Taylor On The Markets & Gold
Jay Taylor
FINANCIAL MARKETS
Indicators as of Friday July 23, 2004, are showing:
1. The Dow is rolling over and headed for 9750. A full downdraft will take us to 8044.93 by late fall if geopolitical conditions do not enter the economic picture. If it's worse, look for 6412.54.
FLASH BULLETIN !!!!!!! TRADER ROG SEES DOW TANKING VERY SOON!
I put Roger Weigand in touch with www.decisionpoint.com. He called me today shortly before press time to so I could pass along to you a very alarming view he picked up from a monthly chart of the Dow. In short Roger believes the Dow and presumably stocks in general are about ready to "fall off the table." Well that is the way I wish characterize Roger's words. In fact, here is a direct quote from Roger:
"Jay: I just finished an analysis on the DJIA Monthly chart from 1982 to 2004. My four major indicators are all showing NEGATIVE TO DOWN. The
200-day moving average is showing a wave three bottom of 6,869.61. My
wave three analysis shows the bottom of the next big wave three down is
BELOW 7,000. The way this thing is rolling over, the time cycle looks like
September-October for below 7,000. There is always the possibility it could
take longer, but all the indicators are saying we drop over 2,000 points by
November 1, 2004 - Roger"
2. The Nasdaq will drop to at least 1,570.52 by late fall if the geopolitical conditions stay the same. If it gets worse, the next stop is 1,270.40.
3. The 90-day moving averages on the Dow, Nasdaq, S&P 500, and Russell 2000, are all under water and getting worse. We are headed into the worst
part of the calendar stock year-September and October.
4. Gold will fulfill its "C" wave down within the next 1-2 weeks. Then, gold begins the one wave of five in a march toward 502 December gold. In metals, bullion spikes first, followed by gold stocks within two weeks. Silver follows gold by about two weeks. Look for silver stocks to move two weeks after gold stocks.
5. T-Bonds were blindsided by Greenspan's speeches this week and dropped.
They will hang on for a while, then begin a rapid decline in anticipation of rate increases by the Fed after the election. Remember, futures precede the movements in cash.
6. Crude oil is holding fast to the $40 area. Traders expect it to sell off, but there is fear to go short because of feared delivery problems and violence. Crude oil is headed for $50 next year. Some less conservative are
saying $50 to $70 price range with $55 the range number. Those who say we
have no inflation are not telling the truth. -Trader Rog.
GOLD
Chart 1- Gold-EMA-20 398.67 and EMA-50 396.46.
The large double top is prominent and indicates a drop. From the second double top down, = an A wave. Next wave, group of lines up =B wave. We are now in a C wave down and settled at 389.90 on 7-23-2004. This wave down is
not completed. I expect chop between 385 and 393.50 for the next 10-14
days. As the C wave completes, it will turn up into a new series of five bull waves. The first turn up is a wave one. We need to be in the trade at the beginning. Go in now, and it might drop as low as 375, but this is doubtful. Probably 385 is the worst we see. If you wait until Wave one shows itself, you might miss most of it, as I expect it to move rather quickly. Our August to November time period will be the best gold rally of 2004, with an expected top of 502.3 by December 1.
Chart 2--Gold-EMA 41-91.03 XAU
The two support lines project to the present. The dotted line just above recent market activity shows resistance. Notice the last few weeks' action
has formed a bull flag up. The XAU is a valuable tool as it homogenizes
silver and gold into a one metal average pronouncing a firmer trend for both. Individually, gold and silver might show something slightly different. Notice on chart one we are below support.
On chart 2, we are above support. This shows gold and silver turning up as a leading indicator for the C wave, beginning in just a few days. I expect this new wave 1 will hit resistance at either 418 or 429, depending upon the velocity of the rally. The U.S. Dollar must fall a corresponding amount to drive gold up, and it shall.
THE DOLLAR
Chart 3--U.S. Dollar Index
The longer a trend continues, as in the dollar chart, showing the dollar continuing down, the more power behind the move, and the more likely it is to continue in the same direction. Notice the EMA 10 line at the bottom. It
supported in summer last year and spring this year. Yet, in spite of a little recent recovery above the down trend, the dollar is rolling over, and will continue down. Note the recent bars above the down trend line heading down in a bear flag formation.
In my opinion, the best the dollar can achieve next, is a 91 top; but it's more likely it is on its way down to 87, then 85, then 80 by December. If we break dollar support below 80, some very serious problems will arise. Next stop down is 77.74 and 74.74. Let's hope we don't get there at all; and if we do, it's a gentle slide not an abrupt one.
SILVER
Silver is usually about two weeks behind gold activity on the charts. When
you compare the progress of gold relative to silver, you will notice this.
Silver has moved through its A wave down, and its B wave up. It is now
topping on the way down in its coming C wave. Gold is already ahead, in that it's C wave down has progressed further. Silver will follow gold down to a main support range of $6.00 to $6.25 and base and chop for awhile. An
estimated 10 to 14 days after gold begins its wave one rally up next month,
silver will do the same and follow gold up. Understand that silver is a very thin market and quite prone to much more volatility. As such, silver can slam higher and lower in its wave one up trend as it follows gold. This volatility confuses investors, and they should be wary of trading too much. For silver, use December or March options. If the price is too rich, buy silver stocks of high quality for buy and hold, and/or invest in physical, or flyer juniors knowing full well these move both ways very quickly. Senior call options in good, large public mining companies for December, and January are good investments with a proposed exit no later than 11-1-2004. "Trader Rog"
Silver: EMA (20) 6.32 and EMA (50) 6.21.
Premium "Fax" Alert Service from Roger Wiegand?
Roger and I are exploring the possibility of providing a market-timing
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When Roger spots a move in some key markets that appear to be perfect for
an entry or exit point, those of you who sign up for this premium service
will be sent a fax alert or e-mail alert to so advise you. We are still in the early planning stage for this project, so we have not figured out how much our fees will be. But this is definitely something we are serious about instituting. You will learn more about Roger Wiegand's views and trading strategies over the coming weeks.
Inflation vs. Deflation - Trader Roger and Your Editor Offer Opinions
One of the most heated ongoing debates among non-mainstream market thinkers is whether our biggest future risk is inflation or deflation. Mainstream thinkers don't believe we have much of a problem in either direction. They simply tell us, "don't worry, be happy."
Most people fail to see the connection between theses two economic
diseases. I believe the two problems are inextricably related. In fact,
inflation inevitably and ultimately leads to deflation. The question is when will the burden of debt and problems of mal investment created by the
excessive creation of fiat money suck the economy into the inevitable black
hole of debt repudiation.
My friend and colleague "Trader Rog," who will be contributing a weekly
column called "Trader Roger's Corner," has provided the following essay and
evidence that inflation is very much alive for now. Following Roger's views, I am going to express some deflationary concerns that have caused me to weight our Model Portfolio more toward deflationary protection than
inflationary protection. But first, Trader Rog provides some insights into just how pernicious the existing inflationary problem is.
EVIDENCE OF INFLATION - Trader Rog
"Figures won't lie, but liars will figure." ------Charles H. Grosvenor
Spin doctors are everywhere, particularly in our nation's capital, where
numbers can be found for any situation. The hot topic for investors this week is a "wondering out loud," as to whether we get inflation or deflation. It's my contention we get both, with inflation coming first. Our deflation comes later after some very serious market adjustments. Now, confusing and inverse markets are pulling information in two directions providing some very convenient answers for the spin doctors. With no clear cut path, the numbers boys can twist anything to fit their favorite scenario. This will change as we go deeper into rapidly rising inflation. Inflation will become more visible.
July 24, 2004
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com
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