May 6 - Precious Metals Update
The February call for a turn was premature and with mixed success, since the Metals are higher but Stocks are lower and the USD is even. We did have a second lower target in mind for the Stocks and it happened to be reached as the Metals are again testing their uptrend. This is all happening with interesting cycle lows in Gold, Silver and Palladium, but Copper looks like it could seriously under perform. The Gold correction in 2004 lasted until mid May and achieved much more damage than this one which is also approaching mid May soon. The rally in 2004 was tighter and steeper than the rally in 2003, and the downside momentum is the one decreasing for the longest time. The weekly chart also says that the 2.15 year cycle high will not be reached until early 2006, and the chart from the 70's agrees.

Charts courtesy of StockCharts.com



Charts courtesy of StockCharts.com

Silver is painting a similar story
Silver is providing us with similar clues to a major move up in 2005, with both a 7.5 month and 4 year cycle lows probably upon us. There is every reason to believe Silver could reach the descending wedge target of 15 with pauses at 10 and 12.5 by the end of this year. Every Chart has its personality and Silver has some behavior that can shed some clues to what is happening to the Money of the People. A look at the decline since the 1980 peak of 50 shows a regular rhythm 2/1, 3/1, and then 4/1 years Down/Up showing increasing bearishness. The major low in late 1992 was marked by a change of behavior as it had only 1 down year followed by 1 up year, until selling resumed. The Bears resumed their increasing bearishness by selling it for 3/1 and 4/1 years Down/Up, but they could not achieve new lows both times. The result was a furious 2 year rally to correct the situation, but since they oversold it for 3/1 and 4/1 years it is probably just begun. These 7 years of selling are not likely all undone, and if the trend has turned, maybe we can expect 2/1 and 3/1 up/down like on the way down. The longer term cycles seem to predict an early 2008 high, followed by an early 2009 low, conveniently 3/1 years up/down away from now.

Charts courtesy of StockCharts.com


Charts courtesy of StockCharts.com

Finally Palladium is on a bullish double bottom
Palladium is giving us dual clues as it built an expanding wedge from the early 2003 low, and a descending wedge from the early 2004 high. Expanding wedges show strong bullishness and buying as the boundaries of the parallel channel are increasingly violated by this trend. Near a low they can signal its importance as Value, late Shorts and Momentum Players all combine to create a strong volatile up trend. This expanding one took exactly 1 year to build in a very clear 5 waves with significant overlap, warning of a possible heavy retrace. This retrace also took almost 1 year to build in a decreasing momentum triangle with 3 waves only, thus weaker than the previous 5 waves up. It broke out and is struggling with its 50 and 200 day MA. Possibly building a bear trap since the StochRSI is up and MACD is divergent. Should the rhythm hold and we reach 300-350 by March 2006, it would also agree with Gold and Silver moves to a high around that time.

Charts courtesy of StockCharts.com


Charts courtesy of StockCharts.com

Feb 4 - The US Dollar, Gold and Gold stocks
An interesting picture is developing in these markets, especially when we compare the 85-87 decline to the 02-04 we just finished. They are very similar in Time and Price, and we could expect to reach the equivalent level of 90-95 in 2006 vs the 100-105 of 1989. The last leg down in 1987, coupled with very high long-term yields and current account deficit caused a panic both ways in many markets. This year yields were already down and the 3 year decline in the USD was less severe than the 50% decline in 85-87 and no panic ensued. Notice in the monthly chart that a lower low was made past the 4 year cycle low, implying new lows in the next cycle down in early 08.

Charts courtesy of StockCharts.com

Charts courtesy of StockCharts.com

USD's 9 month cycle The daily chart suggests that the 9 month cycle high is already upon us, and the USD quite possibly will stay in the channel below 85. While a pullback could retest the 80 level, we should keep in mind that the 90-95 level is likely in mid 2005 to early 2006.

Charts courtesy of StockCharts.com

Charts courtesy of StockCharts.com

Gold and Gold stocks support
Gold approaches very strong support near 415, as the HUI and XAU also approach strong support near 200 and 90 respectively.

Charts courtesy of StockCharts.com



Charts courtesy of StockCharts.com

Waves of the HUI/Gold ratio

Even the HUI/Gold ratio is approaching one of the 2 Elliot Wave targets for this correction while hitting an important cycle.

Charts courtesy of StockCharts.com

Charts courtesy of StockCharts.com

USD and main Currencies

While other currencies are also near support, they also have room to move lower so any drop in the USD could be slow at first.

Charts courtesy of StockCharts.com



Charts courtesy of StockCharts.com

USD, Trade Deficit and Interest Rates
The Balance of Trade is cumulative and as such will keep on getting worse until the ratio of Exports to Imports improves.
I believe the Trade deficit should be looked at in the context of Interest Rates if the USD is being analyzed from such data.
The combined Interest Rates and Exporting deficit as a ratio seems to lead the USD by a few years and is pointing to the 60 level.