Newmont Revisited: Gold's Final Act?

December 4, 2000

On Oct. 24th (the weekend) I wrote an article titled "Newmonts Big Clue" for GOLD-EAGLE. In that article I outlined the very high confidence big picture Ewave pattern unfolding in NEM and said, "a Wave 4 rally ended on 9-12 at 19.81. Since that high we have very likely been in the final 5th wave down of that thrust. And we should see should see the lows at 13.25 marginally broken." Later in the article I said that "once NEM trades below 13 1/4 we should be on high alert for a major low and reversal back higher". I forecast that the final low would likely occur in the $12-13 dollar range. I also stated that this was as high a confidence pattern as one can get interpreting the Ewave theory. And what happened? On Monday morning(Oct. 25th) Nem gapped lower(exhaustion gap?) and bottomed at 12 3/4, putting in a new multi year low, likely completing a huge Ewave pattern to the downside, and from there we have rallied to Fridays close above 16.

All that was and is VERY important by itself. And now we have even more convincing evidence from NEM that THE BOTTOM is in place, and a major Bull Market is getting underway! With Fridays rally to 16-3/8, and close at 16-1/4, NEM now has an unequivocal 5-waves up from the lows on both the daily "bar" charts, and the daily close only charts. The significance of this could not be more Bullish. We could now see a pullback and correct this 5-wave advance, and if that occurs, the possible pullback, perhaps to the 14 1/2-15 level, should be bought aggressively for a first "measured" rally to the $26-28 dollar level. Once "real" gold stock rallies start, they usually like to go straight up, allowing the fewest to participate to the upside. So a case can be made that NEM may not pull back, but instead will just keep accelerating higher early next week. But "IF" that pull back occurs it will in my work be the best, most high confidence buying opportunity I EVER get in my work. My newsletter subscribers are already loaded up. Could I be wrong, certainly, but this is as good as risk/reward gets in my view.

Now this sets us up for gold itself and what likely will be the "final act" of this major bottoming process. Often at major lows gold stocks "lead" the way, which is what Newmonts pattern represents, as does the very good action of the gold stocks over the past few weeks. Now, gold itself has been in a very tight trading range, and it could easily make one FINAL push down to a double bottom or marginal new low towards the 266 level basis the Feb. contract. If that occurs it will likely happen early next week, and I have to say there is a 50/50 chance of that happening. But what is interesting is that so many are expecting that, and one thing I have learned about gold, is that at major lows gold often bottoms very "ugly". What I mean by that is that the trading is very sloppy and choppy, making most of us think another new low is needed and likely. That is where we are at right now!

My "suspicion" and "gut feel" is that gold will not make that new low, because so many are expecting that and it would leave the most people out of the market, watching a blast off. However, if we do get that "gift" of a new low towards or below 266(Feb.) then I would view it as perhaps the best risk/reward buy of the year. And if Nem then does its corrective decline, towards 15 or a bit lower, the other great trade will then present itself. What has amazed me the past few weeks with the XAU rallying 14%, and especially the "true" gold indices, the HUI(up 23%), and GOX(up 21%), is HOW LITTLE excitement and belief there is in the rally! This could not be a potentially more Bullish set up, all the failed rallies of the past months and years has set the psychology up so that no rally is expected to continue or be "for real". I've read and talked to several gold analysts, and almost no one believes the XAU has bottomed, and that this rally is for real.

There are no certainties in any analysis, only hard work and "high confidence" scenarios. For me, the fact that the scenario I wrote about in NEM came to past so perfectly, simply makes the odds that the forecast is correct, very high. And now having the 5-wave rally off the low only "cements" the case that THE LOW for NEM and the rest of the gold stocks and indices is now in place. Now we only have to see if gold itself, needs that final low, likely next week if, and I stress if it does occur.

Folks, it has been a VERY long and VERY excruciating wait for all this to come together as it is now doing. But usually the more painful the process is, the better the rally and likely gold and gold stock explosion will be. All this work I've outlined is of course no guarantee, I can only tell you that it has as high a chance of occurring as I can give it. Best of luck, OUR TIME IS AT HAND.

10 karat gold is 41.7% pure gold.