You Still Ain't Seen Nothing, Yet !!!

It's been awhile since I have written, and it really feels good to be back. Sometimes life gets a little "busy" so I have tried to forward my thoughts for the last couple of months by writing some late night rants on the Gold-Eagle Forum. Tonight, I will try to review the ideas that I have proposed in those rants as I consider where we might be headed along the "HUI fractal road" in this Historical PM Bull Market.

In my last editorial "More Than Words", I tried to convey the idea that many PM stock investors had become a bit shell-shocked by the long Wave II correction in the HUI between late 2003 and May of 2005. Such long and grinding corrections might sow the seeds of doubt in one's mind and encourage one to become a bit timid ~ right when things begin heating up. The markets have a way of encouraging us to always do exactly the wrong thing at every turn. My message was simple ~ we were entering a period of whipsaws that might eventually leave many PM stock investors behind at the station.

Back on August 20th, I wrote my maiden piece entitled, "You Ain't Seen Nothing, Yet!" At that time I posted several charts showing the "set-up" for the HUI that I thought might play out. I had suggested an intermediate first HUI target between 335 and 393, using 365 as a median target number. My ideal target at the time was really a number between 385 and 393. With the correction we have seen after the HUI Index hit 348, many writers have stepped forward to "call a top", but I would not be so sure, yet. I still expect the HUI to hit at least one more high on this move, knowing that the first fractal actually had two more highs to come. I am still holding out for HUI 373, then 393.

Let's take a look at what I have suggested to the Gold-Eagle Forum readers in my late night rants over the last several weeks. I have suggested that this intermediate top (IT) will likely not be a spike top. The reason for this is quite simple, really. Let's consider the fundamental story of the Precious Metals complex. Gold has blasted through what I have termed "Falcor's line in the sand." As Gold crossed about $456 on the chart, it crossed a line that had restrained the price of Gold for many years. Yet, even as Gold traded up into the middle and high 500s, only the large cap producers and some special situation PM stocks really rallied, or were revaluated upward by investors. "Why?" you might ask. I "dunno", but I think the PM stock investors sure looked like a bunch of deer "stuck in the headlights." I guess that too many words have been written about manipulation in the markets by the newsletter people. Maybe everyone was looking for a magic retest of the break-out point……I don't know. All I know is that the PM stock investors seemed to all be standing around waiting for someone else to buy the PM stocks. But, you know, a funny thing happened. Since the PM stocks did not participate with the break-out in the price of Gold, all of the newsletter writers started gushing about how the PM stocks would get slaughtered as the price of Gold corrected. Instead, the PM stocks held very steady while Gold fell back to re-test the top of my expected range at about $490. I think it is pretty obvious, now, that "smart money" was accumulating the PM stocks very heavily at that point. In fact, this whole move up in the early phase of this soon to become historic Wave III move in the HUI has been characterized by a "stop and go" tendency. Such moves usually mean that "smart money" is still desperately trying to accumulate the PM stocks. Now, we are seeing the beginnings of larger PM companies seeking to buy-out the smaller companies to establish more reserves.

Since the large cap PM stocks moved so far ahead on a temporary basis, money started to leave that sub-sector around HUI 348, and it moved to the Gold laggards and the lagging Silver complex. Since the HUI and XAU indices are heavily weighted toward the large caps, this has triggered a period when the large caps have (and will) under perform, but the Gold laggards and Silvers will likely continue to sizzle. These movements will likely create a bit of a disjointed move in the PM stock indices which will in retrospect look like a sideways to slightly down correction. This is exactly how fractal one played out. I still expect to see new highs in the HUI Index with 393 as my IT target. I only see the IT downside into May or June for the HUI to a band between 277 and 305, with expectations that the upper layer of that band will hold. Between now and the May/ June bottom, I expect the Silver stocks to put on a real show with the laggard Gold stocks also kicking up their heels. The tiniest PM stocks, the explorers, are just starting to recover from their Wave II pummeling- just the tiniest of a start to what will likely be one of the biggest positive routs in market history as this Historic HUI Wave III continues on. This is why I spent the last editorial space speaking in a low tone to what I perceived as a "shaky" PM stock investor class. For I see the possibility of the HUI trading well above 600 by the early part of 2007. In fact, my initial projections for the HUI in early 2007 actually lie above 700. That level might seem a bit aggressive to most, but my 365 target looked pretty iffy to many back on August 20th.

