Golden Bull Serves Correction
Time!
Contributed by Olaf Sztaba
NA-Marketletter
www.na-marketletter.com
June 15, 2004
INTRODUCTORY SUMMARY: That's enough! The golden bull went
too far, too fast with prices rallying to 16-year highs of just
above $430 per ounce. As a result, correction forces overcame
the excited bulls and a correction has begun. There is no point
worrying now. The secular bull market is right on target. The
ongoing correction is just one of those readjustment stops that
allow market forces to address the excesses of the last up-leg.
GOLD NOW: In our last
Market Comment we argued that: "The latest mini-run could
be a reaction to a dramatic decline and should not be viewed
as the beginning of the next major up-leg, not just yet. There
is a strong possibility that what we saw was just the test of
the averages and the corrective move will continue." Indeed,
gold's mini-run stalled at its 50- and 200-day moving averages
and the metal currently trades below those two trend indicators.
While the shorter one (the 50-day MA) is trading downwards, the
longer one (the 200-day MA) is still shaping to the upside.
Gold's latest manoeuvres don't seem to be well received by the
growing army of goldbugs. Disappointment is in the air. Again,
there is no reason to be angry. This bull is strong and well.
The correction is a process of adjustment to higher prices and
preparation for another up-leg. The current corrective move is
the most significant since the bull market in gold started. It
will last as long as it takes to eliminate the greatest number
of players. It will bite long enough to disappoint and hurt the
most patient and passionate. Finally it will end when most give
up.
Chart
courtesy of Stockcharts.com
Having said that, here is the
technical DNA of the end of the correction. Watch for the following:
- An oversold condition
.
- The completion of an "a-b-c"
move, when "c" is lower than "a"
.
- A positive divergence by the
MACD (a condition when a lower reading by gold is accompanied
by a higher reading on the MACD)
.
- A negative sentiment towards
gold and gold stocks
.
- A rally that lifts gold and
the gold averages above both the 50- and the 200-day moving averages
Finally, the bull market in
gold is usually asleep during the February-August period and
it is not until September-February that the yellow metal acts
again.
In sum, gold, as projected,
hit the 50- and 200-day MAs and turned down. The next leg of
the correction is now underway. It should provide another buying
opportunity for all latecomers.
A SECULAR (multi-year) PICTURE: In
the long haul, gold should lead the pack. All conditions are
set for the yellow metal to continue its advance towards an all-time
high. The underlying conditions that feed the ongoing bull market
in gold may change over time but the golden multi-year rally
will continue until it reaches all previous set records and beyond.
It is here to shock the investment community. It is here to take
only the most loyal and disciplined along for the ride.
Gold and gold stocks continue the adjustment process. The
excesses of the last rally are being eliminated. The ongoing
correction offers another opportunity to pick the best stocks
one-by-one as they become attractive. This correction may stretch
a little bit longer than anticipated but the up-leg that follows
should provide adequate reward for those who hang in there.
For individual gold stocks recommendations, sign in for a free
trial at www.na-marketletter.com
June 12, 2004
Contributed by Olaf Sztaba
Email: osztaba@na-marketletter.com
Website: www.na-marketletter.com
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