Precious Metals Market Timing
The miracle of Midway Island & Hurricane Katrina

Ron Rosen
Sep 6, 2005

Only in quiet waters do things mirror themselves undistorted.
Only in a quiet mind is adequate perception of the world"
-Hans Margolius

The great bear market of 1937 to 1942 bottomed approximately 6 weeks before the battle of Midway Island which is considered the turning point of the war in the Pacific Ocean. The U.S.A. Pacific fleet was devastated... there was only one aircraft Carrier left afloat. The fleet was virtually non existent. However the stock market knew ahead of time that the U.S.A. would be victorious at Midway Island and deal a severe blow to Japanese dominance in the Pacific area.

How did the market know? The market knew the same way it knows what effect the hurricane Katrina will have on the precious metals complex. Our problem is we don't know for certain what that will be. If the gold complex takes off and starts the next dynamic bull phase we can look back and see if there were any clues that we missed.

Perhaps the relatively mild correction in gold bullion is a clue. However some of the gold and silver shares collapsed 80 to 90 percent from their highs. The HUI index of unhedged mining shares dropped approximately 36 percent from its high so far.

Gold bullion rose from a low of $255 to a high of $458. That is $203 per ounce. So far that rise has been corrected by a drop of $47 or 23 %. Is that enough and are we ready to begin the next big move? There are many precious metals advisory services that say now is the time for gold to move up. Many say the Fed has no choice but to stop raising rates and start once again to expand the money supply. Hurricane Katrina is supposed to have forced the Fed's hand and they will stop raising rates.

If the Fed stops raising rates and gold breaks out of the 23 year down trend line we can claim that the relatively mild correction in Gold was telling the market that this was going to happen. If the Fed keeps raising rates and the precious metals complex heads down we will know there is unfinished corrective work to be done. Which will it be? The answer is we don't know. What we do know is the importance of self discipline.

Aristotle: Quotes on Self Discipline

"What it lies in our power to do, it lies in our power not to do."

We have many indications that there is more corrective work to be done. However regardless of all the excellent technical tools available to us we can't be certain of this result.

The fact that we can't be certain regardless of all the work we have done and all the technical tools we have available to us is why we have a plan of entry and or reentry into the Precious metals complex. I will outline this plan once again early next week.

Some of the most widely followed gold services say we are ready to break out to new highs. Other widely followed gold services say we will have a severe recession and or depression and gold will first decline with the stock market before it rises. We are back at square A. We don't know for certain and there are no claims by any highly regarded gold analysts that they know for certain.

So we utilize self discipline and wait until the gold market tells us what it will do by starting to do it. It is within our power to jump in before we know and it is within our power not to. The key obviously is self discipline. One thought that may help us maintain self discipline is that once this bull market in gold resumes it will most likely go higher than any publicly announced number. Bear markets have always gone lower than publicized expectations and bull markets have always gone higher than publicized expectations. By being patient and waiting, even if we pay higher prices, we will in the end have difficulty believing that we bought so early in the bull move.

I will go on record and say that in my opinion there is more corrective work to be done. My opinion is based on Gann cyclic studies, relatively similar patterns and forms, Delta turning points and long term wave counts. However the most valuable assets are discipline and patience until we head in one direction or the other.

If it is within our power to ignore discipline and patience, it is within our power to be disciplined and patient.

Stay Well,
Ron Rosen

email: rrosen5@tampabay.rr.com

Tee charts reproduced courtesy of The Delta Society International.

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