gold stress testSubmitted by Morris Hubbartt:

Corrections are a cleansing process.  They shakeout weak investors, and get the market poised to move higher.  Technically, key oscillators are already in the “basement”, but that does not mean you can ignore the possibility of one or more rounds of price weakness, before gold begins to rally.

Note the expanding channel on the weekly chart, which portrays what is really my worst case scenario. Most bullish analysts, including myself, think the lows for gold are occurring at this point in time.  Still, it’s important to look at the other side of the “price prediction coin”.

The channel suggests that the gold price could fall to about $1350, without doing any technical damage to the big bullish picture.

 

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US Dollar Wall Of Debt Chart

 

m1

 

  • The dollar has bounced, and many analysts are now making their case, for an even strong dollar. Fiat currencies are unlike other assets, because of the electronic printing press.

 

  • Technically, the US dollar chart now looks likely to move up to the 86 area, where substantial overhead chart resistance resides. From there, I expect a move back to about 72, where support will likely initially hold.

 

  • I call the dotted red trendline the “wall of debt” line, because it represents a price area where all the dollar rallies have failed, during this debt crisis.

 

Gold Shakeout Chart

 

m2

 

  • Corrections are a cleansing process.  They shakeout weak investors, and get the market poised to move higher.  Technically, key oscillators are already in the “basement”, but that does not mean you can ignore the possibility of one or more rounds of price weakness, before gold begins to rally.

 

  • Note the expanding channel on this weekly chart, which portrays what is really my worst case scenario.  Most bullish analysts, including myself, think the lows for gold are occurring at this point in time.  Still, it’s important to look at the other side of the “price prediction coin”.

 

  • The channel suggests that the gold price could fall to about $1350, without doing any technical damage to the big bullish picture.

 

HUI Stress Test Chart

 

m3

 

  • This long term chart shows the HUI index testing a major uptrend line. Gold stocks are massively oversold and key oscillators are poised to rise much higher.  That being said, an oversold market can always get even more oversold.

 

  • I believe the next big move in gold stocks will be to the upside. Gold stocks are known for volatility, so the best strategy is to buy a little bit on weakness, so more can be bought on extreme weakness.

 

  • If the trend line breaks decisively, investors should not panic. Purchase some put options as insurance, but try to buy a bit more stock, too!

 

GDX Bollinger Bands Chart

m4

 

 

  • This weekly chart is probably approaching a “moment of truth”. Sentiment indicators suggest a huge opportunity exists for this sector, but this market is not out of the woods.

 

  • The last time the market was set-up like this, GDX rallied over 40%. I am equally bullish now, but it always makes sense to be prepared for another nasty shakeout, prior to the next major up-leg getting underway.

 

GDXJ $17 To Start Chart

 

m5

 

  • The $17 target area I mentioned a week ago has been acquired. Volume looks quite supportive, for even greater gains, after a pause in the current price area.

 

  • A lot of technical damage has been done, and the rise to $17 is just a start, but it’s a welcome one!

 

GDXJ H&S Bottom Chart

 

m6

 

  • This 60 minute chart shows the remarkable “power volume” bar that occurred in the first week of March.  I’m always impressed with heavy volume that occurs after a low is made.

 

  • It represents  a changing of the guard, at least for the short term. Since my initial $17 area target was acquired, the volume on the pullback has been subdued.

 

  • There is a nice inverse head and shoulders in play now, targeting the $18 zone. I am looking for a move through $17 to come on heavy volume.  That should confirm a breakout, from this bullish price pattern.

 

Silver 1-2-3 Chart

 

m7

 

  • Silver is in the “correction zone”.  This price area served as a platform for a sizable rally, last fall. Fundamentally, silver is a solid asset to own, poised to benefit from the ongoing industrialization in Asia.

 

  • Technically, there is a small inverse head & shoulders pattern in place on this daily chart. Silver also has a classic three-wave correction in play, and big rallies can occur from this type of set-up.

 

  • We all need a rally, even more than we want one, so patience is our greatest ally now. Silver must take out the downtrend line in the $31 area, to start a trending move higher!

 

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    • Brother 4 oz you & I & a great many here know at $1350 there will be little to no Gold availble at that price……what a scam…..remember you can be insurance poor ……buy …….food & brass……they are just as important

  1. I might even be able to afford some at that price, bring it on pleeeeeaassssseee.
    This haircut in Cyprus – I smell a bank run is due across Europe! But I can’t work out if it’s more likely the Cartel will try to smash the PMs from the off tonight or there will be a rise due to the flight to safety.
    I’d be interested in anyone’s thoughts.
    Could do with a few more weeks preparation, truth be told!

    • http://www.reuters.com/article/2013/03/17/us-cyprus-parliament-idUSBRE92G03I20130317

       
      Cyprus parliament postpones vote on savings levy to Monday
       
      RUSSIANS, EUROPEANS
      The proposed levies on deposits are 9.9 percent for those exceeding 100,000 euros and 6.7 percent on anything below that.
      Those affected will include rich Russians with deposits in Cyprus and Europeans who have retired to the island as well as Cypriots themselves.
      “I’m furious,” said Chris Drake, a former Middle East correspondent for the BBC who lives in Cyprus. “There were plenty of opportunities to take our money out, we didn’t because we were promised it was a red line which would not be crossed.”
      “I’ve lost several thousand,” he told Reuters.