In our second editorial "CDE And Silver", posted on August 29th, we suggested a target for the metal Silver of about $11.51 by about May of this year. At the time, the chart in that article showed Silver at $6.74. Again, many probably thought I was Looney tunes, especially considering the number of newsletter writers whom had come out in the previous 48 hours to call a break-down in the Silver chart. I did revise my Silver target higher, up to about $11.87, but since we are moving up a little faster than I had anticipated that original $11.51 target may be more realistic. Still, Silver is riding a rail up a tiny channel that still has a way to go. After Silver tops, it will certainly correct, but I consider it a good possibility for Silver to see both $13 and $15 by mid-2007.

The Silver stocks are currently in a momentum move that has a long way to go, IMO. In fact, many of the smaller Silver stocks are just now starting their momentum moves. Bottom line ~ It might be good advice for PM stock investors to not get too leveraged at this point. To do so will invite you to get scared out, even with the smallest of sideways corrections, right here at what might be the earliest stage of the largest historical PM stock move in the history of the world. What I am trying to say is that you might still need to be a bit patient, but IMO, "You 'STILL' Ain't Seen Nothing, Yet!"

This first chart is my "old original" fractal chart of the HUI. It was first drawn up on 12-31-04 and was accidentally "stuck" in that time-frame as I uploaded it. It shows that the HUI has not broken its uptrend line as of yet, in fact, the HUI looks like it wants to move higher. I still look for the HUI to see a new high and my original upper target of 393 stands, at least in my mind.

This second HUI chart shows some angled support and resistance lines with the HUI still firmly in the channel. If the 348 top is penetrated to the upside, little resistance stands between it and HUI 393, IMO.

Silver has had one heck of a move since our first Silver article on 08-29-05. Silver now looks to be running up a tiny channel in a classic 5th wave momentum run. We'd like to see Silver run up into the area of about $11.87. Please excuse this chart since it is a sloppy "working chart." Also, the arrows have moved since I had to shrink it down to size for this editorial. Look at the ADX line confirming the trending MACD run, though. Hi, Ho, Silver ~ Away!

This next Silver chart shows the tight Silver channel with plenty of room to run.

I am running out of time, but since CDE was in the initial Silver article, I'd feel remiss in not showing the chart. CDE is a both a Silver and a lagging Silver~ just what the doctor ordered in this time-frame, IMO. I'll warn you that this is a stock that I do own in some quantity. With Silver running off to higher ground, it is the perfect environment for CDE to be revaluated, higher. In fact, I suspect that this run in CDE will rival the 2003 run almost in as a fractal mirror. It looks to me like CDE is early in a 5th wave run that might eventually take it up to the $11 to $12 range, then up to about $18, in a later second run.

This first CDE chart is another "sloppy working chart." The channel lines on the right are approximately parallel to the 2003 channel lines. I have drawn two thick green lines up the momentum run of CDE on the left channels. You can see that the price action of CDE accelerated to cross back into the "higher" channel along the blue-green thick line at about the same blue angled line equivalent with ~ the $6.60 level in the right channel. Will the price of CDE travel a similar path, again? We shall soon see.

The following CDE chart is the same chart I showed in the 08-29-05 article. It shows the first two "cup formations" of CDE as provided by impulsive waves 1 and 3 (of Wave I). Will we see this current momentum move in CDE complete the 3rd cup?

I still see the possibility of the HUI trading higher on this move to about the 393 level, a similar move to "fractal one." I still see Silver trading up to around the $11.87 level on this move, or slightly higher. I do not know if Gold will trade higher, but my gut says it will, though it could be a "B" wave higher, only. I expect the laggard Silver stocks to continue their momentum run, and I expect the laggard Gold stocks to start to kick up their heels. I expect the HUI to trade much higher after a brief rest into May or June, and I expect the HUI to trade above 700 in the first half of 2007. Of course, I could be wrong. Everyone needs to think things through and to make his own decisions commensurate with his own investment skills, investment goals, and risk comfort levels.

