Golden Star Resources Signals Bull
Below is a commentary that originally appeared at Treasure Chests for the benefit of subscribers on Friday, February 9th, 2007.
Stock markets are high, if not at a record, but because of unprecedented credit expansion and the corresponding money supply growth that goes along with this condition, and the fact this condition is now a global affair, expect more air to fill the balloons. This was our thought process the other day, and it continues through to precious metals, where because of favorable fundamental and technical conditions now gaining momentum, the future looks bright. And as per my remarks Wednesday, that's really all you need consider right now. We are about to enter the sweet spot for precious metals any day now. So again, the best course of action is to position yourself comfortably for the ride, and allow process to unfold.
How can we tell for sure the precious metals sector has re-entered an accelerated growth phase, one that from an Elliott Wave Theory perspective would be labeled Primary Wave C (or Primary Wave III for aficionados)? Well, for one thing we would like to see Golden Star Resources (GSS:AMEX & GSC:TSX) move above its 200-week moving average on an impulsive basis. Why? Because GSS is the poster child for the go-go stocks in the larger group due to its marginal operations, and for this reason traders have centered on it as the definer.
That is to say when GSS is moving well, the entire sector will be moving well, as traders will take their cues from impulsive behavior in this laggard. So it's a good thing the chart is sporting a bullish disposition, where a break of the long-term trend line occurred just the other day accompanied by an impulsive follow-through, which is always a good sign. (See Figure 1)
As mentioned above however, we are not through the 200-week moving average yet, where it will require a 3-day close greater than 3-percent above this hurdle to confirm the move is on for real. And naturally we would also like to see the same feat out of gold with respect to the $650 mark, and at $14 for silver, the round numbers.
With operating results the best in years, and prospects for the future improving, in my opinion it's just a matter of time before this occurs, and it could be sooner than later if the10-percent move yesterday is any indication. What's more, with the diamond breakout in RSI above leading the way, and more breakouts on the way below if my eyes don't deceive, it should be noted a preponderance of evidence on the technical side unequivocally supports the bullish case. Here is a view of GSS against the larger group that is demonstrating a bullish bias in that not only are indicators coming alive, what's more important is this is occurring at a favorable juncture on a time related basis. (See Figure 2)
So, despite what most think impossible because the equity complex is about to fall off a cliff, prospects for the precious metals sector look bright, as they should considering all the inflation that will have to be unleashed if equities do actually crack. Of course if the larger equity complex remains buoyant for another year or so, which is not out of the question considering the Feds are back in Presidential Cycle related monetary easing mode vis-à-vis money supply growth rates, which is a view supported by historical precedent, then it's a lock Primary Wave C (III) should begin to gain steam any day now, and continue strong well into next year.
And that's all we have to say for today. We are keeping it simple for you in an effort to be focused on the things that matter. So, let's keep an eye on GSS in coming days.
Fast-forward to present, and you should know this confirmation has now been provided, along with being successfully tested just yesterday.
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Good investing all.