    • @NetRanger Yes I agree, the duplicity of govts never ceases to amaze me, although by now you think it wouldn’t. This is a lesson hard learned for those in Cyprus and those invested there. The real question is will the masses here in the US pay attention and learn the lessons of their world neighbors or pretend that it is a whole new unheard of thing, if it were to happen here? I’m a pessimist, so I’m betting not. Again, If it’s not in your hand it’s not yours mantra raises its head.

    • I agree, Tiger.  Although I think of myself as more of a realist than a pessimist, it is clear that Americans do not learn from the problems of others.  If we did, we would not be following the same BS path of central banking / planning and a command economy.  We already KNOW that this has failed everywhere else it has been tried except China.  They have implemented enough free market aspects into their economy that it is doing better than any other commie run economy ever has.  Also, if we did, we would LISTEN when warned that a big storm was coming a week ahead of time and would not wait until the last hour before doing that mad rush out to clean out the store shelves… repeatedly. 

  2. Are the unfolding events in Cyprus the trigger to a contagion across the Eurozone that cannot be contained?? If the banks in Cyprus freeze  accounts this will be the red flag for a bank run that could spread faster than the cards can fall. Only a maybe, but the possibility is real!! If fear spreads to Greece, Spain and Italy it could get ugly!! UK banks will not be spared the charges for any branches in Cyprus. Will a bank run reach the UK?? They may be too sleepy…. But the next 72 hours will be very telling!!

    • Indeed it will, Julie.  It is difficult to say whether or not the bank runs in Cyprus will affect the rest of the EU or the UK.  They might or they might not.  It does seem to be eroding people’s confidence in the banks, although why they waited until now for that to happen escapes me. It has been clear since at least 2008 that the banks are seriously fockered.  Yes, they did it to themselves but they are fockered nonetheless.  Keeping something that we hold to be valuable in businesses that are so poorly run that they need constant “liquidity” infusions is asinine.  Liquidity is basically Fed-speak for free money.  Well, what business couldn’t use some of that?  The difference here is that banks can’t merely use it, they MUST have it if they are to survive their own stupidity.  I’m thinking that the price of their survival is just too d@mned high.

  3. My laziness won yesterday, did not go to the ATM after all. Will now go and take the €1000 day limit out. Tomorrow morning some more. Bad thing to have a bit more than I really need there. Or, just buy more silver?

    • Actually, Charlie, it is not silver that is magical.  It is fiat that is magical.  I know this to be true because it is the only form of currency that can both shrink away to nothing over time AND just plain up and disappear on us over-night!  lol
       

  4. More people that were wrong before are now predicting what will happen in the near future?
    It’s a volatile market that could rapidly move up or down.  The only thing I’m banking on is this, the price of the real phyzzzz isn’t going to tank.  Who knows what the 100:1 rigged derivative paper price will do.

  5. I wouldn’t be surprised if gold just continues to trade sideways.  This news is big to us but nothing to the sheeple.  We keep looking for some kind of news that will wake up the gold market.  We don’t know if this will be the news we are looking for or not until next week.  If there is little to no response to this bank heist we can expect the IMF to do the same trick in other EU country’s.  Eventually the sheep will wake up.  TA is a moot point right now.  Morris Hubbart’s charts have no relevance right now.

    • Sheeple are well known to munch their cud as their fellows are dragged off to the mutton factory.  It is ONLY when THEIR chewing is interrupted that they actually awaken.  Of course, by then it is too late and they are cut, wrapped, and flash frozen before they know it.
       
      Maybe it’s just me but, somehow, this seems a fitting end for an otherwise useless existence. Shrug.

  6. taking FIAT from your accounts no matter where you live, UK, US, Euro, is prudent  Better to be a week early than an hour late.  I plan to pay bills monday and bleed some more green from the account just in case.

    • You really think that this cr@p will come here this quickly, AG?  Doesn’t seem all that likely… but then… black swans never are.  :-/
       

  7. Gold at $1350?  Yeah, that’ll be the day.  Although anything is possible, this looks a lot like one of those paper BS prices where no one is selling any phyzz at all.  I would not be a seller at that price.  I would be a buyer… with BOTH hands!  You hear that beeping noise?  That’s the backup alarm on the truck.  ;-)

  8. Nothing would suprise me with this administration Ed  I should have been more observant of the last one as well but it was ‘my guy’ Baby Bush.  What a DA I was in those days.  But never waste a good crisis.  This systemtic looting of the Cypriot bank accounts by an Obama Drone, Legard, a Chitown hack, will embolden these kleptocrats.  Nothing short of a full on war in Cyprus, waged by the people will tell TPTB the IMF that the line in the sand is here in front of our feet.   Like the commies said, ‘when you encounter mush, move forward. When you encounter steel, move back.  There must be steel in the hearts, minds and hands of people to stop this assault.  To me the looting of bank accounts is is nothing different than someone breaking into my home to steal my stuff.  That will go badly for the thief.  The Cyprus citizens need to take up arms and destroy the foe in the streets until the run red with blood of the looters.
    Easy for me to say since I’m not there but it is my concern and opinion that it can and will happen here and under the present political watch.

  9. I believe that if gold’s price falls at 1350$ per ounce, the premium of it will rise because of the supply and demand. As for the gold’s 1350$ per ounce price, I wish that happens so that I could buy gold really cheaply if the premium doesn’t rise.

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