-- Posted 6 May, 2004 | | Source: SilverSeek.com
We’ll let the Warren Buffett piece ride till tomorrow, since I want to get something else of particular interest out to you this evening. I’ve just received an insightful letter from a long-time pen-pal, Karl, who sees bullish parallels between silver’s current, corrective chart pattern and the pattern it traced out between 1974 and 1978 before going parabolic. He writes as follows:
“It's interesting that you talk about all the letters you’ve received concerning a market collapse and the effect it would have on mining stocks. I would submit to you, being the contrarian I am, that the very receipt of so many letters asking that question is evidence that the stock market is nowhere near a high. There are so many things going on in the markets, and it doesn't take a rocket scientist to see the heavy hand of market influence that is there at each critical point. Yet, there is almost a fanatical disbelief that the market is not being controlled or influenced or colluded on at key moments. Now, THAT I find hard to believe.
Fundamentals Unchanged
“As a bit of a gold bug, I would say that the nothing has changed fundamentally. Yet, there is an almost new mindset that somehow Everything has changed, that the metals and mining shares are in trouble, and that the dollar is set to continue higher. This it may well do, but if it premised solely on higher interest rates, than I would submit to you that the edging up in rates is what kicked off the parabolic rise in the metals in 1978.
“I found a parallel in the Silver chart from Prechter’s book, where he discussed a nine-wave triangle. In July of last year, I wrote about this triangle and about how it seemed that we were in an identical situation. Now, let me ask you a question: If this market (i.e., precious metals and mining shares) were on the verge of a huge move due to myriad of factors, not the least of which is the massive inflation underway while the economy is struggling, wouldn't a vicious washout to make everyone cautious be the very thing one would expect before the PMs begin a real ascent?
Collapse Served Its Purpose
“I think so, and it would have to be convincing. I’ve long expected that, when inflation began to kick into high gear, there would be an event that would make people think they were flat-out wrong and that the bull market was over. That appears to be what is happening now, with mining stocks and metals falling out of bed.
“Now, I could certainly be wrong. And maybe the fundamental picture did change in a two-week time-frame. But that would be hard for me to believe. We needed an event that would shake bulls’ beliefs to the core, and that’s exactly what we’ve gotten. If you go back to the link I posted about silver and its repetition of this triangle, everything is happening right on cue --
including the shakeout that happened after the rise out of the triangle. Granted, it didn't correct as much as now -- but then, the market has never been this heavily manipulated before. Regards, Karl.”
***
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-- Posted 6 May, 2004 | |
