Thursday, February 11, 2010


When I see the frustration levels that we saw last week amonst gold bugs I know the bull is doing its job.

When I see someone slamming body parts in a file cabinet, I know the bull is intact.

When I see cavity-boy and his Baby Ruth's I'm confident the bull is still alive and well.

These are all signs that the bull is doing what it needs to do to shake off as many riders as possible. And that is exactly what must happen before a big move can begin.

I've said it before, the bull will either scare you out, or wear you out. This is how big moves start. They first shake everyone off. They have to make it almost impossible to buy. Just at that point when you feel like you're going to throw up that's when the next leg up begins.

Gold has gone through two scare you out phases and three wear you out periods during the last 4 years.

Amazingly enough the bull has now managed to shake just about everyone off and he's done it without even coming close to testing the $1000 level. As a matter of fact he hasn't even tested the $1034 breakout.

I think the brief break below $1075 last week was very telling. There had to be a ton of sell stops below that level. You just know every technician in the world was selling at that point. But gold didn't follow through. Someone was buying what the dumb money was selling. If the trend was down gold should have plummetted. If this was a D-wave gold should have crashed. It didn't!

The miners on the other hand almost always follow the scare you out strategy and this time was no exception. It probably explains how gold managed to create such negative sentiment despite the minor correction.

At 11 weeks the dollar is now in jeopardy of starting the decline into the intermediate cycle low at any time. That move, when it starts, should power the second leg of this C-wave.

For those that can hang on to the bull through all his tricks the reward will be big.