In my late night Gold-Eagle rants of a few weeks, ago, I suggested that I, personally, would be taking a heavier weighting in the Silver stocks at that time. It was, and still is, my opinion that the Silver sector would be the best place to be for sometime. Sure, the newsletter writers and short-term traders have been calling tops for the past few weeks on the PM indices. Please remember that some newsletter writers are motivated by getting and keeping new subscribers as a source of income. Others are just trying to convey what they think is in the best interest of their readers. If they have caught a good portion of this move, even if they were not with our calls back at the HUI 165 bottom- it still might be in their best interest to have "called it quits for the day." A similar situation can be found with the short-term traders. The correct ST call was to go short the HUI at 348, and these guys will not reverse to long until it is TA correct to do so. But if you are a LT investor that only trades individual PM stocks on an intermediate basis; then your objective might be different than those two groups I have described, above. This is what I was referring to when I said, "Never leave a putt, short." If I'd have sold out with the newsletter writers and ST traders, I would have missed some really big moves in the Silver stocks and many others. Have you looked at AUA.V, IMO, the class act of the Moly stocks? Look at all the charts of the tiny PM explorers and see the bases that many are starting to climb out of. How about GOR.V? In order to navigate these PM investing waters, well, all investors need to look across the landscape at individual companies and their charts, IMO; not just listen to what newsletter writers and short-term traders are doing. Come on, you are better than that. Get in there and dig up the fundamental news on these companies……look at their charts and learn what the technical indicators mean. I knew absolutely zero about those things in late 2001. I will guarantee that I am no smarter than you are. Just go out and "Git-R-dun!" Okay, so the summary was "not so short."

Here is one last parting set of suggestions to try to tie up a few loose ends that some readers have mentioned. It is imperative that each investor has control over his finances and knows his risk acceptance level. Using leverage with margin accounts can be very risky. IMO, these PM stocks are already leveraged enough to the momentum "real money" vehicles of Gold and Silver as it is so I do not use margin. Also remember to continuously move some profits over to the real thing~ real Gold and Silver. If you feel comfortable doing a little trading, then sell a little into strength with the idea of buying back on weakness. If you have a problem with over-trading, then find a couple of stocks that seem fundamentally sound to you and do some trading away from your core positions. I always do exactly that. I continue to work on my skills in fundamental analysis and technical analysis by choosing a few stocks that are fairly unrelated to my core positions so I don't get confused on what I am doing. I will post the links for charts of two very small companies, below, both of which I own. I like to look at very small companies in this area since that is where all large companies once began. One company is in the Moly field, but if I understand correctly also owns a Silver property- MOR.V. The other little company is drilling for Blackgold in Texas, and I lovingly refer to her as "Lil Miss Ame P."~ AMEP. Look at the charts of all of the PM explorers that exist in this universe. As these links will show, all of your charting skills should work on the smallest of stocks as well as the large companies.

AMEP chart link………….

http://stockcharts.com/def/servlet/SC.web?c=amep,uu[e,a]daclyyay[d20001002,20061231]
[pb50!b200][vc60][ium12!ug!uh5,5!la5,34,5!ll14!lf][j69797858,y]&listNum=1

MOR.V chart link………….

http://stockcharts.com/def/servlet/SC.web?c=MOR.V,uu[h,a]waolyyay[d19991002,20061231]
[pb50!b200][vc60][ium12!la5,34,5!lh5,5!ll14!ug][J68897708,Y]&listNum=1

AUA.V chart link…………..

http://stockcharts.com/def/servlet/SC.web?c=aua.v,uu[g,a]waclyyay[d20010203,20061231]
[pd20,2!d10,2][vc60][iuc20!ua12,26,9!ll14][j68749743,y]&listNum=1

The link for the Gold-Eagle Forum can be found, below

www.gold-eagle.com/cgi-bin/gn/get/forum.html

Again, I'd like to thank all of the posters at the Gold-Eagle Forum for their daily input. This thank you is especially extended to TQ and to Grininbarrett. Special thanks go to Dr. Vronsky and Westerman for creating the Gold-Eagle site and for editing my work. A very special "Congratulations" go out to Dr. Vronsky and Westerman after Gold-Eagle saw its hit counter ring up 216 million this last week.

Thanks also go out to CaptainHook and David Petch of TreasureChests, since I have learned so much from them. They can be found at www.treasurechests.info/index.php

There are many great editorials that can be found on the Gold-Eagle site at the following link. www.gold-eagle.com/research/petchndx.html

E-mail contact:

[email protected]