Can Metals Go Parabolic?
Our different point of view identifying "A New Bull Market in the Making" was rewarded with some quite sensational upside action in the markets, in what appears to be a pattern of mild pullbacks, bereft of any real selling, followed by strong impulse waves to the upside. And, thus far we have had a similar pattern in Gold and Silver, although we have yet to see the next strong impulse waves unfold and this has created some worry, which is exactly what we want to see: The Precious and Base Metals also climbing a big wall of worry to sharply higher levels and we're now at an important inflexion point, that could define the metals direction going forward into the end of 2006.
Longer term readers may recall, how in the very early days of the liftoff in Gold a year ago, in a groundbreaking piece of research, we were able to identify a remarkable resemblance in the behavior of Gold over the past 6 years or so, with that of the Dow Jones Industrial Average taking off from its double-bottom formation of 1980 and mid-August 1982, in a stunningly similar pattern of percentage gains and behavior...
In a way it makes a lot of sense. The 1980's and 90's were back to back periods of tremendous gains in paper based financial instruments and over that period, not only did resources suffer one of the longest and most drawn-out bear markets ever, but resource based currencies such as the Canadian and Australian Dollars were basically cut in half over the same period. Now the tables appear to be turning, wherein some market indices have remained subdued since 2000, while Gold and Silver have been the place to be, just as the Dow was in the 80's and the major casualty thus far has been the very significant decline to date in the US Dollar and its potential for much worse to come still.
Everything was going perfectly according to this plan in the first 5 months of this year, wherein extrapolating forward, we were able to come up with a potential target of $925 to $1,050 for Gold sometime next year and then perhaps following a pullback or yearlong more period of consolidation, we might actually see a run to as high as $1,785 by 2009 with a possible run to as high as $3,790 by 2019, which curiously is about equal to the Dow hitting 10,000 at the turn of the Century. So don't say it can't happen. If a stodgy old Dow can do it, so can Gold. And, there are many compelling reasons why such heady numbers can be achieved, including $100 Silver over the next 15 years or so, if this ongoing resources bull market that by historical measures is 20 years or so from inception, would fit with the average length very well.
So, the ducks were almost perfectly lined up, so to speak... Until the markets got too giddy back in May and suffered a short, sharp and to some, a devastating correction, the most interesting part of which is: Being that both the Gold and Silver charts are a microcosm of the old Dow's behavior back in the early to mid-1980's: Was May through June, Gold and Silver's version of the crash of ' 87...? It certainly looks a lot like it on their charts, especially in the way the precious and base metals have since defied the laws of gravity by rallying so strongly off these extreme lows... Remember the intense level of bearishness following the '87 Market Meltdown, there wasn't a bull in the World and as for anyone predicting the Dow was headed for 10,000, would have been locked up for his own protection from angry mobsters wiped out.
Even after the Dow hit new highs in 1990, the Research Director of one major firm predicted the 90's would be a boring decade of anemic growth. He could not have been more wrong. Such is the way of Wall St. That's why we keep an open mind here: Expect the unexpected...
What is intriguing thus far is the juxtaposition of Gold and Silver at this time. We've maintained all along that the power of the trend is the one thing that has kept us bullish on Gold and Silver. The trend was so strong, it overshot and self-corrected. But now that correction may be long over, or its end may be near, because even if more consolidation is likely, the sheer size and dimension of the unfolding ranges is likely to portend Gold and Silver prices substantially higher in due time and lest we forget, we broke out of a 25 year base which has been building up an enormous amount of energy and portends Gold and Silver prices extremely sharply higher in the years ahead and right now we're right at this inflexion point, where one could argue the case that like the Crash of 87' lows rising to new all time highs faster than just about anyone thought possible, so too could the same fate await Silver, Gold, Platinum and Copper. One could make the case that, Silver in particular has a distinct 3 wave pattern that could be a triple 1 - 2 unfolding upwave formation that in the event of a huge upside breakout, could usher in the mother of all third waves in Silver, taking it almost vertically higher, methodically taking out the milestones of $13, $14 & $15 for openers, with the potential of going all the way to $18 or even at a stretch $25, with Gold potentially following to new all time highs.
Your Savant has done more intense analysis and research of Dow Jones from the beginning of the last Century to present than most and one recurring theme was the enormous number of macro mini minor and major 1 - 2's, that punctuated the Dow's incredibly bullish patterns all through the 1980's, prior to exploding into the greatest 3rd wave ever, that began on January 16, 1991, in the largest gap open in history.
In fact what many fail to correctly realize from the lows of 1975, from which the Super-Bull Market was initiated: The 1980 ~ 82 period was the first major 1 - 2, 83 - 84, the second and 1987 itself was the third massive and profoundly bullish 1 - 2 and the fourth was the 90 - 91 so called Gulf War 1 - 2 and what we are actually going through right now in the Dow, S&P and other markets, is one of a series of important major 3 - 4 corrections, counter-balancing one of the major 1 - 2 corrections 2 decades ago and longer term readers may recall, back in the first quarter we predicted that we were very close to entering one of the major 3 - 4 waves sometime soon in 2006, and it sure came soon... And, as we've recounted before, when this 3 - 4 is out of the way, it could open the way forward to a super-bull 5th wave multi-year upmove.
What is most intriguing about the Gold and Silver moves of the past 6 years or so, are those same telltale macro, mini, minor, major and even mega wave activity, that tells us there really is a monster bull market brewing out there of epic proportions, and just as the Dow's 1 - 2 wave activity foretold of same, few could imagine even a decade ago, just how high the Dow, Nasdaq, S& P and others would eventually rise and how the tech sector explosion, capped off the greatest bull market in history bar none. And now in the earliest days of a megabull market in Gold, Silver, Precious and Industrial metals, this early in the game, metals like Copper have already moved beyond imagination and before this decade is out, we believe the emulation of the Tech explosion of 1999 ~ 2000, will be in Gold issues, that today look cheap.
Just as the seismic activity can predict an earthquake ahead of time, the footprints laid by the metals tell us there's a very big one coming.
Trade Well
From the Desk of Savant |
