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The $2000 Tea Cup

Morris Hubbartt
Weekly Market Update Excerpt
posted Oct 19, 2012

US Dollar Bear Action Chart

  • On October 16th, the dollar's short term bounce probably ended. A bear flag has become the right shoulder of a significant h&s top pattern. A new and sizable bearish move would be confirmed if the neckline breaks.
  • Some congressmen have noted that about 10,000 people sign up for social security benefits every day. Unfortunately, political leaders seem reluctant to implement austerity measures. They consider printing money to be the best route out of the current labyrinth of debt.
  • The mathematical target of the h&s top pattern is about 73. The inner Fibonacci arc, and resistance near 80.50, is probably limiting the upside of the dollar’s rally attempts.
  • A decline below the neckline area at 78.50 could start a very powerful rally in both gold and silver.

Gold Volume-Based Support Chart

  • On Monday, volume-based support (VBS) at $1721 almost came into play. Gold dipped to about $1729. This decline comes after a series of lightly bearish Commitment of Traders (COT) reports, and a rise in bearish sentiment.
  • If the dollar is completing a top, gold is probably close to resuming its upside movement.
  • Today, gold could retest Monday’s low, and then begin a steady move towards $1850.

Gold Cup and Handle Chart

  • A “cup and handle” pattern on the gold chart appears to be almost completed. The handle is forming nicely, and volume is bullish.
  • The price target is about $2000, which is similar to the $2015 target projected by my other technical work.
  • Are you drinking your tea from a $2000 cup? Give it a try!

GDX Buy Signal Chart

  • I projected a modest pullback would take GDX to about $47.50, but this correction has been even more shallow than I envisioned.
  • Volume is extremely bullish. Price corrections that are this mild tend to be followed by powerful moves to the upside.

GDX Head & Shoulders Bottom Chart

  • Bullish flag patterns are apparent on many charts in the precious metals sector, including GDX.
  • The flag is also the right shoulder of a sizable h&s bottom pattern. When activated by a rise over the neckline, my projection is that by April of 2013, GDX will reach $77.

GDXJ Triangle Time Chart

  • GDXJ is consolidating in a beautiful triangle pattern. The price is contained by the blue converging trend lines. Volume is bullish.
  • This triangle has been in play for about 5 weeks now, and a breakout in the next few days would make this a “textbook” chart pattern.

Silver Volume-Based Support Chart

  • On Monday, silver dipped to about $32.57. Like gold, silver is exhibiting a very shallow price correction.
  • Volume-based support sits at $32.50.
  • There is a possibility of a short term test of Monday’s low, but my sentiment indicators showed a significant spike in investor fear. That “fear factor” suggests the correction is probably almost over.
  • I expect to get a trading buy signal for silver this morning, and if you don’t have much silver, it could be a good idea to buy today!

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Oct 19, 2012
Morris Hubbartt

321gold Ltd