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Will Golds carry this bull market to its finish?Contributed by Olaf Sztaba It all started in October 2002. The advance that followed was spectacular. The first ones to participate were the banking and insurance sectors. Then technology stocks had their moment along with Golds (the odd man out in this cycle). The market worked through all sectors until it got to energy, materials and consumer staples. Now, which sectors will take this bull market to the finish line? For many months we have been saying that the NASDAQ was unlikely to lead this bull market. History suggests that after the bubble bursts (the U.S. market in 1929, the gold market in the 1970s or the Tokyo market from the 1989 peak) the market goes to sleep for a long time, usually 5 to 6 years. In addition, the leader of one cycle usually lags during the subsequent cycle. For example, the NASDAQ, which was a leader in the last market cycle (1998-2000), is likely to be a laggard this time around. Energy and metals have been good performers through most of this cycle. During the first months of this bull market, energy and metal stocks moved higher at a very moderate pace. This year it changed, and the advance in energy and metals accelerated. Now the energy sector is in its "sweet spot" as both intermediate- and long-term cycles work in favour of the group (energy stocks are usually the late- stage leaders). In addition, history shows that the energy sector is strongest from the end of January through mid-May. The TSX Energy index has gained an average of 11.7 per cent during this period in the past ten years. Taking into account the age of this cycle and that the long-term cycles resonate towards "hard assets," this window of opportunity for energy stocks could extend into the summer months. We have shown the numerous abnormalities of this cycle, among them being the unusual behavior of gold stocks, which more recently did not participate in the advance alongside energy and metals. Our research shows that this may change soon. To summarize, in 2001 and 2002, gold and gold stocks were on the rise. In 2003 the advance accelerated. The charts of many gold stocks started to move in a parabola. As a result, the start of 2004 brought about a correction. The decline was as strong as the advance that preceded it. Most gold stocks fell below their 50-day moving averages and, later, below their 200-day moving averages. Finally, in May 2004, gold stocks stabilized and started to build their intermediate-term basing formations. Now, the positive sentiment towards gold stocks is slowly evaporating. The latest sell-off in this sector should cause even more bulls to quit and that's exactly what golds need now. At the start of this bull market in October 2002, gold and gold stocks were already in the middle of a powerful advance which continued to the end of 2003. However, during the last 15 months gold stocks staged a correction, thus surrendering the leadership to energy and metal stocks. This should change soon as gold stocks, after months of base building, are ready to carry this bull market to its end. For individual gold stocks
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