Technical observations of RossClark@shaw.ca

Bob Hoye
Institutional Advisors
Posted Nov 20, 2009

It seems that everyone has a target for gold. With thousands of analysts, someone is bound to get a bulls-eye. Our work has presented measurements based upon the minor consolidation from February ($1034 & $1100), intermediate calculations based upon the eighteen month consolidation ($1150 and $1300) and longer objectives of $2000+ based on the ‘Battle at 1000’ as it related to the Dow of 1966 to 1982.

However, the most important fact is that the various consolidation patterns in gold (Feb ’09 –Sept ’09, Mar ’08 - Sept ’09 and Jan ’80 – Sept ’07), have been wide enough and deep enough to accumulate a significant amount of stored energy capable of producing a prolonged rally. It is only after the market experiences an exponential move in multiple time frames that we will consider it to be nearing an end. Last Thursday’s daily Upside Exhaustion alert was just the first of what could become numerous daily, weekly and monthly signals over the next few years. Each daily and weekly occurrence can put the market into a position of short term vulnerability, offering attractive buying opportunities on pullbacks within the rising trend.

The best of bull markets will generate overbought readings on expanding volume in the early stages following a breakout of a base or consolidation. This ‘sign of strength’ was seen in copper breaking out at $1.50 in 2005 on the way to $4, crude oil passing through $40 in 2005, the Dow Industrials through 1000 in 1982, gold through $250 in 1979 and silver through $3 in 1974. The recent overbought reading in gold is constructive. It emphasizes the fact that money is truly moving into the market at an accelerated pace. Dips are to be bought.