These charts need updating of course, but the premise has not changed. I am currently long the PM market now, as I believe the charts point upward for now. How far up? who knows , however I could see the big picture would allow a short squeeze up to maybe 1450 in gold which would of course include a wild advance for the gold shares. As you can note in my phase III essay the claim is we have not seen the bottom yet because the psychology has not fulfilled the normal life cycle elements of a bear market. When prices were at the lows back in December the psychology was pretty bearish. Think about it, too bearish for the market to have the fuel to power a decline, no more weak hands to liquidate. If we could get the average PM invester lathered up again with a rally from here, I believe we would then have the required long positioning to provide the fuel for a decline that could violate the December lows. That would enter us into a phase III.
The other day Martin Armstrong wrote that the state of psychology was still to bullish. He said that with any micro rally people get all excited and that is NOT the psychology likely in a bull market. He then said what we should have is doubt and skepticism with any new rally. We don’t really have that. If we we’re to enter a phase III cycle I believe that would transform the psychology to be consistent to what Armstrong is saying. So I guess we are on the same page as to what lies ahead. I would suspect the flush that I speak of could possibly be in sympathy of a deflationary impulse which also takes down the general stock market. Maybe it takes another 1-2 years to get there. The FED keeps intervening with renewed QE injections after the market cracks this fall and eventually the renewed injections just don’t revive the market anymore and we come tumbling down.
The initial reaction of this deflationary impulse would be PM stocks go down, but eventually the market realizes that deflation is actually good for gold because people begin fleeing financial and paper assets and seek safety and physical security that gold has to offer. Meanwhile the real price of gold begins rising, and the input costs of the miners falls. This begins to fuel a grand bull market in gold stocks. But this is after we go through a phase III.