Wow! What a crazy week it has been. I can't remember another period with such extreme day to day volatility. Specifically I am referring to the stock market. Will 1270 hold on the S&P? If you have been paying attention over the past week, you likely changed your mind at least four times. I do not think 1270 is going to hold. The market will not get a sustained rebound until it hits 1175. That is my target for a good bounce. More on this later. Turning to the precious metals (and specifically the metals), their movements are amazingly coinciding with Fibonnaci targets. I have written a lot about the $1020 level as an important target. If you run a Fibonnaci correction sequence, and you will see this on the chart, from $255 to about $1025, you will see that the retracement levels match up closely with $730, $640 and $550. $255 was the major bottom and $730 was a key top. $640 and $550 were also important levels. Hence, I figured $1025 had to be a top of some kind. Okay so gold peaked at $1033, but you get the point. In this series, the next target is $1500 and so that is my next target for gold. In the same vein, the Fibonnaci lines told me that 72 was an important target on the dollar.
Technical Update on Gold & Gold Stocks
Gold peaked near the aforementioned Fib target. The next target is $1500. The good news is that we are not as extended as we were in May 2006. At the last peak gold was 46% above the 50 week moving average, while Monday's peak was 34% higher. If June was the bottom, which it was in terms of price, then gold completed a nice five wave advance. We'd expect the correction to go no lower than the previous fourth wave ($775). The retracements are roughly 791, 838 and 884. Since gold isn't as extended, I would opt for the 50% retracement at 838. Also, we have to remember that 850, being the old high, is a very important level. The 200 day moving average is at 785. It has risen nearly 9% over the past two months and should rise at least at the same pace over the next two months. Such would put it at 855.