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December 2, 2012

Current Call IV: Buy Gold Miners

With our third Current Call to buy gold still alive and kicking, I would like to open a fourth call: buy the gold miners. Cycles for both gold and the general stock market are aligning in a way which could give a great boost to mining shares. First, gold moved out of a weekly cycle low in early November and is now in process of completing its first daily cycle within that intermediate cycle.

Gold is moving into a daily cycle low

Gold typically moves into a minor low every 18 to 28 days, so a cycle low is now due. Given the setup of the dollar's daily cycle, discussed in detail in the Member Letter, gold should be feeling out a daily cycle low in the coming week. We should then see price move above the recent peak in the $1750s.

Likewise, stocks formed a weekly cycle low of their own earlier in November, as was anticipated in the Equity Correction Almost Done post of November 7.

Stocks are rallying out of an intermediate cycle low

Given the nature of the previous weekly cycle, this new cycle should eclipse the September high before finding a peak. Once gold rallies out of a daily cycle low, both stocks and gold will be rallying in tandem, providing a strong tailwind for mining shares.

GDX is poised to rally big

The stop for this trade will be placed under the recent low at $45.35.


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