Although no price appreciation since writing the weekend report, the Gold Cycle nevertheless is constructive. We’ve seen a 14 day streak that has quietly and patiently added 4.3% since the last Cycle Low. The fact that gold has generally ascended (while dips bought) for 14 days has almost ensured that our Cycle phasing as a 1st Daily Cycle is correct. This is important; the first step is to understand which Cycle we are in.
But gold continues to do a wonderful job of confusing investors while keeping sentiment subdued. The lack of a surge out of deep lows has kept many lightly exposed and believing that a new decline is directly ahead. I’m also afraid those who are faithlessly invested here might be shaken out by what should be an imminent and minor 2-3 session drop into a Half Cycle Low.
So if we remain committed to the 1st Daily Cycle framework, then we must be ready to accept a minor Half Cycle decline on the way up to a much larger 1st Daily Cycle top. These 1st Daily Cycle average a full 28 trading days, so there is plenty of time and no reason to expect a significant move above $1,700 will not unfold.
If Silver is any indication of the coming strength, then we’re in good hands. The action out of Silver is showing extreme strength, the type of move that 1st Daily Cycles are known for. Whenever Silver makes a bullish move, it quickly finds the top of the Bollinger Band and rides it all the way to a Cycle top. Seeing this type of development here is encouraging, you want to see Silver leading the pack. This move has been deliberately strong while not overly exuberant. We’re not seeing the extreme moves that land Silver outside of the Bollinger Bands that often mark the end of a premature run.
But as gold is in need of a Half Cycle Low and Silver extended in the short term, I expect that Silver’s powerful 8 session winning streak will need to take a breather. A quick move back to the $31.50 level over 3 sessions would be more than enough of a “re-charge” before Silver sets off into the 2nd half of the Cycle.
But the miners continue to cast a grey cloud over the gold Cycle. Maybe this weakness is helping to mask sentiment; it could be what is helping gold/silver rally here. Whatever the reason for the extreme negative sentiment and technical weakness, lets again hope it’s not a leading indicator for the gold Cycle.
The best hope for the miners is that they’re forming a 3-4 month rounded bottoming pattern while gold begins the process of moving up in a new Investor Cycle. I have noted before that the miners have appeared to bottom and look to be in the process of forming a solid base or foundation. If this were true, then we should expect to see a little more weakness followed by the beginnings of a long, powerful, and sustained rally. But the threat is that the rounded bottoming pattern gives way and followed by a test of the Dec lows ($43.70 area). Failure to hold that level should open the gates for a swift 10% drop back to the $40 level.
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