Gold Seasonality

Let us pass on the Dominant Theme investing observations again this week and take a quick look at the current precious metals complex. The seasonality for gold and the gold stocks is from December 2000 to December 2012 – give or take a few quarters. I gather most investors have recognised the secular bull in the precious metals complex and know that to trade in and out of a rising sector simply means to sell high and buy back at higher prices. Or, you can sell and never get back on board.

Our chart is a daily of the TSX listed BMO Jr. gold ETF (ZJG) plotted above the big cap Barreck Gold (ABX). Last Friday the ZJG posted a new 52-week and all-time high. Note the lagging Barrick. Most interesting is the little confirmation signals that flash from the small cap ZJG such as the short term sell and buy setup through March and July. We can apply the same test on the longer term weekly and monthly plots to get a sell-and-buy setup on the longer secular advance. My best guess would be that sometime in 2011 or 2012 we get a new all-time in Barrick and a swing failure in the ZJG – but that is another day and so for the moment let us party.

US Long Bond Bubble:

Let us pass on the Dominant Theme investing observations this week and take a quick look at the current sell-everything and buy US T-bonds movement. Many long bond bulls are basically berma-bears who believe that anyone who owns anything else such as a house, stocks, collectables and even gold are dummies

Our chart is about 30-years of monthly closes of the 10-year US T-bond yield. Remember the bond price and the yield are inverse – so a long 30-yr downtrend in yields translates into a long 30-uptrend in the US 10-yr T-Bond. This long advance in the 10-yr T-Bond was a secular advance or secular bull with this one having 5-shorter bull and bear cycles (see the secular cycle count on the chart). I have also placed a simple Elliott Wave count 1-2-3-4-5 with wave three (2 to 3) subdividing into a (1), (2), (3), (4) and (5) wave count. So who is correct the bond bulls or bears? The acid test is the price – the bond bulls need a new low on the yield (under 2% ) and the bond bears need a move above 4% to confirm a long term sell-of-a-generation on bonds

Timing the Market for Dummies

Thought I would post a chart illustrating the Sell-in-May and go away scam

Over the past 8-years - it worked once

I rest my case

BC