Ready to Run- II

We are going to continue to take a bit of a break from our editorial series "The Effects of Dollar Inflation" while we continue to track the progress of what we expect to be a sharp run higher in the PM complex into June. Last week Gold, Silver, and the PM stocks continued to work upward through the last heavy line of resistance on the charts. Above that line of resistance is a thinly traded area that price can move through more rapidly. We still expect the Silver complex to outperform in this time-frame as it lags the Gold complex, and we expect the mid-caps, especially the high cost producers, to outperform the large cap PM stocks. We also expect the explorers to out-perform, especially the Silver explorers.

The US Dollar and the US Bonds broke down on the charts, last week. We had discussed our expectations of this earlier in the Editorial series which can be accessed at the bottom of this editorial at the link "Also by Goldrunner." The break down in the US Bonds and in the US Dollar certainly fits into the rational behind expecting the PM sector to move higher, here. Let's go to the charts.

The US Dollar

The first chart is a daily view of the US Dollar breaking below the blue dotted support line. The Dollar has now fallen below the 200 day moving average while the MACD is falling with the ADX line rising in support the MACD being in a trending mode. This usually means the "price" is trending in a direction- down in this case. We can see the similar fall the Dollar had in late 2008 when the same break of a blue dotted support line was broken while the MACD was falling supported by a rising ADX line. We expect the Dollar to fall to around the 77 to 78 level initially before falling lower as we will see on the next weekly chart. The weekly chart should dominate in this time-frame.

In the weekly US Dollar chart we can see that the RSI failed its test of the 50 line, an important line. We have drawn a potential channel that the Dollar might fall through marked by the black dotted lines, though that channel might not be steep enough. We expect the Dollar to fall down to the red line over the coming months before it finds some support for awhile. The Dollar's fundamentals are terrible as the US continues to monetize debts of all kinds. Now, the Bonds are breaking down on the charts which should just add to the Dollar misery.

Gold

Below, is an 8 hour chart of $Gold. We can see that Gold has clearly broken up through the down trend line at this time. Once it clears this line of resistance there is much less chart resistance, above.

Silver

We can see on the chart that Silver has not yet broken through the down trend line as it lags the price moves of Gold. Above the current band of resistance lies a thinly traded area on the charts marked by the blue box. Once Silver has cleared the recent highs its price might move fairly quickly through that thinly traded area. If Silver breaks out of the cup formation, the upside target per the cup would be back to the old highs- though we expect Silver will go higher than that on this run as it usually outperforms in this part of the cycle.

The Precious Metals Stocks

The charts of the Precious Metals Stocks look quite promising, here. One point I'd like to make is that although we often cover the PM stock indices, one needs to depend more on the individual chart of the PM stock that he is considering for investment. Different subsectors tend to lead and to lag at different times. When we get our site or newsletter going we will be including large numbers of individual stock charts that we follow. That is not feasible for an editorial, but it is crucial to investing. For instance, while the HUI and larger cap PM stocks are working through resistance at this time, there are a number of smaller PM companies that have been moving up very nicely. There are also a large number of charts in the areas of oil, uranium, the base metals- you name it- the charts of "real things" that are bottoming and moving higher. We expect this to be the theme for the next several years due to the vast amount of Dollar Inflation being provided by the Fed as it monetizes everything in sight.

The HUI

The first chart of the HUI is a Daily moving average ribbon chart- different from the weekly we showed last time. The Daily chart is a bit easier to see the price relationships. The weekly HUI is still pushing through the top roll of the moving average ribbon at this time. On the daily MA ribbon chart, we can see that the HUI popped out of the ribbon to the upside, and then fell back into it as a re-test. That is not uncommon. Now, the HUI has moved back above the top of the MA ribbons. We can see on the chart that the HUI has broken the down trend line, the RSI has broken out, and the MACD is moving up. We can also see the similarity of the HUI price moves out of the top of the MA ribbon compared to the period in 2005 on the chart.

This next chart of the HUI is a bit "busy" as it is the chart framework I had always shown for the HUI fractal work I did back in 2005 and 2006. This chart shows the reason why the HUI and many of the larger-cap PM stocks are have such a hard time moving up in this area as they are being buffeted by the top moving average ribbon roll and by a major angled resistance line as shown on this chart. Look at the black resistance line that the HUI is attacking for the 4th time. This black line has been the source of intermediate-term tops and bottoms all along since 2001. The good news is that when the HUI breaks through this massive resistance line, there is a fairly large very thinly traded area above it as marked by the yellow box. Thus, the break of such an important resistance line combined with a thinly traded area above it might lead to some fireworks, soon. You can also see the similar resistance line in the RSI marked by a red line. With the MACD on this weekly chart curling up, as long as Gold and Silver continue to run higher, the HUI should make it through this time. All of this, of course, is the response by investors to the massive Dollar inflation being created by the Fed.

I decided to add one more chart of the HUI to show the different types of charts we can use. I don't know how well this chart will show up in an editorial, but it includes the key EMAs (exponential moving averages) along with the Bollinger Bands in a daily format. We can see that the HUI recently found support at the key EMAs, the .38 Fib, and the mid-line of the Bollinger Bands. That tends to be key support in a bullish and impulsive move. Next, we can see that the HUI moved up off of this support zone while "crawling up the upper Bollinger Band" to challenge and break through both an angled down trend resistance line and the .50 Fib line. The HUI has found support slightly below at the red line- a ray of angled support. The RSI has broken out, the MACD is curling up, and the ADX line is rising suggesting that this is an impulsive trending move, higher.

Goldcorp

We can see in the chart of GG that I posted last time that price is rising out of the MA ribbons much like the chart of the HUI.

Silver Wheaton

The chart of SLW looks very constructive like we'd expect since we expect Silver to outperform in the coming time period. We can see that the RSI moved down to re-test the 50 line, then has moved up while the price of SLW broke up through the down trend line on the chart. Price is crawling up the upper Bollinger Band while the MACD curls up, confirmed by a rising ADX line………very bullish. If price gets through the .38 fib at around 9, then the next target will be the .50 fib around $11. There is a very thinly traded area between $9 and $11 so SLW might make it to $11 pretty quickly.

The Dow

We discussed our expectations for the Dow in an earlier part of the editorial series, and we included our reasoning in detail. We believe that the Dow has entered a window in time where it will either make one final low or it has already bottomed and will be re-testing that low. We agree that the economy will be a mess for a long-time, but we have laid out our reasoning in terms of cycles and in terms of Dollar inflation. Below, is the Dow chart showing some characteristics that I think might be important. In the Dow chart we can see that there are some close similarities to the bottom back in 2002. We expect the Dow might spike up into the 200 day MA as it did back in 2002, then fall sharply. Such a re-test of the 200 day MA might come between 9,000 and 9,200. With the Dow having already fallen about 87% in "value" as we have shown, we expect either a re-test of that bottom or a slightly lower low. Look at the similar relationships in the chart to the late 2002 bottom.

It is early AM on Monday as I complete this writing. Gold and Silver are down a bit, but we like to see Gold and Silver rise during the US market hours since that is when we get the best rises across the PM complex.

With some work and responsibilities out of the way, we expect to be moving to a subscription newsletter or investment site. It looks like I will have a friend as a partner. Anyone interested in receiving information when our site is up, feel free to send a note to the e-mail contact, below. Anybody who contacted us last year will have an e-mail notification sent to them.