Thursday, February 25, 2010
I Still Smell a Replay
A replay of the general stocks down, Gold and Gold stocks up scenario that occurred during the 2000-2003 bear market in general stocks, the 1973-1974 bear market in stocks, and the 1929-1932 bear market in stocks. I think Gold stocks are going to rise while the general market declines. I think we are getting real close and I think the bottom is already in for the Gold price and general Gold stock indices.
I am thinking something like the chart below is what's in store. This chart is stolen from Frank Barbera with my scribbles on it:
For those who don't know, Homestake was a huge Gold mining company that was around for both the 1930s and 1970s Gold stock bull markets and its remnants are now part of Barrick Gold (ticker: ABX). Speaking of Homestake, perhaps something like this chart, stolen from Mr. Ian Gordon at the Longwave Group, may be coming:
I know, I know, Bloomberg sayz Gold and Gold stocks only do well during inflation and Gold stocks go the same direction as the general market. Except for the fact that some of the greatest historical bull moves in Gold secular bull markets over the past century have done exactly the opposite, including those from 2000-2003. I know, I know, markets never rhyme or repeat and the swinging pendulum of market history can't possibly work because it's general stocks for the long haul, duh.
You can put your money where you want, but I don't fear a return of the general stock bear market at all. Flea on a bull's back. It is Gold's time. Gold stocks will eventually start to outperform the Gold price on multiple consecutive days and even for weeks at a time, in a manner very similar to what Gold stock indices did today.
I don't think today's move in Newmont (ticker: NEM) was a one-day wonder, I think it is setting the tone for the next 2-4 week move higher. I don't like Newmont as an investment, but stodgy blue chip Gold miners often lead the move then slow down and lag as other faster growing Gold stocks come to life. Here's the last 3 weeks of action in NEM using a 15 minute intraday chart:
I am not saying that general stocks can't go higher - they can. But I smell a rhyme of some of the most successful Gold stock and Gold moves coming up and it don't matter one iota whether the stock market goes up or down. A stock market crash spares almost no stock, but a bear market in general stocks is irrelevant right now for the Gold bull market. Still stubbornly long and wildly bullish all things precious and metal.