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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (24233)	1/8/2005 1:23:15 PM
From: Crimson Ghost	Read Replies (2) \| Respond to of 110194

Golden Wall of Worry By Mark Hulbert CBS.MarketWatch.com Friday, January 7, 2005 ANNANDALE, Va. -- Gold bullion's plunge over the past month is likely to be a mere correction within the confines of a long-term bull market. That at least is the conclusion of contrarian analysis, in light of how quickly most gold timing newsletters have jumped on the bearish bandwagon. More typical of a market top is stubborn bullishness, and what we've seen in recent weeks is anything but. Consider the latest readings from the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average exposure to the gold market among a subset of short-term gold timing newsletters tracked by the Hulbert Financial Digest. As of Thursday night's close, the HGNSI stood at negative 23.2 percent, which means that the average gold timer in this group is actually net short the market. As recently as the end of November, when an ounce of gold bullion was trading for nearly $30 more than where it's trading today, the HGNSI stood at plus 78.6 percent. That means that, over the past month, the gold market exposure of the average gold timing newsletter has dropped by more than 100 percentage points. That's more than just an orderly retreat. That's a veritable rush to the exits. On the contrarian theory that markets like to climb a wall of worry, this is good news. In fact, the average gold timing newsletter that the HFD tracks is now more bearish than at any time since late 1997, more than seven years ago. Furthermore, the HGNSI's level at that time -- negative 31.3 percent -- was not that much lower than the current reading. It's amazing that the HGNSI today is anywhere close to its low level of late 1997, if you stop to think about it. At that time, gold was more than 15 years into a severe bear market. Despair was an entirely understandable reaction to where the market stood. Today, in contrast, bullion is higher than it at any time in years, but for a few trading sessions at the end of last year. And yet the average gold timer appears to be as dejected as he was near the depths of a punishing long-term bear market. Another perspective on gold market sentiment comes by contrasting gold timers' recent behavior with stock market timers' reaction in March 2000, at what turned out to be the top of the stock market and the bursting of the Internet bubble. During the first 10 percent correction after that top, the average stock market timer actually increased his equity exposure. Now that is stubborn bullishness. And we all know what happened next. This is not at all the situation that currently prevails a