Tuesday, December 1, 2009


Let me start off by showing you a longer term weekly chart of gold.

You can see these intermediate term corrections come like clockwork about every 15-25 weeks. Some run a bit long like the cycle that bottomed in Oct. `09 and some are short like the last cycle in July. But whether they end up being long or short they always appear.

The problem right now is that gold has rallied for 21 weeks with no sign of anything that can even remotely be considered an intermediate term correction. Now unless this time is different (it never is) then gold is now due, actually over due, for that correction.

This is why I think it's dangerous to keep pushing the pedal to the metal at this time.

Now let me show you another chart. This one is the mining index.

You can see the HUI has rallied right up to the top of the trend channel that it has been in for the last year. Now if gold was on week 10 of its intermediate cycle I would say the miners are going to break out of that channel. I actually expect them to break out and move into a parabolic rally during the next phase of the C-wave. But 21 weeks into the rally is probably not a good time to bet on that parabolic move.

In order for gold to continue this rally and reach the level that I think it's going to eventually reach ($1500-$1800) we absolutely need to see a scary correction. Gold desperately needs to wash out all the bullish optimism that is so prevelant in the gold sector right now. A scary 3-4 week correction would reset sentiment back to levels of bearishness that could spawn a monster second phase of this C-wave.

More in tonights report.