"Time is more important than price; when time is up price will reverse."
W.D.Gann
In honor of our friends who saved the day for the HUI.
They know the true value of a paper dollar.
The corrective pattern that the HUI has formed since May 2006 appears to be complete. Friday's activity had gold and silver collapsing while the HUI attempted to break down and dissolve the corrective pattern it has been undergoing for over a year. The HUI refused to break down. The HUI is about to begin a third of a third wave.
"Third waves are wonders to behold. They are strong and broad, and the trend at this point is unmistakable. Increasingly favorable fundamentals enter the picture as confidence returns. Third waves usually generate the greatest volume and price movement and are most often the extended wave in a series. It follows, of course, that the third wave of a third wave, and so on, will be the most volatile point of strength in any wave sequence." …. Elliott Wave Therory
Gold and silver bullion are still working on their Major Wave Two correction based on what I see in all of their patterns and wave counts. However, it appears that gold, silver, and the HUI will be going up together for the next few months. Gold and silver will be completing the B wave of an expanded flat correction when they make a new high. Following the B wave they will collapse and finish their Major Wave Two correction by making new lows below the previous Wave A. The HUI will also correct but it will not go below its previous low or even below the peak of 401 that was reached in May 2006. The correction in the HUI may seem dramatic but it will be only a portion of its rise from this point forward. The metals could give back more than 100% of their rise since the bottom in October 2006.
I suspect the decline in the HUI this fall will seem dramatic for the reason that the coming rise over the next few months should be more than dramatic and could make new all time highs well over the 401 high.
The way all of this is shaping up on the charts makes it appear that the stock indexes, gold, silver, and the HUI, after making new highs for this bull market, will be declining starting late this summer. A bottom should be made late this fall.
Interest rates and the dollar should be rising together while the stock indexes and the precious metals complex decline. The decline may be vicious but short lived. It may last two to three months.
I believe the probability is quite good that the decline will be severe because it will most likely not confront government interference. There is nothing unusual about a severe stock market decline in the sixth or seventh year of a decade. W. D. Gann's cyclical studies earmarked the six and/or seventh year of a decade as a top in the market. The sixth and/or seventh year has often seen a vicious decline in the averages. I doubt that the HUI or other precious metal shares will escape this decline. 2008 in the United States is an election year and we should see a recovery in most markets. There will probably be a recovery in the markets right up to election time. The elections are held in November in the U.S.A.
These are not predictions. They are projections based on my reading of the various charts and my study of the history of the markets. W. D. Gann spent a good portion of his life studying and researching the history of markets as far back as data was available. He was hard working and brilliant. He was not perfect, but he was amazingly accurate in his cyclical projections. We are in the seventh year of this decade and it is often a downer. This is particularly true after a bull market that has lasted more than 4 years. The first half of this year saw the stock indexes make new all time highs. The decline from the current levels could be quite precipitous.
What should we do about all this? If you are long the precious metal shares in the HUI, at the moment do nothing. If the scenario I have just outlined takes place, step by step, we will have our road map. We can then follow the patterns as they unfold. The first step calls for a big move up in the HUI and new highs for gold and silver. If and when this occurs we can take the next step. I can tell you in advance if the first step does take place, the second step will be profit taking!
Key reversal days on the Delta software charts are signaled by the line that shows the day's action being half black and half red. Friday was a key reversal day. There are three other key reversal days on this daily chart of the HUI.
HUI DAILY
This week's action in the HUI on the weekly chart was a wee bit nerve wracking. The entire pattern since May 2006 was put to the test. Was it a valid pattern or was it going to be invalidated by a decline below the [e] wave at 317.70? The low was 319.00 on Friday. In stellar fashion the HUI index turned around and closed near the high for the day. I show a strong move up beginning soon. Once a new high is made I show an in between point and a drop that I believe will be the medium # 2 low. After the medium # 2 low is in I show a further rally up to Long Term # 4 and medium term # 3 highs. They are both due around mid August. From here there should be about 8 to 10 weeks of rising precious metals and precious metal shares. It looks like an in-between point and medium # 2 low will take place after the break out above 401.
HUI WEEKLY
Everything that I thought had to remain intact in order for the wave count and the current corrective pattern since May 2006 to be valid has remained intact. This chart is truly a thing of beauty. No corrective low has gone below a previous peak. The wave formations are clear. The corrections are right out of the book. Up to this very moment in time this chart of the HUI is picture perfect. Of course this doesn't mean it will stay this way, but I am not aware of anything that will change it. So, I suggest we proceed step by step. We have the chart showing a picture perfect wave count and corrective pattern. We know what should happen next. Now all we can do is wait and see if perfection continues. If it does, we know when the next Delta Long term high is due. That is cash in time!! After cash in time, we wait for a bottom in late fall of this year or purchase various puts with a small portion of the profits.
HUI MONTHLY
It appears that gold and silver are undergoing an expanded flat correction as per the illustrations posted below. If they are experiencing a regular flat correction they won't be making a new high. I believe the odds favor a new high and then an in between point as gold falls to the Delta Long Term # 1 low due in October of this year. The biggest moves tend to occur on either side of number one.
"Far more common, however, is the variety called an expanded flat, which contains a price extreme beyond that of the preceding impulse wave. In expanded flats, wave B of the 3-3-5 pattern terminates beyond the starting level of wave A, and wave C ends more substantially beyond the ending level of wave A, as shown in Figures 16 and 17."……….. Elliott Wave Principle
$548 for a final low would arrive in the middle of Delta Long Term # 1 low and touch the rising logarithmic trend line. A break of the trend line may lead to a severe decline and a bottom at the 50% mark which is the $492.77 area. I have a difficult time envisioning gold dropping to the $492 level, but I would not rule it out. This is a Major Wave Four correction.
GOLD MONTHLY
"Far more common, however, is the variety called an expanded flat, which contains a price extreme beyond that of the preceding impulse wave. In expanded flats, wave B of the 3-3-5 pattern terminates beyond the starting level of wave A, and wave C ends more substantially beyond the ending level of wave A, as shown in Figures 16 and 17."……….. Elliott Wave Principle
SILVER MONTHLY
If you would like to read more of my reports that provide timing
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Stay well,
Ron Rosen
Disclaimer: The contents of this letter represent the opinions of Ronald L. Rosen. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Ronald L. Rosen is not a registered investment advisor Information and analysis above are derived from sources and using methods believed to be reliable, but Ronald L. Rosen cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions.
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