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Below I repost my RT letter from 2-13 one day after a significant low. I
called at that time for a rally into the 360's into March which is exactly
what we had. Then (in same 2-97 post) I called for the market to fall apart
again by April with a downmove into summer under 320. As shown below this is
again exactly what followed the March high in the 360's - we then fell to 315
in July and the foreign currencies continued to fall apart as predicted.
Since this 2-97 post it became obvious with swing targets that 315 was the
main target for the July bottom and a good medium support area like the Feb'
support.
What next ? I feel more of the same. Overall lower foreign currencies
throughout most of this year still and lower metals. After a modest gold
rally into the 330's to 340's we should retest the 315 to 320 area over the
next few months. Once under 310 to 314 we should be set up for a test of the
280 to 300 critical 18 year support zone.-- The reasons continue to be based
partly on the EMU process. This has been a clear year of long term
forecasting in these markets. I'll elaborate more on a later post.
Kurt
Sunnen@xxxxxxxxxxxxxxx
Sent: Thursday, February 13, 1997 5:20 PM
To: 'NP Chat'
Subject: GOLD: outlook
It's amazing how I never hear one person in the news or in this chat group
talk of a Bearish outlook for Gold and other precious metals. Having fallen a
sharp thirty dollars (sharp for Gold) over the previous nine months I began
posting to this group last November of my Bearish views with Gold in mid
380's. Each month since then I have given renewed Bearish forecasts for Gold
and Foreign currencies. I did want to show I do have at least a little
credibility here but the reason for posting now is to forecast what is next -
a modest rally and then down again.
SENTIMENT: Obviously some others are Bearish like me as the number of
Bullish advisors has fallen to the lowest level since 2-95 when a 5 week rally
ensued back then. This certainly allows for a rally.
CYCLES: My 6 to 9 month cycle reached the mid-point of 7 an a half months
this week, so at least an intermediate low in a Bear market could be in
allowing for a one to three month rally.
C.O.T.: The near record COMMERCIAL net long positions I have been saying
for months to ignore - though they generally imply a Bull move coming. I have
felt that C.O.T. numbers were tracing out a similar pattern to 1989, which was
the last and only time in history that Commercial Buying stayed this high for
this long. My best guess was to expect an intermediate low around mid-Jan. to
mid-Feb. In 1989 we had a 4 to 6 week rally from a similar condition as now.
There was also at that time a similar wild spike up like we witnessed on
2-12-97 that was retraced to a slight new low immediately - we'll see. So
after this rally in Gold (starting 2-12 or by month end and ending in Mar' or
April) the COT pattern I see argues for yet more downside starting by
sometime in April lasting into the summer.
EP: Natures Pulse Auto-Scan also gave a turn for 2-11-97 which is closing
low so far.
Fundamentals: As I have harped on many times in Real Traders the ECU (union
is due in a couple years) combined with the 5 year recession in Europe and
Japan continues to argue longer term for more Dollar strength and Gold
weakness and low inflation until foreign economies revive - maybe later this
year. ECU standards require major fiscal restraint for those countries and
thus they must devalue their currencies to lift exports and their economies.
This is an old argument by me which has held up well with the near panic rise
in the Dollar and collapse of Gold. Sometime during the last half of 1997 I
think Gold could begin a Bull move of a year or so.
------
For now look for uptrend into March with resistance in 360's. 280 to 320 is
potential down the road however. I remain longer term Bearish on Gold and
foreign currencies with the first chance in months now for a modest rally
mode for a month or two.
Kurt
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