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This Rally Has Legs

Morris Hubbartt
Weekly Market Update Excerpt
posted Nov 4, 2011

US Dollar Chart Sentiment

 Dollar Commentary

  • The fear trade that started in early September caused a huge run into the US dollar. Assets fled the “risk” trade. Investors feared that a re-run of 2008 was coming again. On Tuesday this week, we all felt a bit of that fear, again.

  • In 2008, the dollar formed a sharp double top technical pattern. From there a major top was put in.

  • My technical indicators indicate the recent US dollar rally has already ended. If there is a second rally, I fully expect a double top, and it should be as short lived as it was in 2008.

  • My sentiment and technical readings target the 65-66 area in the intermediate term. Fundamental dollar analysis suggests a substantially lower dollar over the next two years.

Gold Super Highway Chart

Gold Analysis

  • Gold has excellent support. The worldwide fiat currency system is clearly broken. There is a round of QE by one nation, and then another, like children on a merry go-round.

  • The greater problem is that there is no end game. Now that the application of QE is the normal response of governments and central banks, it’s very unlikely that it will change, until the system breaks.

  • It’s this set of circumstances that supports the gold market on all corrections. Gold is knocking on the door of the upper channel line at his price point of $1764. That is the solid purple trendline on the above chart. Is it time to sit back and enjoy your trip, on the gold super highway?

  • In the above chart the smart money commercial buyers are highlighted. By a number of measurements, their recent buying support has been unprecedented, and that surely spells much higher gold prices.

Gold Turn Call Chart

  • General pessimism about gold and gold stocks is substantial. I expect gold to climb this wall of worry, right to my trading target of $2,000. It should happen by late December, 2011, or early January, 2012.

  • Some technicians have called for deep corrections in gold at this time. They believe gold will decline to around $1300-$1400. I don’t see anything technical that indicates such an event is likely.

  • Today the fundamentals are profoundly different from the fundamentals at past “blow off tops”. The fundamentals of the gold market are enormously supportive for an ongoing bull market.

  • My technical analysis of both the super highway chart and the turn call chart suggests gold has started an immense move higher!

GDX Breakout Chart

  • Sentiment indicators are as bullish as they can be. I use a number of indicators to analyze sentiment. Some indicators are based on traders. I have highlighted these in recent weeks. Sentiment helped pinpoint the recent bottom in gold almost to the day. Trader sentiment is still very negative right now, and that is rocket fuel for this bull market.

  • The enormous head and shoulders formation on the above chart projects $95 for GDX is very likely in the intermediate term. This pattern is confirmed by substantial volume.

  • I continue to target $75 for GDX by the end of 2011.

GDX Swing Trade Chart

GDXJ Swing Trade Chart

  • The two above charts are where some financial rubber meets the road. They show how you can make money in the short term. Buy and sell the swings in this power rally, but don’t let go of your big core positions!

  • For GDX, my short term target is $63.

  • For GDXJ, the short term target is $35.

Natural Gas Opportunity Chart

  • Natural Gas is set up now, to make a strong move. Volume patterns are quite encouraging. There is an interesting inverse head and shoulders formation that has taken shape. Sentiment, as a contrary indicator is phenomenally bullish. A key contrarian indicator is public sentiment. At this time, the public is completely out of the natural gas market. Last, and certainly not least, the seasonality for Nat Gas is quite good. All in all, a decent set up is here.

UNG Swing Trading Chart

  • The above chart shows the price action for UNG-nyse, the natural gas ETF. This commodity offers tremendous value for the patient investor, and you should work to book trading profits in the short term, while building an investment position for the really big move.

Silver Launch Chart

  • On the above weekly chart, the momentum indicator is turning up. With silver, I’d rather be a month early than a minute too late. Smart money buyers have quietly added in size to their positions on the latest price weakness. All the technical pieces are falling into place, to help you multiply your wealth with silver!

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Nov 4, 2011
Morris Hubbartt

321gold Ltd