Gold And Fred Astaire
July 31, 2012
1. If something is broken, it can often be repaired. If your car is in an accident, you take it to the repair shop.
2. If you go to the repair shop and see it on a hoist with mechanics working on it, the odds are good that repairs are being made.
3. Junior gold stocks are the passion, and arguably the lifeblood, of the gold community. They have been broken, like a car in a bad accident, but there is now a beehive of activity going on at the “technical analysis repair shop”.
4. To view GDXJ on the hoist with mechanics working on it, please click here now.
5. As GDXJ has risen from the lows, volume has started to grow. A key breakout over a downtrend line occurred on Friday, and Monday’s price action helped confirm it.
6. Many individual junior gold stocks have exhibited geyser-like price action over the past few days, and I think that’s a precursor to what is coming to the entire sector.
7. The bottom line is that your junior gold stock “vehicles” are being technically repaired and put back onto the racetrack.
8. Before this rally pauses, the resistance zone created by the early June highs of $22.18 and the late 2011 low of $22.58 should be taken out on the upside.
9. The $22.18 high is also the neckline of a very significant double bottom formation. GDXJ and its component stocks could stage a powerful rally from there, taking it to the $30 level.
10. Please click here now. The Dow has a possible flag pattern on it. Flags have been appearing on quite a number charts in various sectors over the past few weeks.
11. These technical patterns tend to be harbingers of near-vertical price movement. They could be indicating that immense global easing is coming soon.
12. Mario Draghi and Tim Geithner have both recently indicated their extreme dissatisfaction with the global “recovery”. The FOMC meeting begins today, and the US Department of Labour release the Employment Situation Summary report on Friday.
13. These are arguably the two most important reports to be released in the past several months. All institutional money managers are keenly awaiting them. The bullish GDXJ and Dow charts suggest that whatever is coming, it is likely very bullish for stocks.
14. I often refer to silver as gold’s “wild little brother”. Please click here now. If silver manages to close to the upside today, that will make it 5 consecutive days in a row of rising prices.
15. I view the $28.50 price mark as equivalent to about $1625 for gold, and gold has already tested resistance there. Solid support has been created around $27.50, and I would expect any pullback to be halted there.
16. Please click here now. The dollar had been rising in a parallel upchannel, but that is rapidly degrading into a bearish rising wedge formation.
17. It’s important to realize that a small move to the downside on the dollar index can be accompanied by a very big movement in the gold price, on the upside.
18. US elections are not far away, and telling America’s unemployed that “I’m a strong dollar man” is probably not at the top of President Obama’s campaign statements list.
19. It’s very difficult for the stock markets of the debt-laden United States to rally, while the dollar also rallies. Tim Geithner seems to be hinting to Ben Bernanke that now is the time to unveil more accommodative Fed policy, to help the nation’s financial “risk-on” markets.
20. Gold itself seems to agree. It is displaying extremely bullish price movement. Please click here now. That symmetrical triangle belongs in every technical analysis handbook.
21. Symmetrical triangles often usher in powerful momentum-based price movement, and I think that’s what is coming soon to the gold market.
22. The target of that triangle is at least $1700, and such a move would open the door to a test of the highs near $1923.
23. The breakout occurred well ahead of the apex, and it feels like gold has Fred Astaire’s dancing shoes on.
24. The question is, would you care for a dance?
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Stewart Thomson / 1276 Lakeview Drive / Oakville, Ontario L6H 2M8 Canada
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