PM Decline

Well, everyone seems to be staking out bold predictions of a major USD bounce and the top for precious metals and their shares. EWI just sent out an alert that the USD has put in 5 waves (60% probability) and its all down from here for PMs. They could be right, but they are usually wrong. We'll see. I won't prognosticate here, just follow the chart clues. It will be very important to trade each instrument on its own technicals in the coming years IMO, more so than at any other time.

I count a major impulse down for the HUI from 245 as posted yesterday. We are currently in wave 3-4 of that wave set. That means there is at least one very bad down day shortly (think wave 3-5 down) probably Friday, and possibly another major low in a final 5th wave after that. This correction could last into the New Year with some nice trading opportunities long and short. 4th wave bounces are nice day trade plays in themselves, then catch the volatility in a sector like this and it can be great fun. Of course the reverse is true as well, so trade carefully.

Watch Friday this week. It could be a doozy on the downside.

As for what is in store over the intermediate term, I still think silver is the next ride to catch. I will be watching CDE, HL, WHT, WTZ, SSRI, SIL, and PAAS carefully.

The mega drop in silver is the usual bull market correction IMO. Look at any major bull market and the sudden pullbacks are typical after a steady grind higher. Time will tell.



cheers,

john

Thanks John- by top I meant price tops like gss for instance. Somehere around 5.56 fro a medium top price not 8 and change like most thought for Dec. Drooy- 2.13-2.30 for a top price this go around. I am with you that another shake out is looming.

Silent, is there any particular reason for Friday being a down day? Currently, I think we are in a wave 4 bounce that, if I am correct, should be ending today and be a down day. 5th wave down into friday is what I see but you never know with waves for sure. Scott

Hi Scott,

I had us in an impulse down (5 wave "C") from HUI 245. I was expecting a 4th bounce and a 5th wave down in that wave set to occur, but the final spike down to HUI 207 may have done it for the moment. Petch had the move down from from 230 to 207 as an extended 5th wave. Possible and if correct, that would mean the near term selling is done.

Very tough read here ST. I like silver stocks and am accumulating. Also picked up some PAL again. I don't buy the mega bearish arguments just yet. We'll let price action decide where things might go next.

Is this trying to make a turn??

http://stockcharts.com/def/servlet/SharpChartv05.ServletDriver?chart=$hui:$gold,uu[l,a]daclyyay[dd][pb50!b200][vc60][iub14!la12,26,9]&r=1674.gif

cheers,

john

Edited by SilentOne, 14 December 2004 - 05:04 PM.

EWI has missed the gold rally from inception...they are the worst TA people around...during thier last free week they were burbling about a wave 3 down for copper...of course it has done nothing but go up they have a deflation ideology and then twist their counts to show that there are other analysts out there that are somewhat bearish on gold and are more reliable...ARden sisters have a D wave decline coming..saville thinks the USD may have a strong rally...mind you he has beensaying that for awhile for myself I have been in cash in regards to gold....I really don't know which way gold will go from here....looking for the HUI?gold ratio to get back into bullish alignment... I can see some kind of C wave to finish off a corrective pattern and then up from there I am surprised to see how many people are citing "cycles" to declare major multi-year top in place....unless the clock stops and some kind of systematic deflationary tidal wave hits...I just cannot see that.

I agree SilentOne....... I was looking for 5th wave but it may be done already. have to take a loss on my puts........ still long gold options. Scott

we do have a bearish pennant IMO and we have broken out to the upside (NEM) but we are now below the high and the open....... could be a bearish throwover and the last of wave 4? Scott

Hi Scott, I'm not impressed with today's action. Poor run for the shares against some firming in silver and gold. The HUI rolled too easily. I exited recent positions and will watch. The pattern off the 207 HUI low is looking rather bearish. A retest of the lows seems inevitable, whether a 5th wave in this wave set or a corrective abc from last week's highs. cheers, john

Hey SilentOne, looking back at Dec 15th when I made that post the action so far fits my analysis... hopefully that was the end of wave 4 early dec 15 and we are beginning wave 5 down. even though price is lower than when I bought my puts the value of the puts is lower and time is running out. I am not very confident that we will get some follow thru tomorrow even though that is what should happen. would love to see one more drop. Scott

Hi Scott, My advise is to close your puts today. I think a PM rally is brewing shortly of some form and you cannot count on a 5th wave down here. It could simply be a triangle here and a bounce ensues. I used to play options quite a bit but have moved away from it. The problem is time value as you point out. Been right many times but lost out due to timing. You have to be so precise in order to win consistently. As a hedge I find it still works, but as for pure trading, its not always easy to make money in options. cheers, john