Precious Metals And Mining Stocks Approaching A Major Bottom

The next rally will be powerful and last a long time, probably more than a year. That is because it will be a wave 5 move. In the precious metals and mining stocks markets, wave 5's tend to be the largest and longest, most dramatic moves, not wave 3's as is typical in stock markets. The coming rally will be the start of a wave five of large degree.

Playing this rally should be a profitable venture. There are several ways to play it, such as owning the metals physical, owning the individual mining stocks, or playing ETFs such as GLD, SLV or GDX, or playing leveraged ETFs, or even playing call options long.

The signal for when this rally starts will be when several factors line up. First would be when we get new buy signals in our HUI Purchasing Power Indicator, and our 30 Day Stochastic indicator, when at the same time we see the Weekly Full Stochastics oversold, and also when we see the sideways descending triangles' last leg down, wave e down, reach or fall below the bottom boundary support shelf. We present daily updates of the HUI Purchasing Power Indicator and 30 day Stochastic, which are proprietary indicators of ours, to our subscribers at www.technicalindicatorindex.com if you have interest in being plugged into this signal information.

We believe this rally signal will occur sometime over the next several weeks. The final wave e-down is approaching completion. This triangle has been almost a nine month pattern, so Gold bugs will be singing a Halleluiah once this annoying pattern finishes. The upside potential for this coming rally is enormous. The HUI could approach 800 to 1,000, while Gold could approach 3,000 and Silver could approach 60 to 70. It will take time for those levels to be achieved, but the important point is precious metals and mining stocks remain in a Bull market, and the juicy part of this Bull market lies ahead.

The following charts map where prices are now within the sideways descending triangle pattern:

As far as Gold is concerned, Wave 4-down needs another drop for its final leg, wave {e} down to complete a five wave triangle. Wave {e} is about half complete, with a downside target of 1,525ish.

If the HUI generates a new buy signal soon, that would strongly suggest wave {e} down is not going to reach the bottom boundary, it will truncate.

As far as the HUI is concerned, Wave 4-down has dropped below the bottom of the triangle, the downside target, suggesting wave 5-up could start at any time. A rise above 550 would confirm that wave 5-up has started, a decisive breakout above the upper boundary of this Declining Bullish Wedge.

As far as Silver is concerned, A rise above 40 would confirm that wave 5-up has started in Silver. Silver could decline toward the 27 to 30 area before starting a mega rally wave 5-up.

We cover a host of indicators and patterns, and present charts for most major markets in our International and U.S. Market reports, available to subscribers at www.technicalindicatorindex.com

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"Jesus said to them, "I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day."

John 6: 35, 38, 40

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2011, Main Line Investors, Inc. All Rights Reserved.