COT Bearish Signal HUI

Long Term I remain bullish on gold but gold stocks look ready for profit taking.






"After a wild ride to the stars, my setups for gold, the HUI Gold Bugs Index and USERX U.S. Gold Fund have gone bearish. Sorry, gold bugs and dollar-haters!"
Alex Roslin see COT Link

The broad market DJIA S&P 500 remains bullish.

Newmont Mining Corp. shares fell more than 7% Wednesday

Newmont Mining Corp. shares fell more than 7% Wednesday after the gold producer warned of higher costs from its Nevada mines and dwindling reserves from older pit operations. I am still looking for a 50% retracement of HUI or more.

Gold ends slightly lower

The velocity of money is not a constant

Since 1970, most cuts by the Fed (1970, 1974, 1985, 1989, 2001) were followed for at least two years by massive declines in the inflation rate. There were, however, exceptions: 1980 (which was quickly taken back by Mr Volcker) and 1998 (which was also quickly taken back).

Which leaves us with the following question: Will the recent Fed cut prove to be right? Or will it be, like 1980 and 1998, a mistake quickly taken back?

Gold Seasonality

Interestingly this monthly seasonal approach confirms the four outstanding seasonal long points that the annual gold seasonality revealed. Gold tends to be weak seasonally in early January, mid-March, late July, and mid-October. These four points, as well as a fifth in early June, represent the times of the year when gold is most likely to be seasonally weak and hence the highest-probability-for-success times to add long positions.

Possible Takeover candidates Gold and Silver Stocks

On my watch list include possible takeover candidates: TGB WGDFF KGC AUY GSS SLW HL SBB.V FR.V SA

Inflation Concerns

Nowadays, there are numerous signposts indicating that inflation in the United States is getting out of control. The US M3 money supply is 14% higher than a year ago, its fastest growth rate in 35-years, the US Dollar Index is plunging to 15-year lows, gold is surging toward $725 /oz, a 28-year high, crude oil is cruising above $80 /barrel, wheat prices have doubled to $8.75 /bushel, an all-time high, and the Baltic Dry Freight Index has zoomed 300% higher to stratospheric levels.

The Federal Reserve's first interest-rate cut in four years has weakened the dollar and sparked inflation concerns, analysts said. The Fed cut its benchmark interest rate on Sept. 18 by half a point to 4.75 percent. My forecast Sept 8 for a .5% rate cut was correct. I was wrong to anticipate a selloff on the news but I still am looking for a 50% retracement of the last move of the HUI.

``The decision to no longer be concerned about inflation has sent the dollar dramatically lower and gold dramatically higher,'' said Dennis Gartman, economist and editor of the Suffolk, Virginia-based Gartman Letter. ``The Fed has unleashed an inflationary force.''

The best way to become a millionaire is to borrow a million dollars and have your renters pay it off.
Jack Miller

Still looking for market correction

So far I have been absolutely wrong in waiting for a correction in broad markets and in gold and silver. But I have learned patience over the years and I will wait until early Novemeber to take new positions.

Silver Stocks

Silver is even more bullish than gold. I look for one more pullback and then I will buy these few silver stocks and the gold stocks on my watch list.

Where are we in gold cycle?

Answer the following questions:
1) Is the rate of inflation higher than 6 months earlier?
2) Are treasury bond yields lower than 6 months earlier?
3) Is the NAPM Purchasing Managers Index below 50?
4) Is the Gold/XAU ratio above 4.0

See below for yearly PMI
Month PMI Month PMI
Aug 2007 52.9 Feb 2007 52.3
Jul 2007 53.8 Jan 2007 49.3
Jun 2007 56.0 Dec 2006 51.4
May 2007 55.0 Nov 2006 49.9
Apr 2007 54.7 Oct 2006 51.5
Mar 2007 50.9 Sep 2006 52.7
Average for 12 months – 52.5
High – 56.0
Low – 49.3




When all 4 questions are answered yes, the XAU has soared at an astounding rate of 123.63% annualized. In contrast, when none of these have been true, the XAU has plunged at -53.21%.

Read these links for good essays on intermarket analysis:
http://www.gold-eagle.com/editorials_05/roy-byrne051007.html

http://www.netscape.com/viewstory/2007/08/24/-gold-stock-market-quote-says-buy/?url=http://www.bestwaytoinvest.com/greg-silberman-august-24&frame=true





Today on my Hardscrabble Golf course I shot 40 for the first 9 holes and ballooned to 50 on the back side. In golf I am always looking for the one magic move or secret that will fix my swing.

In my trading I have learned that there is no single indicator or "Holy Grail" that will unlock the door to consist profits. Hard work and discipline combined with attention to fundamental and technical analysis hold the keys to success. Good Luck and God Bless.

Gold/XAU Ratio 4.48

Gold bugs index fails to break 370
Keep tight stops--look out below if gold breaks $700

For those looking to short this market consider the HBP Gold Bear + ETF that seeks daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to two times (200%) the inverse of the daily performance of the S&P/TSX Global Gold Index.

Look for profit taking Gold Stocks

A decisive break above 370 on $HUI would be a very bullish signal to add to gold stock position. I anticapate a 50% or more retracement as I feel gold stocks are overbought.



The two lows on the D-J Averages to watch are 12845.78 for the Industrials and 4672.35 for the Transports

Support Levels to Watch

The two lows on the D-J Averages to watch are 12845.78 for the Industrials and 4672.35 for the Transports.

Yesterday's very weak job report pushed the 10-Year T-Note yield below the trough formed late last year and completed a "double top" pattern in the process. That puts bond yields at the lowest level in twenty months. That's very bullish for bond prices which rise when yields fall. But it's potentially bearish for stocks because it suggests a slowing economy and the need for more supportive Fed action. I look for a 0.5% Fed Easing at its next meeting but it will be too litle too late and we are headed for recession. Overall once we are several months down the road this will be bullish for gold stocks but I look for gold shares to be dragged down by the broad market in September-October.

Triple top breakout Point & Figure Chart $HUI, Gold Breaks OUT

Market Talk with Piranha: What is a Point and Figure Chart?

Gold hit a 16-month high above $700 per ounce on Friday, boosted by a falling dollar after U.S. data showing a surprise contraction in U.S. non-farm payrolls for the first time in four years.

The August report showing a fall of 4,000 jobs dented the U.S. currency against the euro, making dollar-denominated gold cheaper for overseas investors.

“Paper money eventually returns to its
intrinsic value ---- zero.”
Voltaire ( 1694-1778 )


Gold/XAU Ratio 4.62

Gold Stocks Ready for Breakout

I am very cautious with new positions in September and October because of broad market vulnerability and this possible seasonal weakness. I like AEM, ABX,MDG, RGLD, TGB, GXL,MFN,BVN,SCEY

Gold stocks rally

Gold/XAU Ratio 4.78
As long as current broad market bull continues I will be a buyer of gold stocks that have been the strongest during latest gold stock selloff.

Tonight ends our stay at my second home at Horseshoe Bay--wonderful weekend--but a long 9 hour drive home tomorrow--back to work Tuesday.

Good luck and God Bless your trading.