We are at the door

Chuck Cohen

Bill, after looking at today's action in the precious metals, I am convinced that the next move, an unusually explosive one, is at the door. In brief, here are my reasons, most of which I have mentioned recently but with one new chart to support my stance.

First, we are seeing the selling of the dollar down. It hangs precariously just above the 82 level. This move is providing liquidity to everything, including the stock market which is heading up here. But the primary recipients will be gold, and especially silver. I am looking for a sharp drop in the gold-silver ratio as an indication of this move.

Two, today marked the 7th Monday that gold has been down, for a total of over $85. That is just on Mondays.

Three, "Thestreet.com" poll had twice as many bears as bulls this past weekend. This is by far the most bearish I have seen since I have been following it. I believe its participants represent the average investor. Very bullish.

Four, the DZZ-DGP continues to exhibit an extraordinary tendency to go short. I view this ratio again contrarily, and incredibly bullish for the precious metals.

Five, the volume in the listed shares are down to some of the lowest readings in many a moon.

Six, I came across this very instructive chart from John Townsend's piece in Kitco. It confirms almost precisely the bearishness of the gold market. Look at his points when the put-call ratio on GLD spikes up. This latest spike appears to be the granddaddy of bearishness. All of the others that he points out came at major bottoms, as will this one.

Seven, we are now coming into the best time of the year for the precious metals. Each of the past three moves up began in either late July, August or early September. We appear to be on schedule for another one shot up here.

When you mix all of these technical points together, you have the brewings of a move that will be very different from previous ones. I believe we could soon have a run on the physical metals as the naked shorting is exposed. The cocoa corner could be the precursor to gold and silver shorts getting trapped. Chuck
One other point, I believe that calls on the listed gold shares over the next six months offer a tremendous risk-reward. I can help but we must do it on the honor system.

Thanks.

ikiecohen@msn.com