A New Gold Bull Market is Born!

The best technical analyst I have found recently when it comes to short term trading in gold any market is Richard Postma, M.D. You can listen to his comments here http://jaytaylormedia.com/ker/ But for my purposes in this letter, from a longer term perspective the analyst that is most helpful to me is J. Michael Oliver who is a guest on my radio show almost every week. While you may use Doc’s work for timing when you might want to increase or decrease the allocation of gold stocks in your portfolio, to have a sense as to whether we are in a long term bull or bear, the momentum structural analyst work has been most helpful to me in providing a green light for a more aggressive approach to buying gold mining stocks.  I will also mention in this letter the work of Adam Hamilton who is reporting in no uncertain terms not only that we are in a new gold bull market but that based on seasonal behavior, we should see some very strong price action for gold from the end of March into the end of May. Following are some of what Michael Oliver said about gold over the past week. Go to www.OliverMSA.com to learn more about Michael’s Work and listen to his weekly commentary from my radio show here: http://jaytaylormedia.com/audio/

Gold vs. global equities (by Michael Oliver)

 I offer these comments for non?institutional subscribers.

Sometimes if one’s risk tolerance is limited, it might be best to position one’s assets in different categories. An example here. Both charts replicate what gold has done versus the S&P500 (those charts shown in many recent reports). The S&P is among the stronger global developed market indices. Anupside breakout of a massive multi?year momentum and spread chart base. Here we see gold’s performance breakout vs. global stocks.

So, whether measured vs. global or the domestically stronger metric of stock prices (the S&P500), gold has emerged as a better place to be. A very long?term trend of gold outperformance has now reasserted itself. For the investor or asset manager, this is merely another potential positioning piece in a larger puzzle. And realize that historically when gold assets itself, usually the commodity basket follows to some extent. (March 20, 2016)

Gold’s Momentum Breaks Through Forbidden Structure  

After several years of basing, gold’s long?term momentum broke out to the upside in early February as price triggered both quarterly and annual momentum (the price zone of that breakout was $1142 to $1169). The immediate response was a further advance to the upper $1200s.

Observations regarding the long?term trend: The base was substantial and clear on MSA’s gold long?term momentum charts. Given that the breakouts occurred on the long?term charts, one should expect long term upside consequences. This is not a “trade.” There will be corrections and conges?ons, but the major trend has turned.

Furthermore, long?term momentum readings are not overbought in the least, and after due congestion they will likely see a further, major advance. MSA continues to expect the first working target of this new bull trend to be in the $1450 area. Not the end of the bull, just a likely level of major pause.

Also a hefty factor in this bullish view is that gold’s relative performance vs. the S&P500 and vs. the Dow Jones World Index (these charts shown in prior MSA reports) has broken out of equally large momentum basing structures. That occurred as of the January close and therefore more or less coincided with and reinforced the breakout shown on these long?term momentum charts (March 24, 2016)

GDX (Market Vectors gold miners ETF)

Below left is a very long?term momentum chart, using the 200?wk. avg. as the mean. GDX’s long?term momentum emerged upside on various long?term indicators between the prices of $15.20 and $16.GDX’s immediate response was to run up above $20 where congestion has now set?in over the past seven weeks. Currently trading at 19.42.

The next level to watch is the parallel channel top on weekly price. The channel bottom was plotted first, through the lows back to summer 2013. Then the projected channel top was plotted across the peak of mid?2014, at the same angle of decline as the channel bottom. There has been some minor emergence out above the channel but it’s not yet convincing enough.

While long?term momentum is clearly up and provides major wind at the back of GDX, the next level to watch for further strength is the ability to close out a week at $21 or higher (credibly above the channel top). If we see that, then expect price to move, over the next year or perhaps sooner, to the very upper $30s. (March 24, 2016)

Michael Oliver