The bulk of the evidence leads me to believe that we
probably have not seen the bottom though we are very close. In contrast
to Gold, the mining stocks appear to have very limited downside
potential. It’s difficult to make a case that they can move much lower.
Gold, on the other hand, which last closed at $1261 doesn’t have strong
support until the 50% retracement at $1085 and the 12-year trendline
slightly above $1100. The worst is over for the mining stocks but we
don’t know that to be the case with Gold.
Bottoms can happen in an instant or develop through a
basing process. Huge immediate rebounds originate from extreme oversold
conditions. We don’t have that at the moment. The corollary is that
precious metals spend the next few months in a basing process. The
bottom line is there is no need to aggressively buy yet unless the
market becomes extremely oversold and plunges to a new low. Wait for
that to happen and if it doesn’t, then a base is likely developing.
Another thing to note is that the gold stocks started the bull market in
November 2000 while Gold bottomed three months later.Careful out there...
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