Taylor On The Markets & Gold
Jay Taylor
Financial Markets
TRADER ROG'S CORNER
HORSES, GOLD, DOW, AND THE NASDAQ
"A market is the combined behavior of thousands of people responding to
information, misinformation, and whim." -Kenneth Chang
Horses do some very irrational things causing a combination of exhilaration, fear, and excitement. To me, it sounds like a hot day at the track or just a few minutes in the New York trading pits. Unfortunately, they can both inflict some real tears and pain. On this beautiful fall day, we are on the edge of one or the other for gold, silver, and the Dow, NASDAQ, and Amex markets.
This is it. This is the fork in the road, that point in time, to the get the answers everyone has been waiting for. Either the general stocks tank and metals begin to run, or vice versa. My key projected days for our expected excitement are September 13, 17, and 20. The 10th has passed with nary a murmur, which I considered an action possibility. The Plunge Protection Team jumped in last week to sell gold and buy the S&Ps. Please notice the last few times they have done this, with each succeeding occurrence, it has taken more buying and selling to achieve the same milder outcome.
Gold was hit hard on Friday and stayed even; then went up. Our weekly gold
chart is in a pennant continuation pattern without a bias up or down, but
sideways. The U.S. dollar has done this as well, but closed lower Friday to
88.37, losing .046 on the September weekly chart. The dollar closed on a
down bar, meaning more weakness for Monday's open. Conversely, gold has
closed on an up bar showing strength for next week's trading. It is my
opinion that gold and the U.S. dollar are slowly becoming decoupled. Normally, they march along as perfect, inverse opposites; but in the last
two weeks or so, gold is beginning to go its own way, not paying quite as
much attention to the dollar. This says to me, the gold buyers are
beginning to view gold as a currency instead of just a commodity.
To further reinforce that thought, the Chinese have opened Shanghai for
public gold trading, have told their citizens to buy gold, and even more
important, they told those same citizens not to sell or trade, but buy and hold. What do you suppose happens to the gold market when even a tiny
portion of one billion people are told to buy and hold gold? This, to me, was the biggest news on gold for the weekly report. In other news this last week, an Australian gold miner went bankrupt to the tune of $800,000,000 as some massive failures in hedging efforts were experienced. However, I don't see too many more of these types of things hanging over the gold markets.
Our next leg up in gold is 408. If we close 3 times over 408, that support
is considered reestablished, and then we go to 416. I think it will take
only one or two nasty Dow days, which are expected shortly, then gold will
drive higher with more velocity than previous Dow sell-offs. If you try to
consider all aspects of these markets, I personally cannot find one good
reason to buy any Dow stocks. Yes, the corporations are flush with cash
(running scared), and yes, a few have shown some decent profits (after
several cost exclusions), but the chart tracks, consumer attitude,
unemployment, war, fear, debt, poor dollar, etc., etc., are all overwhelmingly negative. Those corporate "one time charges" and those "exclusions" are beginning to sound like CPI reports that tell us food and energy don't really count, and should therefore be excluded. Yeah, right. We probably should exclude all the new junk bonds being sold as well. New junk bond sales are up over the last three weeks. I guess if you can't earn it, just go borrow more.
December silver closed on a down bar, showing more weakness for next week. Remember, silver is either two weeks behind or ahead of gold, so the weekly reactions will not be quite identical. Silver closed at $6.165 for the
December contract. Use the Decembers for best information from now on in
2004, for both weekly and monthly tracking. While silver got slapped and
gold didn't, silver is still in the mode for rallies. Do not worry about silver; it's just being its usual erratic self in the daily trading of a tiny market. Treasury bonds are nearing a top while still rising and the Dow is headed down. Watch 9815 for Dow major support.
Nobody wants bad news for any particular segment of the markets. However,
it can't all be peaches and cream for all sectors, all the time. In reality, there are never bad markets and good markets, but all markets experiencing change together. While the end of the world is not at hand, we see some very severe disruptions, which the world has survived many times before. Problems arise and problems are solved. It's our job here at Jay Taylor's Gold & Technology Stocks to find our readers the best positions and information, and to give you the tools to make money. Nobody is such a
mind reader or so brilliant they can call and time the markets perfectly. It might seem desirable, but if anyone possessed those powers, as if these
powers existed, the markets would evaporate in a flash. However, using both
the fundamentals and the tools of charting and technical trading, we feel we can help you stay on the best trends.
If you study many years of charts and try to pick the best times to buy and
sell for the longest rallies or longest shorts, you would be out of the market a great deal of the time. Metals are going to run this month and next; then we expect a large wave of profit taking. After this, you could see a nice little Dow comeback rally, which will sucker in a host of buy and hold buyers. By mid-January 2005, metals rally again, and non-metal stocks will get very nervous and choppy.
Like all horse races, the metals markets and the others keep changing
positions while the race is run. We think gold is the next Secretariat and
will be the huge winner for many years to come. Further, the Treasury, the
Fed, and several other factors are all doing their level best to cut the legs out from under the big stock markets, our currencies, and anything else they can find to mess up. Those are horses you do not want to ride. If you do, you will not only get tossed, you will get stomped, and the pain could be unimaginable.
This Week's New Rally Trend: Canada has a 2003 budget surplus, and the
highest relative to its GDP. As we told you recently in a previous issue, we expect the Canadian dollar to rise to parity with the U.S. dollar. This means at least 25% up and possibly more. Further, while they have debt, it is nothing like the USA's. Canada means mining, and mines are rallying. Not only are they moving up in precious metals, but in base metals and other commodities like coal, oil, nickel, copper, natural gas, grains, and of course precious metals and diamonds.
Buy gold, buy Canada, sell the Dow and the dollar, get out of debt, and be happy. And watch out which horse you intend to ride. Some are better than
others. Just stay off the really crazy ones like those favored in most big
funds. -Trader Rog
September 12, 2004
Jay Taylor, Editor of J Taylor's Gold & Technology Stocks
www.miningstocks.com
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