The Bull Market is Off and Running - Again

Includes: GLD, SPY
by: Investing The Middle Way

Long time readers know that I'm pretty stubborn in that I hold on to my opinion unless incontrovertibly proven otherwise. Two views that I've expressed for a while are:

  • We made an interim bottom (basis the S&P) on March 17.
  • We're still in phase 3 of III of the Precious Metals [PM] bull market that should see much loftier heights.
  • In the S&P chart below I drew a potential inverse head and shoulder pattern. The most recent low came last Friday when, technically speaking, the market had a good reason to drop another 20 S&P points. Naturally short covering was a part of Tuesday's rally, but the materials/energy names were too strong to be dismissed. My read here is that for now the bulls are in control as money on the sidelines rushing in. I have 1475-1500 as my first upside target.

    click to enlarge

    I wish I have as specific an idea about the near term agenda of Precious Metals stocks as I gave above for the S&P. PM stocks have moved in tandem with the general market since the precipitous drop in March. As shown in the chart below, the uptrend channel was broken and the Amex Gold BUGS Index (HUI) have just made it back into this channel. Painful as it was, this kind of volatility was fairly typical for PMs as we're once again reminded that the bull market tries to throw off as many people as possible along the way. As previously observed, the HUI tends to take several tries before overcoming a significant demarcation line. Presently, I expect the 500-515 region to be such a battleground.

    click to enlarge