Market sentiment has been holding near bullish extremes for the past three months, yet even as the overextended rally in stocks from early September has drifted up to new marginal highs during the past several weeks, save haven assets such as gold have remained strong as well, suggesting that the extreme optimism pervading US market psychology should continue to be viewed with a healthy amount of skepticism. Today, a meaningful fundamental warning sign was issued by the precious yellow metal as it closed at a new all-time high for the secular bull market.
Technical indicators are now bullish overall on the daily chart, strongly supporting a continuation of the rally. The Gold Currency Index (NYSE:GCI), which measures the intrinsic value of gold as an international currency itself, closed sharply higher as well, moving up toward its recent all-time high. Although the GCI is lagging gold slightly in terms of price action, technical indicators are bullish overall on the daily chart, confirming the underlying strength of the advance.
With respect to cycle analysis, today's strong move higher indicates that the current short-term cycle has moved into the beta phase and reconfirms the extreme right translation exhibited by the last two cycles.
As we forecast in late January, the latest Intermediate-Term Cycle Low (ITCL) has been followed by a strong move higher during the past 5 weeks.
A weekly close at current levels or higher on Friday would constitute a long-term breakout, reconfirming the secular bull market and forecasting additional gains during the next 2 to 3 months.
Disclosure: I am long SGOL.