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February 27, 2010

Pivots and Cycles

In Thursday's post I outlined three market developments which need to occur in order to confirm our outlook for a parabolic run in precious metals. Silver was the only asset to make an attempt at complying with the requirements, posting a 40c rally on Friday. We still await explosive moves in gold, junior miners, and the S&P 500. I have a feeling those moves will not be mutually exclusive. The key to those moves will depend on how various assets behave around important pivots, not the least of which are a couple of important pivots on the dollar chart.

Dollar Index Support Line

Dollar index 2009 top

Silver Daily Price Chart

The action in silver is characteristic of the beginnings of a significant run, but the rally's development will be dependent on downside follow-thru in the dollar.

Gold Chart

In the meantime, the SPX refuses to take out its most important pivot: the 65-day moving average:

SPX Chart

With all these price series flirting with important pivots, there is only one way to characterize next week's action: pivotal! In the grand scheme of things, I don't see any particular development having derailed our outlook for the second half of the parabolic run in precious metals. This year's mid-point was simply more complex due to the dive into a yearly cycle low by equities and the machinations of the dollar index in finding an intermediate cycle top. Once the dollar capitulates, we should be gold (they just write themselves).


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