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July 31, 2004

Skyrocketing Gold Stocks
by Don Delavan

Are you ready for skyrocketing gold stocks in a blow-off wave 5 up?

HUI touched its 2-year moving average on May 10 and again on July 27, probably completing Wave 4 down and the previous HUI cycle. July 27 was exactly 34 Fibonacci weeks from HUI's all-time high on December 2, 2003. Plus HUI came very close to retracing 61.8% of its Wave 3 on May 10.

A new HUI cycle has probably started and should rally into late September with Wave 5 up. A break above the 1-year moving averages will confirm that the new HUI cycle is heading to new highs. Since the previous cycle peaked in 60 days, the current HUI cycle might also peak in 60 days, around September 24-28. The targets for Wave 5 up are at the red lines connecting the tops of Waves 1 and 3, which are around HUI 315, XAU 140, and NEM 60+ by late September.

So gold stocks might be the most profitable investment during the late summer months. Inflation fears will probably return because the Fed is so far behind the curve, which will cause gold stocks to skyrocket into September like they did before the 1987 crash when NEM skyrocketed 122% in 12 weeks! Will we see a repeat of history?

Gold will probably make a second bottom around $375-385 sometime in August and may touch its 2-year moving average, which is currently $374 and rising. Then its Wave 5 up should rally towards $500+ by December.

The US dollar will probably make a second top around 91-93 sometime in August to touch its 1-year moving average for a second time, which is currently 91.22 and falling. Its Wave 5 down should decline toward 80 by December and touch the outside of the previous red resistance line. This would confirm that a multi-month rally in the dollar would start near 80. A multi-week break below 80 would be much more bearish for the dollar and require a different wave count for gold and the US dollar.

Don Delavan
SBRB Management Corp.

Don Delavan is the editor of the Market Waves newsletter. For subscriptions, contact dondelavan@adelphia.net

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