Stocks, Gold, Silver: Time For Close Observation

Article was updated at 4:15 pm 19 February 2013

by William Kurtz

Here’s my interpretation of the Dow this morning: It is in the final stage of forming an “Ending Diagonal Triangle,” which is the end-move in a fifth (and final) wave. We can see the five waves within that triangle – A, B, C, D, and E. I’ve marked them on the accompanying chart. The next move should be Down.

Click on chart for larger image.

If prices were to fall beneath the bottom of wave “D,” that would be an early
warning of a change in major trend in the Dow, from Up to Down. If prices were to fall below the bottom of wave “B” now, without making such a substantial new High as to wreck the triangle, that would constitute a stronger warning still. Some folks would take it as a “sure thing.” I’d be more conservative, and would call it “strong evidence” that the Dow has topped and that the major trend has switched.

Click on chart for larger image.

So: I’m watching to see whether the Dow drops below 13906.73 (the bottom of wave “D”); and, especially, whether it drops below 13852.20 (the bottom of wave “B”) before making a substantial new High. If the latter were to happen, the red-light flashers would light up. Any Dow number below 13852.20 would warrant really sitting up and staying awake, because this “rubber band” of a
market is stretched to its limit, or very nearly so.

This will all play out before th first week in April.

Click on chart for larger image.

Gold is off another $22, and Silver is off another 74 cents.  Silver is within about two cents of its “support shelf” at $26.80.  Gold is nearing its own “support shelf” at about $1550. Both of them are increasingly oversold in the short term, and susceptible to a countertrend bounce. It may be, though, that they will just continue to fall until they reach their own individual “support
shelf.” The intraday bounces that have occurred so far today have been tiny. At the bottom of these selloffs, there ought to be buying op.tunities for short term trading; but I would not consider them to be op.tunities for long term investment, because Gold and Silver both posted Tops and major trend-reversals in 2011, and those tops are not likely to be surpassed for many years.

Various commentators continue to call for a great new bull market in Gold and in Silver – and dramatic new Highs for both of them.  Nevertheless, and probably because the opposition is so uniform and so loud, I’ll continue to stick to my contrarian guns by maintaining that the long term outlook for Gold and for Silver continues to be Down. I would consider changing my mind if Gold were to top $1804, which was about the High last October.

Update at 4:15 pm 19 February 2013:  The market has drifted lower all day and a bearish engulfing pattern has developed for the Dow for the day:

Click on chart for larger image.