Tuesday, May 17, 2011

David Banister: The Dollar Bull Monkey Dance Will End Badly, with a QE3 party?

Interesting to watch all of the Silver and Gold Bears running out into the streets from their caves beating their chests due to the silver shellacking we just saw. Getting jiggy with the US Dollar rally is all the rage right now, and stomping on the precious metals Bulls is the hot sport. The only problem is calling for a crash after a crash is kind of like picking the winner of the NCAA tournament at your office the day after the tournament ends. It’s rare to get a crash on top of a crash, and trying to predict any crash is a fool’s game anyways.

The reality is the US can’t even keep their continually rising debt ceiling in check let alone run a normal break even budget. The constant calls for the end of Q2 are kind of funny, because in one form or another, we will see a Q3…....call it what you will. Getting on board now with being bearish on silver or gold and bullish on the US dollar is probably going to be short lived near term. 

One of the confirmations I look for at bottoms is not just with my Elliott Wave patterns or charts, it’s headlines, forecasters, and erstwhile market seers are going the same direction and high fiving each other. When everyone stops trying to call the top in Gold and Silver, then we will probably have a major top in 3 years or so, but not yet.

The dollar should bounce a bit higher yet between 76.20-77 ranges on this chart below then resume the decline......Giving the Bin Laden news credit for the Dollar rally is a bit silly to say the least; it was overdue no matter what the news of the day was.

The bottom line is that Silver was likely to top in the $45-$47 per ounce range after a huge rally from $26.50 whether or not the COMEX raised equity requirements. I had forecasted a run to the $45 highs way back in the mid 26’s for my subscribers. I had mentioned that as we approach those highs, predicting the next “D wave” correction would be very difficult indeed. Certainly the COMEX raising equity requirements made that D wave that much more difficult to assess. The fact that they did it four times in one week certainly sped up the correction and caused an “overthrow bottom”.

Now if we can step back and take a deep breath, we can see that Silver roughly retraced a Fibonacci 61% of the rally from 26.xx to $49.xx and this is typical of a major wave correction in sentiment and price. Gold has so far retraced 61% of its prior 3rd wave up, and that does happen as well. Investors and forecasters simply like to use the day’s headlines to explain the action, so they can feel justified with what just occurred.

I believe that the headlines don’t much matter during rallies or corrections. Instead what matters is typical crowd behavioral patterns and trying to outline pivot highs and lows as best as I can for my paying subscribers. With Gold’s recent bottom at 1462 being a likely “A Wave” of an A B C correction, we then saw a “B wave” rally as I forecasted would occur to “About $1520 or so”, and then a C wave so far to a higher low than $1462. I thought the pullback from the $1520 area would bottom at a higher level than $1462 and so far that is still the case. I am looking for Gold to rally past $1577 and complete a large 5 wave rally from October of 2008 at $1627 or higher. At that time, or close to that time, you will then be wise to take a fair amount of cash off the table.

Indeed, we have had a stellar rally in Gold and Silver from the October 2008 lows and there will be eventually longer periods of consolidations and corrective wave patterns to work that off. However, my theory has been that we are in a 13 year bull cycle for the metals and this is like 1997 in the Tech stocks, still a few good years left and probably one of those 1999 years is still in front of us for the better gold/silver junior exploration companies. 

Certainly after rallying from $681 in October of 2008 to the $1577 recent highs of April, we are getting a little long in the tooth on this multi-wave pattern to the upside. This next top at $1627 or higher will be followed by a multi-month corrective pattern, and I’ll keep my subscribers on top of the coming moves as best as possible. Consider joining us now and save 33% off the annual subscription covering Silver, Gold, and the SP 500 with a 24 hour limited offer at Market Trend Forecast.com and or sign up for occasional weekly reports.


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