Their selling the Nasdaq off to the tune of 46 points in Asia this evening:
Interesting read on the Gold and Silver markets for 2000:
Wave Signals Commentary
By Mike Drakulich 1-2-00
A GOLDEN YEAR AHEAD?
My style of analyis combines a technical and Elliott Wave approach in attempting to forecast the markets. And that analysis is now telling me that gold, silver, and the gold stocks are readying themselves for a spectacular year. I strongly believe that the probabilities are 90% or higher that gold saw a final Bear Market low last August. Before getting Bullish, it is important to determine the Wave structure of the decline from the highs made above $800 in Jan. of 1980. The key is that last year we saw prices take out the 1985 low, which was at the $282 level, and the monthly charts strongly indicate that the decline very likely completed not only the decline from the 1996 peak at $417 level, but very possibly the entire corrective process form the 1980 highs. Yes, it's now likely a
twenty year Bear Market may have ended.
The rally in gold from the late August low to the early October high in my view is the first leg up of an unfolding Bull Market. While not perfect, Elliott Wave never is, the wave structure of that rally looks best counted as a Bullish five wave pattern. The implications are now that after a large corrective decline gold will again rally strongly, easily surpassing the October 1999 high at $339, and rally to at least the $400-420 level next year. That would be the initial, minimum expectation of a rally based upon the long term charts, to rally to the 1996 high near the $417 level. And frankly, that is all we need to know for trading or investing purposes at this point in time.
Where we are now in my view is in the process of making, or having already made, the important secondary bottom from which I expect a huge rally to occur. It is important to note some important factors about secondary lows. In gold especially, the retracement of the initial rally off an important low often retraces at least 62% of the rally, and many times as much as 70-85%. The decline that we have seen so far from the early Oct. $339 high to the early Dec. low around $276, is approximately a 73% retracement of the rally from the August low at $252.50 to $339. Going into next week I view the odds as 50/50 that a final corrective low has already been seen. That means we could still see another decline towards the $270-275 level in the next 4-8 weeks to complete the final secondary bottom.
Corrective declines can be very tricky and time consuming and
exhausting. One of the most important characteristics of a large corrective decline is to cause the investor sentiment that was finally getting hopeful, to again turn into despair, as hope of a further rally erodes and sentiment turns almost as bearish as was seen at the lows. That has happened to a fairly decent extent already, but if did see a further decline in January, below the $276 level in gold, then the Bearish sentiment would again likely hit a fever pitch, and most of the Bulls would give up. That would in my opinion be the recipe for another great, risk/reward buying opportunity. We will probably get a good idea after the first week of trading in January whether gold has already bottomed, or one
more leg down below $276 will occur, again I view the odds at 50/50.
With last months decline in gold to the $276 level, I have already had subscribers begin accumulating gold, gold options, gold stocks, and a Rydex Precious Metals position. If we go lower I will simply buy more, if and when gold declines to and below the $276 level. I think it is important here to focus on the 6-12 month outlook, and to be in big picture "accumulation mode" on any further weakness. Also of importance is the time frame here, gold and gold stocks often make important bottoms in this time frame, extending as far out as early March. January and early Feb. have often in the past seen very important bottoms.
The technicals in gold basis daily and weekly charts, and their
momentum oscillators, is also supportive of a major rally. The initial
rally last year finally turned my monthly oscillator positive, and it's only now reaching the "zero line". The recent decline the past few months has also put the weekly oscillator in very oversold territory, and it has turned higher the past 2 weeks as well. One more spike down would do little to affect this condition, and it would most likely set up the final Bullish
divergence basis the weekly oscillator if a marginal new low was seen below the $276 level. At the $276 low in early Dec., we hit the 200 day moving average in gold almost perfectly and found the bottom. That 200 day MA is pretty much going sideways at the 277-278 level, and I would not be surprised to see a quick dip below that MA, IF we get and need the one more leg down. That in my view would serve as the classic "springboard" to washout the weak longs and launch this market to the upside.
The XAU is always a helpful key in forecasting gold. Historically the XAU bottoms before gold and "leads" the way higher. So far we have that in place as well for the Bullish case. The XAU actually reached its major bottom on August 31, 1998 at the 48.67 level! Since then we have seen a series of higher XAU lows with gold making lower lows all last year until the bottom seen in August at $252.50. That was almost a FULL year from the XAU bottom of the previous year. While the XAU's Ewave pattern is not pretty or conclusive, the key is if one looks at a daily or weekly chart,
we have established a huge basing pattern from Dec. of 1997. That base is classic, technical long term bottoming action, and what is one very often sees before a major Bull Market move can get underway.
If one really wants to see a huge basing and bottoming formation
simply look at the silver chart going back the past 10-12 years! With the exception of a brief spike to the $7.50 level in Feb. of 1998, silver has been contained in a range between 4.20-6.20 for the past TWELVE YEARS! At some point, and I think it's getting closer, we will see silver embark on I what I believe will be a huge Bull move. And silver is often the leader in a major Bull move in the metals.
So a strong case can be made individually for Bullish action in gold, silver, and gold stocks. Taken as a whole these markets simply reinforce the Bullish outlook. It is also of long term importance to note that the CRB made what is very likely a major Bear Market bottom last summer as well. And recent Ewave patterns suggest a very strong up move in the CRB is likely in the first 6 months of 2000. This is simply more reinforcement from another different, but related sector that commodities and metals will rise from the ashes and begin multi year Bull Markets. The oil market the past year has already lead the way, and will likely continue its Bull market action overall next year.
This leads me to determine that the year 2000 will likely mark a
milestone year when paper assets(STOCKS) finally reach a major peak, and physical assets arise from their depths and move to the Bullish camp. It's been a long time in the making, changes like this do not occur in one day, or overnight. But all the "evidence" I have presented makes me believe that this scenario has a very high probability of occurring. When dealing with any market we can only deal with risk/reward and probabilities. And it's my opinion that the risk/reward strongly favors metals and gold stock investments for the coming year!
decisionpoint.com
|
