Oldtent Archives 2007 - 2008

The other day for the editorial I went through the LT version re-checking the work I had done from 2005 that still seems to right using certain chart reference points. Unfortunately, the sideways move from about Feb 2007 to August appears to be a bit of an aberration to me. Once a market has such a spot in it, I suspect it can cause some minor differences over the interim. That is the same where the psychology of investors is affected by some short-term problem at a mine that does not affect the intermediate-term fundamentals. Thus, if one looks at the work and thinks the time-frame makes the move “un-doable” there might be a bit of a time lag due to what I mentoined, above. Thus, that top could come in as late as August or September. Or we should see an absolute rocket shot coming to catch back up with the fundamentals.

August would not fall out of line with my work as the May 2006 high came in 3 months later than I had expected, but right on the mark as to price. What would need to happen to have a later “time component?” I have asked myself that several times. I guess one possibility would be for Gold and Silver to have a high level consolidation where the PM stocks moved on up. That is possible since investors psychology would allow for a mark-up in the price of the PM stocks if they felt the PM stocks were behind the funamentals AND that Gold and Silver were going to stay at higher levels, then move higher.

My opinion of what limits the time-frame for the PM stock move comes from the fractal relationsip where somebody tends to hammer the PM metals, the PM stocks, Oil, etc…….awhile before deflationary scare bottoms come into the general markets. I expect the Dow to bottom in the 4th quarter of 2008 in a deflation scare.

If I can find time to look at the HUI chart from several directions on charts, I might be able to answer your question better. I think that the psychology that we are fighting is the average investor watching the deflationary news cross the airwaves while at the same time assuming Gold will not get through $1,000. Yet, there is no horizontal reistance above the HUI at this time. There is also no major angled resistance above the HUI should we cross the line I showed in the chart a bit, ago. Thus, there is nothing but “air up there.”

Thus, the way I read the environment is like this.

1) No resistance above the PM stocks as shown on my HUI chart, but also on the individual charts of the HUI components with the “middle line jump the creek final resistance.”

2)Potential PM investor psychology focused on deflation with massive inflation showing in all “real things.”

3) Weakness in the general markets that are headed even lower into the 4th quarter of 2008 as a source for funds should the Dow continue down while the PM stocks roar. Also, noting that interest rates can do little but act as a short-term support for general stocks with the deflationary new confined to the general stock sector inundating the airwaves.

4)An environment not conducive to Bond market strength with the Fed being forced to cut rates.

5)Commodity markets that have already run extremely hard on the upside to show “inflation” in the producer pipeline, but commodity markets that might be ripe for a little profit taking.

6)That leaves the HUI with no resistance above, lagging the fundamentals of extremely much higher PM Metal pricing both in real-time (earnings) plus on a 3 year average (reserve revaluations upward), in an interest rate environment that is very supportive of higher PM stock pricing as relative rates are already crazy and going crazier, with liquidity inflow potentials from other markets “including stock investors” as many stock investors think in terms of stocks, and TA readings that are potentially explosive.

If you look at charts of $Plat, $Gold, $Silver,etc…..in a “momentum run environment” the RSI has only dropped to retest the 50 line. That is true of the HUI at present, also. A move up above the final vestiges of chart resistance at this time should give a catapult to the PM stocks. You know as well as I do that the big trading firms like GS love to take a market higher under the right circumstances and just keep going as they bury the shorts and leave so many chasing as they try to trade it. IMO, the news that will be released will be “higher underlying Gold and Silver prices” supporting earnings, a vastly higher 3 year average Gold and Silver pricing that will cause investors to revaluate reserves much higher, and the current interest rate environment leaving other investment choices in the dust in terms of inflation.

Should it play out, this should be only a glimpse of what we will see after the next intermediate-term correction when the real PM parabola begins. Yet, the environment for the explorers will likely be very prominent in that parabola…….why? My guess is that the way the fools on the Street that push out all of the investing info to the public thinks, they will at that time cite the higher earnings expectatons for producers to be favorable, but to be limited by the rising costs of mining……….yet, explorers with reserves in the ground will be seen as shielded from the rising costs of mining as they are not producing, but will see their reserve valuations explode upward, not only based on higher Gold and Silver pricing, but reserve valuations will move from the view of the “trailing 3 year average method” to the panicked “future price of Gold and Silver method” as Gold and Silver go ballistic. In that environment smart money will consider the lagging price of explorers along with the inherent leverage……and a small market like the PM stock market does not need a lot of money flow to take it to da moon when investors start to panic over inflation eating their savings up.

I apologize for the long-winded answer, but as long as I was going, I figured I’d take it all to the end.

No time to edit………