Markets at a crossroad – what now?

We are very bullish over the long-term for the resource sector ( i.e., gold, silver and commodities). However, we need to react to markets on a real-time basis and the question is: Where are we now and what should investors do, if anything?

The bigger question mark is about the short-term (several weeks) and intermediate-term (1 – 3 months).

One very simple tool which will frequently keep you on the right side of the markets is the 50-day moving average.

Gold and the shares represented by the HUI (Gold Bugs Index) and the GDX (Gold Miners Index) broke below the 50-day M.A. in early January.

The current rally we have been expecting has now brought the prices back up to the M.A. and the question is: What now?

With many of the technical indicators over-bought on a short-term basis, we think there is a high probably of gold and the shares resuming their downtrend soon.

Investors should consider raising some cash or be mentally prepared for the possibility of a significant decline in their portfolios.

Cash will be king in the next few months to take advantage of what we believe could well be the greatest buying opportunity for the resource shares before the next major up-leg.

A couple of simple charts on gold and the HUI will allow you to see what we see and decide for yourself the degree of risk.

There is a strong possibility of gold returning to the $1220 range over the next 3 to 6 months.
Again, we stress our views that any correction will be within the framework of the long-term bull market and give investors a great once in a lifetime buying opportunity.

Patience and cash are the keys to your future success.

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