PRECIOUS METALS – FOREX - STOCK INDICES - COMMODITIES
“Time is more important than price; when time is up price will reverse.”
W.D.Gann
RONALD L. ROSEN
“Time is more important than price; when time is up price will reverse.”
W.D.Gann
RONALD L. ROSEN
There is one thing that must be kept in the forefront of our minds while the madness of a gold rush is taking place. That thing is the fact that the 30 year gold cycle will be in its terminal phase. Up to this point in time, March 2009, I have been writing about the 30 year cycle and how it has been unfolding on schedule. If the 30 year cycle continues to unfold in the future as it has in the past, gold should reach a top within the next 12 to 16 months. At that point in time we will be faced with making a difficult emotional decision. I will discuss this further as the precious metals bull market continues to roll along.
Before we abandon all hope for the United States of America there is a very important fact we should remember. The United States of America has the largest gold supply in the world. According to the latest annual report of the Treasury department there are approximately 261 million ounces of gold in storage. As the price of gold increases so does the gold collateral behind the dollar and the national debt. A gold price of $1,000.00 an ounce means that the United States has 261 billion dollars of gold. If the national debt rises to 15 trillion dollars, a gold price of $6,000.00 an ounce would equal 1.5 trillion dollars, or 10% backing. Whatever the ultimate price of gold is, it will represent increased backing for the national debt. So, assuming that the gold supply as stated by the Annual Report of the Treasury Department is accurate, all is not lost.
As of September 2008, gold exchange-traded funds held 1,039 tonnes of gold in total for private and institutional investors.
The United States of America has the largest gold supply in the world.
We may be witnessing a so called economic miracle in the making. For some time I have been assuming, as many others have, that the stock indexes are fated to collapse in a move down as severe as the 1929 to 1932 stock market disaster. However, for several years I have also been posting the Dow Jones and the S & P 500 long term charts showing what I thought may be an irregular expanding flat correction for the Dow and a regular flat correction for the S & P 500. If the flat corrections are the proper interpretation, once the indexes bottom the next move up should be a huge bull market. How can this possibly be? The first clues were the flat corrections in the stock indexes that have been forming since the year 2000. I knew they portend a huge bull market to follow once they are complete, but in view of the impending financial disasters that did not make sense to me until yesterday. The old saxophone playing, Princeton University professor, and Chairman of the Federal Reserve System, buoyant Ben Bernanke may be brighter than anyone could imagine.
He just may want the price of gold to rise in order to collateralize the trillions of dollars of debt he is going to create. A very high price of gold will be considered a prelude to runaway inflation. You know the story. Too much money chasing to few goods causes runaway inflation. However, and it is a very big however, this is not the 1930's depression or the 1930's German runaway inflation. The aces in the hole are India, China, Vietnam, Korea, and all those nations that have the ability to produce more low cost goods than we have the money to buy. With a huge pile of gold backing it, even at 3000, 4000, or 5,000 dollars an ounce, the dollar will once again be King. Well, maybe not king but perhaps an acceptable appearing Prince Consort. Once the entire world's productivity starts to perk up a rampaging bull market in the stock indexes may raise its long awaited head, look around, and start to run more than anyone can imagine.
For quite some time I have also been writing about the need to prepare ourselves emotionally for making the "Big Switch." It may be very, very difficult to do it. The "Big Switch" will involve selling our gold portfolios and buying deflated quality common stocks that will participate in the new bull market.
It does appear that the final third phase in the gold bull market may be complete by early to mid 2010. At that time the stock indexes may have bottomed in the October/November 2009 time frame. You can count on the fact that I will be monitoring this scenario every day the markets are open. I'm rather certain that I will also be spending a big hunk of my weekends reviewing it all. Several charts are posted that have the patterns to which I am referring.
The chart on the next page shows what appears to be a completed five wave move that began in the year 1800. A wave theorist would normally expect this five wave 200 year bull market to be followed by a multi-decade, three wave bear market. The illustration of a five wave bull market followed by a three wave bear market is posted just above the chart.
However, all figures prior to 1913 do not reflect the creation of the Federal Reserve System in 1913. As often happens with wave counting, we must start all over again beginning in 1913. Ever since then the stock markets have been living with and trading under the fundamental changes and influences that came about with the creation of the Federal Reserve and that is where our wave counting must begin. The second chart is the chart that I believe accurately represents where the stock indexes are right now. They are completing an expanded flat correction for the Dow Jones Industrial Average and a regular flat correction for the S & P 500.
"Since the year 1800 a clear five wave pattern has unfolded. Following the five wave pattern a three wave correction is theoretically supposed to occur, bringing the average back down to the level between the previous third and fourth wave. That would be some where between the 1929 high of 386 and the 1932 low of 42. That seems preposterous at this point in time. Let's hope it is." ….. R. R.
However, if we begin our wave counting for the D. J. I. A. in 1913, we see that the D. J. I. A. is working on completing leg C down of Major Wave IV down. Major Wave IV is an expanded flat correction which is explained with the next chart in this report. Once Major Wave IV is complete Major Wave V up should begin. Major Wave IV is an expanded flat type (pattern) correction.
"Within impulses, fourth waves frequently sport flats, while second waves rarely do." E. W. P.
"Within impulses, fourth waves frequently sport flats, while second waves rarely do." E. W. P.
Gold is close to launching its third and final phase of this bull market that began in July 1999. The peak may be reached early in 2010. This final phase three will most likely resemble the final third phase of the gold bull market that peaked in January 1980. A top in early 2010 would conclude a peak to peak, 30 year cycle.
The S & P 500 and the Dow Jones Industrial Average should have one more severe decline in order to complete their 10 year, Wave Four, regular flat and expanded flat patterns. They have a Delta Long Term # 5 high due to arrive………. The next Delta Long Term turning point is LTD # 6 low due to arrive………………. The standard deviation for arrival extends out to…………….. Elliott Wave Theory purists will quickly notice that a 10 year, A, B, C Flat Correction is not sufficient time to correct a Major Wave Three that began in June 1932 and topped in January 2000. A 68 year bull market normally would require more than a ten year bear market corrective process to wring out all the accumulated excesses. However, these are not normal economic times. The Federal Reserve led by Chairman Ben Bernanke is taking anything but a normal path to prevent a depression from engulfing this nation and the rest of the world. The "flat corrective patterns" that the S & P 500 and the Dow Jones Industrial Average have been forming since January 2000 are the clues that indicate Chairman Bernanke may be successful in preventing a depression and a total wipe out of the stock market. This is truly fascinating to watch unfold. Incidentally, it is not exactly prudent to believe that all key government officials are ignorant of the cyclical and technical information that we are aware of. Opinions based on that belief just may fall flat. Pun intended. That old saying, "Don't fight the Fed" may have a few curtain calls remaining before it is booted off the stage.
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.