously undervalued. Sentiment continues to indicate the bottom is very close, or already achieved. It may require one quick punch lower. The smartest way to play the current market is to be prepared for either outcome.
- I will be offering a follow-up video in the next few days to assess the possibility of the capitulation alert.
GDXJ Double Bottom Chart
- I have mentioned in recent weeks that GDXJ is my favorite asset class of the gold sector now, just as silver was late last year. At this point the gold juniors are down about 40% from the highs of last summer. I recently issued a trading buy signal at $22.82.
- The washout day at $22.01 came on excellent volume. Yesterday was another high-volume day.
- Note the gap in the $26-26.50 area. That’s my first price target, but I think that GDXJ will quickly rise to $30 and then to $38, quickly making the current price area nothing but an ancient memory.
Silver Flag Chart
- Silver is my second largest holding, just behind gold. I am projecting that silver rises to about $100 per ounce over the next 18 months.
- Note the MACD indicator at the bottom of the chart. My shorter term oscillators indicate that MACD is consolidating here near the zero line. It’s likely pausing before continuing what I believe is a powerful uptrend.
- I see the action of the commercial traders in gold as very bullish, but even more bullish in silver.
- The volume pattern that is developing is incredibly bullish. Note how the volume rose on the latest rally, after declining for most of the correction. The latest decline from about $37 comes on declining volume. I think the silver price is poised for an explosive move to the upside on rapidly expanding volume!
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Apr 13, 2012