Based on our preliminary work, we believe that gold stocks, as represented by the Philadelphia Gold and Silver Stock Index, will reach our long-term gold stock sell indication between July 15, 2013 and November 25, 2013.
This is our best estimate based on the current trajectory of our Gold Stock Indicator. As we get closer to the dates, we will be better able to project the gold stock long-term sell indication with what we believe to be a certain level of accuracy.
This estimate is subject to change if the short-term gold stock buy indication (green diagonal line) is broken to the downside which would bring us back to the long-term gold stock buy indication. The scenario that could easily break the downside trendline is a general stock market decline. Although Dow Theory indicates that this is a possibility, we're waiting for the appropriate confirmation either up or down.
The best example of where the stock market is right now is reflected in the chart below, from our September 21, 2012 Dow Altimeter:
Royal Gold (RGLD) Speed Resistance Lines
In the chart below we’ve provided Edson Gould’s Speed Resistance Lines (SRL).
What is interesting about the above chart is the following:
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Point A1 to point A2 declined –60%
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Point B1 to point B2 declined –40%
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Point C1 to point C2 is a projected decline of –55%
The SRL for Royal Gold at $44.62 doesn’t seem outlandish given what has already occurred in the previous declines from prior peaks. The X marks the first decline after a “minor” parabolic move that was later exceeded on a larger scale to point A1, B1 and C1. Additionally, the X reflects the minimum retracement from the top and has provided consistent support for the price for RGLD.
We’d consider buying RGLD if it declines to either of the support levels of X3 or C2. The movement of RGLD has been consistent with the price of gold (GLD) which is in stark contrast with gold stocks as represented by the Philadelphia Gold and Silver Stock Index (^XAU), as indicated in the chart below.
