By Fred M. Starkey
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The Gold and Silver markets have exhibited the same cyclic
characteristics for a number of years. But, Silver has had in the past a more
reliable periodicity. Therefore, our
cyclic forecast will be based on the cycles that have dominated the Silver
Market.
The two dominant cycles in the Silver market have been: the
34 month cycle low and the 26 week cycle low.
The 34 month cycle low was last due in November of 2001,
again in September of 2004, and is due to recur in June of 2007.
The 26 week cycle low was last due in June of 2006, is due to recur ideally the week beginning January 10th of 2007, and then again in early June of 2007.
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As of this writing, projected high timing is due ideally the week beginning October 9th. The next projected low timing is due the week beginning November 6th, and again, the week beginning January 8th, of 2007. (Same as the 26 week cycle low for Silver). Platinum projects a major low for the month of March in 2007.
Based on the Timing indications from the Monthly and Weekly
graphs; the January time window is anticipated to be the low turning point for
the beginning of another major move to the upside.
Price Evaluation…Sections
As general rule bull markets are composed of 3 upward sections with corrective behavior after the 1st section, and corrective behavior, after the 2nd section. Identifying the correct section count is one of main keys to forecasting.
The Elliott Wave is an elaboration on this concept which
labels these basic market movements as Leg I: up, Let II: down, Leg III: up,
Leg IV: down and Leg V: up. Elliott Wave
Theorists continue to subdivide the price movement into further intricate
patterns which, for the most part, leads to confusion more than clarity. In
fact, I believe most would agree that the Elliott Wave is simple in concept but
is very difficult in practice.
This methodology uses the rules of balance, support and resistance, price projection, and time projection to clarify the section concept. This also allows us to measure the variance from the forecast and act when the market behavior aligns with these other indications.
Price Evaluation….Balance
The Principle of Action/Reaction is one of the basic tenets
of trend following.
The Gold Market of 1976 – 1980 was a straightforward classic bull phase which was completed in 41 months. Beginning from the August 1976 low the market suffered one, 2 month correction in 1977, followed by four, 1 month corrections before completing the bull market phase in January of 1980.
The current bull market is now in its 85th month since the
August 1999 low through the September 2006 high. This overbalance in time, of all previous
bull market phases, indicates that we are in a long-term bull phase with much
higher prices to follow.
Since the Silver market bottomed in 2001; monthly reactions
against the trend have been 3 months, 1 month, 1 month, 1 month, 2 months, and
1 month. The market has not, at this
time, exceeded any of these reaction lows throughout this bull market phase.
Guardian Angel Sterling Silver Pendant
This 50 lire coin was issued by the Vatican in 1996
Since the Gold market secondary higher bottom of 2001;
monthly reactions against the trend have been 3 months, 2 months, 1 month, 2
months, and 1 month. The market has not
at this time, exceeded any of these reaction lows throughout the bull market
phase. (Refer to Graph)
Price Evaluation…Support and Resistance
As a general rule bull markets have price corrections which are 50% of the previous advance. This measurement is the 1st priority in measuring buying and selling pressure. This, of course, is measured with the reactions in time using the principle of balance to further evaluate the market.
In a bull market, reactions that hold above the 50% retacement, within the time balance, are in strong position
and portend a further breakout to the upside. In a bear market, reactions that
stay below the 50% retracement level, within the time
balance, are in weak position and portend further breakout to the downside.
In a bull market, the next support level is the 5/8ths or
the .618 retracment level. A price retracement
of this magnitude generally means that more consolidation will be required to
generate the next advance; but this decline does not violate the bull market
structure. [The same measurements are used but the opposite direction for a
bear market]
Silver: The advance from the 2001 low to the 2004 high was followed by a decline slightly below the .618 retracement level. (Cash Weekly) The advance from the 2004 low to the 2006 was followed by a decline slightly below the 50% retracement of 10.25. (The market, at this time, has recovered above this price level), but above the .618 retracement level of 9.140. This indicates that the bull market is still intact.