Precious Metals Market Timing
From the October 15th Report

Ron Rosen
Oct 17, 2005

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

GOLD AND SILVER SHARES
Gold and Silver shares topped in December of 2003. They have undergone a long, painful and sometimes confusing correction. I believe the correction is almost over. There are perhaps 3 to 5 months and one more move down to complete this exhausting process. Throughout this corrective period there has been a great deal of bullish talk and writing about the precious metals and how high they will fly. I suspect the final wave down will tend to diminish the bullishness to some extent. Let's say that we are taxiing down the runway and there is just one more pothole left. Once past that, we are ready to lift off. In this report I have attempted to show just how difficult it is to project what type of correction we are undergoing. It is well known amongst those who seriously study wave theory that corrective waves are extremely difficult to identify, compared to what is called impulse waves. I was able to identify the completion of the first phase of the bull move in the HUI with a fair amount of ease. Although I did say to myself, "Can this really be the top of the first phase?" The reason I questioned my opinion was the extreme amount of bullishness at that top. There were a number of very prominent analysts and letter writers that differed with my interpretation. Some folks were quite annoyed at my opinion. I have constantly stated that if, at any time, the HUI closes over 260 and gold bullion closes over its long term resistance, we should add to or reenter the market at that time, regardless of my interpretation of the correction. The reason for that statement was and is the fact that corrective waves are very difficult to hone in on with a high degree of probability. It appears that the closer they are to completion the more identifiable they become. Thus in my opinion there is one more wave down. A number of good technicians disagree with that opinion. There are opinions and then there are opinions. Here's one for the road. When the silver shares finally break out and start to move they will appear to be jet propelled. I don't think we can or will miss the take off.

CORRECTIVE WAVES
"Markets move against the trend of one greater degree only with a seeming struggle. Resistance from the larger trend appears to prevent a correction from developing a full impulsive structure. The struggle between the two oppositely trending degrees generally makes corrective waves less clearly identifiable than impulsive waves, which always flow with comparative ease in the direction of the one larger trend. As another result of the conflict between trends, corrective waves are quite a bit more varied than impulsive waves." E.W.T.
I originally thought this would be a three wave "flat" correction. It has morphed into a different type as I recently explained. I now believe one more wave down is necessary for completion. You can see that the five waves of the upward impulse are much less complicated and easier to decipher. The only confusion might be over wave five. Wave three is supposed to be the biggest. However, in commodities and commodity producing stocks, wave five is most often the biggest. Wave four was a triangle, which is what it should be if wave five is going to be very big. It really was easy to read the first bull phase. Right now trying to interpret this corrective wave, I feel as though I am peeking through a blindfold. However, please allow me to whisper, "I think I am correct that there is one more wave down."

I have written many times that I consider silver to be a "cantankerous" metal. It is cantankerous in the sense that its moves can be sudden and violent. However, the moves do conform to Delta turning points. That is very much to our benefit. Silver bottomed and started its bull market in October 2001. This was 6 months after gold bottomed in April 2001 and started its bull market. It appears to me that silver is completing a large triangle. I have labeled the monthly chart showing that silver is still in its first phase up. The triangle is wave four. Triangles almost always appear as wave four. Wave five will follow to complete silver's first phase. Once the first phase is over, a probable drawn out correction will take place. I have included charts from the 1970s' silver bull market to show that it appeared to lag behind gold then, as it appears to be doing now. I compare its 1970s chart to gold's 1970s chart. It is easy to see the different timing by comparing the two charts.

Gold topped in January 1975, and silver topped in the first quarter of 1974. However the gold top was an irregular flat that I will discuss in the future.

WIDELY FOLLOWED SILVER STOCKS
PAAS appears to be making a 5 wave triangle. Delta Long Term # 12 low gives us a great clue that the fifth wave of the triangle will bottom at that time. The long term Delta turning points have delineated the tops and bottoms of this triangle. LTD numbers 8, 9, 10, 11, and 12 have provided us with the clues that only members, directors and subscribers to this letter will ever have. They are absolutely invaluable.

Apex silver appears to be in the process of completing a 5 wave declining wedge. Once again Delta Long Term numbers 8, 9, 10, 11, and 12 have provided us with the approximate time of completion of the wedge.

SIL
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SSRI appears to be working on a 5 wave triangle and will most likely bottom approximately the same time as the other silver shares.

I am not certain what CDE s' corrective formation should be called, but it usually follows the rest of the silver shares up and down. Lower highs and lower lows is the best description. It also should bottom at Delta Long Term # 12 low.

CDE
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Hecla will be completing a 5 wave declining wedge.

HL WEEKLY
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HL MONTHLY
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GOLD AND THE GOLD SHARES
Gold bullion has been rising in a remarkably steady fashion without any apparent prolonged corrections. Delta Long Term # 3 high may have arrived late. Delta Long Term # 4 low is due to bottom in February 2006. Some kind of a sell off should appear between now and when Delta Long Term # 4 is due. The gold shares however have experienced a prolonged, approximate two year corrective period. It does not appear that the correction is over.

GOLD MONTHLY
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The HUI should have one more wave down and complete the correction at Delta LTD low # 12.

HUI WEEKLY
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There is a good probability that the final fifth wave of the correction in the HUI will go below the previous two down waves. If it does, the major trend line of the first phase will be broken to the down side. This would be normal because each phase usually establishes its own major trend line. See the descriptions below.

HUI MONTHLY
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Each down wave of the HUI went approximately 50 points below the 200 day moving average. If we have entered a fifth and final wave down it also may go about 50 points below the 200 day moving average. This would bring the price down to the next obvious support area of 150. If the 150 area is going to be the bottom, it should produce a severe wash out. Each of the previous two waves down have been accompanied by a high MACD reading.

Newmont mining is the premier gold mining company in the United States, perhaps the world. It is also in the process of completing wave # 5 down. If the price goes as low as the previous two waves, NEM will break below the major rising trend line. This would complete the correction between the first and second phase.

NEM MONTHLY
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If the precious metals complex completes its corrective process over the next several months as I have described above, there will most likely be a great deal of talk about deflation. I imagine the Federal Reserve will be blamed because they have been raising interest rates and telling banks that they must tighten their lending requirements. In addition to that, the new bankruptcy laws will be in effect early next year and many people will be excluded from wiping out their debts. Minimum monthly payments on credit card debt will be doubled from 2 % to 4 % by January 2006. Consumer spending will probably be curtailed because of these new restrictions. What we will know, to a very high probability, is that the correction in the precious metals complex is over amidst the cry of, "Deflation is here." However, whatever is here early next year will be what the correction in the precious metals complex has been discounting for slightly more than two years. Whether there is deflation or inflation, the precious metals complex should be ready to move up in the next bullish phase. It will most likely make the first phase pale by comparison.

I will begin my hypothetical trading program when the next bull phase starts. The trading program will be taking advantage of the Delta medium turning points. They will provide us with multi week trades. If we use only the long trades, there should be about 5 or 6 trades a year. There will be 5 or 6 in the gold complex and 5 or 6 in the silver complex. That will be about 12 multi week trades a year. Each trade may involve a number of items. I am not inclined to recommend short sales. They can keep you awake at night.

Stay Well,

Oct 15, 2005
Ron Rosen

email: rrosen5@tampabay.rr.com

Tee charts reproduced courtesy of The Delta Society International.

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