Posted at my PM blog today.
My PM Blog
This will probably be a very unpopular post on this forum. But I have gained a lot of knowledge in the junior area through this board, so I feel obligated to share what I see from a market cycle point of view.
A couple of weeks ago I said:
December will be an extremely important month which will determine the trend for a good part of 2008.
And given the performance this week, I believe we have our answer. We have to now look at the monthly chart and decide what is likely ahead from a cycle point of view. The following chart is extremely busy but here are the important points to take home.
1) The USD made an 18 month low in November as predicted and this will cap the PM sector upside for months to come. I do not believe that the XAU will take out its high anytime soon.
2) The Hurst 4.5 and 9 year cycles for the XAU have topped and are now putting downward pressure on the XAU and PM stocks in general. This will be in force until the important major nest of lows (2008 - 2009?). A cursory look at NEM's performance confirms that it has started a long "C" wave decline off last month's top. NEM topped back in Jan. 2006 and I noted this from a cycle viewpoint in March 2006. It proved to be a warning shot for the sector. Other big cap stocks like GFI tell the same story.
3) Both XAU 4.5 year highs were right translated which is bullish long term. This means that as gold/PM stocks emerge from their next major cycle low (4.5/9 year lows), gold will begin a very strong rise.
4) This sector will now correct considerably in time and/or price. There is no valid reason for me to hold long term positions at this point in the cycle. Cash raised should be deployed in other markets until the next major low unfolds.
5) The XAU is now 7+ years along in its 9 year Hurst cycle. The last two such cycles lasted 6.5 and 8 years. Thus the XAU should now decline into whatever nest of lows lies ahead for the 4.5 and 9 year cycles.
There is a chance that gold makes another attack on $900 - 1000 from a spring low into year end 2008. I see this as being a very remote possibility, certainly one I will not speculate on with positions of any size. This would come on the presumption that the 4.5 and 9 year nest of lows was made last summer (Aug. 2007). I see it as extremely unlikely, but possible if the world is heading into a hyperinflationary period from 2008 onward. The best strategy is now to wait for the coming low and conserve/ expand capital within other markets.
I sold my long term PM funds in early Nov. and I sold approx. 1/2 my gold and silver bullion at the same time. I'll hold the remainder of the bullion as a hedge and LT hold.
I project the next major low will come as early as 2008, but could extend to 2009, and that the next major high and selling point for gold will probably come in 2013. This is likely if we get a major nest of lows for the 4.5 & 9 year cycles in 2008 - 2009. It is much too early to say.
I hope with this analysis you obtain some perspective of the risk now involved with PMs in terms of time and price. The underperformance of NEM through 2006-2007 served as a warning that the bull cycle was tiring. The weak performance of the juniors since last winter has been the second warning.
I predict that by the time the XAU finds its next major cycle lows, the XAU will come down through its 50 month MA, which now stands about 120ish and is rising.
cheers,
john
John, with all due respect, if I recall correctly, you have been cautious/bearish on PMs for some time now. For example, on Sept. 13, you wrote you were out of longs:
http://www.traders-t...?...c=76145&hl=
While I dont disagree with your longer-term view that we will retest the Aug 07 lows (eventually), I also dont see anything that conclusively rules out new IT highs until 2013, as you suggest. Moreover, nothing has shown any real decoupling between the PMs and the broads. So unless one believes the latter is headed straight down, it's all trading in sync. From a TRADING standpoint, the difference between these two scenarios represents major stakes here (+/ 30%).
I sold my PM longs on 11/2 at HUI 439 (posted here) and have been scalping on the long side since. Im sticking with my call for HUI 360-370, followed by new highs, posted on 11/7:
http://www.traders-t...?...c=78911&hl=
Ill be buying HUI 360-370 aggressively, and believe we are getting very close in time to those buying levels. If not new IT highs, I expect at least a minimum bounce to 400.
While I respect your knowledge and experience in trading these markets (and dont have sufficient knowledge of Hurst cycles myself to address those points), we must all follow our own TA paths. All the best.
Edited by beta, 16 December 2007 - 09:41 PM.
I am not buying yet, but........... a close above $44 on the GDX takes it up and out of the 10 minute 5 day chart falling wedge pattern. If we get some good upside volume with it then it would be a ST buy signal for me. 
