Precious Metals Market Timing
Trend Changes

Ron Rosen
Aug 3, 2005

"Time is more important than price; when time is up price will reverse." - W.D.Gann

One of the most difficult things to accomplish in the markets is to identify a probable change in the trend that will be more than a momentary thing. At the very top we tend to be extremely bullish and at the bottom we tend to be very bearish and disgusted with what's going on unless we are short. The importance of being able to identify a change in trend is indisputable and absolutely necessary if you want your assets to stay invested with the profitable flow and direction of the markets. There are a number of ways to identify a change in trend.The two I have found the most helpful are;

1. A completed 5 wave monthly or weekly move.

2. An over balancing of time which is the method Gann used.

I will try to explain both methods. They are not difficult to understand.

I use the monthly and weekly patterns to help identify completed 5 wave moves because they have proven to be most helpful and reliable. I have found that shorter time frames do not give us the information we need to determine a possible change in trend.

I distinctly remember that when the HUI reached its top area I was really excited that now it's ready to head to the moon! The gold bug community was foaming at the mouth. Pay day was here! "Now all those foolish doubters will see what we mean when we say BUY, BUY GOLD SHARES AND GOLD COINS IF YOU WANT TO SURVIVE."

I was ready to run to the bank empty all my savings accounts, sell all my treasury paper and whatever stocks I had and buy only Gold and silver related items. As I stood up from my desk I said, "Wait a minute Rosen, what does your work tell you?" I sheepishly sat back down at my desk and marveled at the fact that even after all these years I could still get excited at exactly the wrong time. Fortunately I have done a lot of work over the years and finally learned to trust it. For the simple reason it works. The work I have done involved studying what other people have discovered to be very valuable. However I discovered on my own that the more patience I have the faster things get done, and done properly. That was the most painful process i.e. "If you want to get rich fast, Take your time." Talk about a Conundrum, phew, what a tough lesson to learn!

I sat back down at my desk and mumbled to myself, "You have been staring at this completed monthly five wave up move and now you want to buy?" I did not buy, I sold. I announced this fact and gave the reasons why on a very popular investment web site. There was not a soul on that site that agreed with me and there were some who said so in no uncertain terms. So be it, on to the evidence and charts.

I have posted below two charts of the HUI. One is a monthly and the other is a weekly. Above both charts I have placed the basic pattern of a five wave move. The fifth wave involving the HUI was larger than the third and involved an extension which usually follows a triangle in the fourth wave position. This is exactly what we have in the monthly and weekly charts of the HUI. The correction of this five wave move up should be three waves down and at the very least return to the beginning of the extension. Price will more likely return to the area of the previous fourth wave which is the area between 100 and 150. It has not yet done so but according to my vision is about to do so, at least to a high degree of probability. Oh yes, I have also learned not to be adamant about my opinions. That too was a painful lesson therefore I think in terms of probabilities not certainties and that is the way I will continue to express myself for the simple reason that when we look for the future path of the markets the only thing available is probability.

Next after the charts of the HUI is the method for determining a change of trend discovered by the brilliant W.D.Gann.

FROM THE MIND AND EXPERIENCE OF W.D.GANN

OVERBALANCING OF TIME

"Time period is another way to tell when the main trend is changing. When a campaign has run three or four sections and the TIME period on a reaction exceeds the greatest time previous reaction consider that the main trend has changed.

"Remember that the most important thing is the time period and when time overbalances or shows a change in trend, it is much more important than a percentage of prices.

"Time period: Another way to tell when the main trend is changing. Rule: When a campaign has run three or four sections and the TIME period on a reaction exceeds the greatest time of a previous reaction consider that the main trend has changed.

"Go over the records and find the greatest time period from any minor top or the duration of a reaction in previous sections of the Bull Market. If you find that the greatest reaction has been about four weeks, the first time the market declines consecutively for five weeks or more, it is an indication that the main trend has changed and short sales on a secondary rally will be appropriate."

I have posted three weekly charts of gold bullion showing the time involved with each correction since the beginning of the bull market at $255. The charts overlap so you can pick up where the previous chart left off. The very last chart of Gold bullion shows that if we are experiencing an expanded flat correction, which I believe we are, this last correction is 65 weeks old even though it made a new high during the correction. The new high would be wave B. If we only measure time from the actual high price of $458 it is still the longest correction time wise and has a long way to go before it could possibly make a new high. These charts indicate, according to W.D.Gann, that because the time spent correcting in the last correction is greater than all the other corrections, the trend has changed. I believe the top was reached at $433 for completed wave purposes and not $458 even though $458 was the actual price high. According to my count this correction is 65 weeks old and not yet completed.

I have posted this chart of gold bullion from the 1975 period several times in past reports. Since, in many ways we, have been repeating the performance of the gold bull market of 30 years ago and if this performance continues we should be very near a severe drop in price for gold. The fact that the HUI has been underperforming bullion recently is a good indication that a drop in bullions price may be forthcoming soon. The shares do tend to lead the bullion. The chart below is from 30 years ago and demonstrates the severity of the drop back then.

The seasonal chart calls for a low in late August or early September.

Newmont Mining is one of the premier mining shares in the HUI. It has not made a new high for 19 months. The volume and other indicators have been trending down for quite some time.

This daily Delta chart of the HUI shows a Delta medium # 3 low due in mid to late September.

This monthly Delta chart shows the parabolic rise of the HUI being broken to the down side.

The last two charts are weekly charts of silver showing the amount of time spent in each correction since the bottom at $4.01. The bottom of $4.01 occurred just about 30 years after the bottom at $1.28 in 1971. The current correction is obviously consuming more time then the others.. Since I have previously stated my opinion that silvers performance over the years has been "cantankerous" at best I don't want to draw a premature opinion of what its performance in the future will be. However the bullish talk and opinions on the future price of silver have not only been huge but close to, science fiction. This in spite of the fact that price has only gone from $ 4.00 up to $8.50. To the sky with price??? Maybe, maybe not. However the next phase should be more powerful then the last one.

Stay well.

Ron Rosen
email: rrosen5@tampabay.rr.com

Tee charts reproduced courtesy of The Delta Society International.

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