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(Just before gold and silver assets got
slammed last week, we received the following alert from our friend Chuck
Cohen, a New York-based financial consultant with a laser focus on junior
mining shares. Although the broad averages came down too, Chuck thinks
the worst lies just ahead. Bullish sentiment is almost literally
off-the-charts, he notes, and the bank stocks in particular, with B of A
leading the pack, have been acting positively creepy, opening each day
with head-fakes that have given way much of the time to heavy selling and
lower prices. Chuck says the price action in these stocks is indicating
there is something “seriously wrong” with the banks, and that he
would not be surprised to see another financial crisis requiring heavy
government intervention. )
Meanwhile,
the jury is still out on whether bullion has more correcting to do. Chuck
says it will depend on whether the dollar gets
short-squeezed higher. We agree, and have been using 78.69 as a breakout threshold for the Dollar Index. It was just
missed on Friday, but if DXY exceeds our number this week, we would be
reluctant, go-along dollar bulls ourselves, if only briefly as the technical
rally plays out. If you want a more detailed report from Chuck, click here
and he’ll e-mail you his latest. RA)
Here’s
Chuck:
Everything is in place
for something extraordinary in the markets. Silver is one of the keys, since
it is a primary beneficiary of QE2. Even a novice technician can see an
exhaustion spike and reversal in the chart below. Plus, the sentiment
in silver was recently at the highest level since March of 2008. Yipes! Meanwhile, the broad stock market is ripe
for an incredible decline, most likely a mammoth panic. Be careful here.
 
“The QE2 game
that has driven shares ever upward is over, and the next move is going to be
violently down. Besides the extreme optimism reflected by sentiment
indicators, we see stocks that almost never sell down, especially in the
final hour, and charts that have been building one of the longest wedges in
history. All of these factors are setting up for an avalanche one day
soon. The decline will appear to come out of nowhere, but the market is
running on the fumes of a public determined to recoup losses suffered over
the past decade.
A cautionary sign in
precious metals is that The
New York Times, a dependable contrary barometer, recently had two gold related articles
on the front page on the same day. To repeat: Beware and be cautious here.
Silver bulls should take note of the fact that four key stocks – Hecla, Silver Wheaton, Silver Standard Resources and Pan
American Silver – have recently reversed after experiencing huge moves
on increasing volume and large gaps. If the dollar takes flight here, the
play in silver could be over for a while.
Rick Ackerman
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