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0920 EST Tuesday January 17 2006

Good Morning: Regarding our Friday warnings of clear and present dangers: Whilst our opposing viewpoint may have surprised many who have followed our long-standing bullish posture. For us to turn on a dime and develop an opposing view, has some historical precedents:

Most notably, March 24 2000 at 2 PM EST, when we sent out a rare Special Emergency Bulletin and recommended selling virtually all industrial stocks, especially high tech issues, with the exception of Gold and Mining issues, which we were just begining to accumulate.

Our special alert, was basically calling for the Nasdaq to decline some 750 points, almost immediately. That afternoon, was the last time the Nasdaq ever saw 5,000 and even though we had to endure just a few agonizing days in wait, where we might well have been proven wrong: When the Nasdaq finally did start to unravel, the decline was devastatingly swift and less than 3 weeks later, the Nasdaq was down to 3,227 and the Dow, in an unprecedented unseasonable display of weakness suffered its worst daily point decline ever. That is often how bear markets begin and when, not long after the 1973 market peak, back in the days when a Billion Pounds Sterling was worth $2.5 Billion dollars and 10 times more valuable than today, when the London Evening Standard shrieked headlines: $4,000 Million wiped off Stock Exchange values, became a memory emblazoned on the minds of many, that in today's values would equal about $100 Billion.

While this may appear to be an alarming and perhaps un-necessary way to open the third week in January 2006, we feel compelled to air these views because of the growing momentum and strength of a near runaway bull move in Gold that may or may not mean divergence, but in the event it does and the sentiment were to suddenly change, its consequences could be alarming, so its best to be well prepared.

Therefore, today's conundrum is how goes the day, probably goes the week, in what could be the defining week of January and possibly the year. The market is set up for a weekly reversal basis the action late last week, however, in the event that the market does in fact trade higher and negates any or all of last week's action, this would certainly make our posture more bullish and might become a go with market again. However, in the event of further breakdowns this week and pending any further bad earnings or disappointments a la Alcoa last week, the market might have a hard time justifying current levels and therefore could be prone to an unexpected decline. To be quite honest, a breakdown from here could have brutal consequences and it might just be set off by some kind of runaway upmove in Gold. By way of example Dell DELL looks dreadful and has been uncharacteristically weak for some time now. AMD may have reversed and INTC looks vulnerable. The recent upside breakout in the Nasdaq has not been confirmed by the Semiconductor Index SOX, which is near to a double top, but the secondary high is notably weaker, a very bad sign. Oracle looks awfully prone to a breakdown and Yahoo YHOO and maybe even Google have made potentially reliable weekly reversal formations that would tend to be confirmed by further downside action.
The US Dollar's days are numbered. Some of our proprietary work and Dynamic Quantum Lean Analysis suggests the probability of very extreme weakness in the years ahead. Utilizing proven techniques and actual past relative situations, we have already had 75 as a longer term interim low target. Notice we said interim... Recent developments and the Dollar's late breakdown Friday, suggest an ultimate low end target in the mid to low 60's, with a possible high 50's low as a very extreme target and an ultra-extreme outside shot in the low 40's.

The current value of the US Dollar index against a basket of currencies stands at 88.86 basis Friday's close. The one benefit that might come from a weaker dollar, is that Equity prices could in time benefit significantly from a lower Dollar, much as the European Bourses did all of last year. But that may not be the initial reaction, yet it is still something we need to look out for. Naturally, a weaker Dollar such as we're envisaging, is likely to be hyperinflationary as it may also mean sharply higher Oil prices and Gold trading substantially higher also.

As we have already pointed out, over the past 7 years, Oil has emulated Gold's move up from 1976 thru 1980 by increasing 7 fold. Now it appears to be Gold's turn to play catch-up and repeat either at least its late 1970's performance of 7 times higher, which puts it at 1,785 US Dollars per ounce, or in perhaps an even more extreme move dovetailing in with everything above plus the newly added realization that the World is indeed running out of Gold, then it is would not be impossible for Gold to emulate its entire 1970's decade rise of 20 fold or more, that would put Gold approaching $5,100 per ounce, perhaps in as soon as the next 4 ~ 5 years, as many issues come to a head.

Remember, on the more reasonable assumption of a 7 fold increase off the $255 lows, we are only just past a doubling in price off those lows and thus the upside from here at $558 or so, would still be a more than 3 or 4 fold increase in price towards either our target price of $1,785 or James Turk's realism value of around $2,200 per ounce, being the current price where Gold should be, adjusted for inflation. The more the US Dollar declines going forward the more likely inflation will get worse and possibly much worse than anything yet experienced in our lifetimes. The Genie is already out of the bottle and inflation is building in all the time as prices are being adjusted to accommodate a 7 fold increase in Oil prices that's here to stay unlike in past when prices came back quite substantially from extreme short term highs.

Last week we aired the possibility around midday Friday, that if Gold were to open higher on Tuesday, it could herald the beginning of a dramatic surge to the upside that could even ultimately lead to some Limit Up moves. Overnight Gold did open sharply higher and just for a while looked invincible. It has since pulled back some, but it could be expanding its trading ranges here and could remain dynamic...

Just about 6 months ago, we declared that we were turning dynamically bullish on Gold and ever since Gold has accelerated dynamically higher and has now reached an extreme point where it could go parabolic in some kind of exponential move just as in January 1980. Oil is at its highest level since just post Katrina and so we have a potent elixir to still drive Gold.

We will re-post our column from August 4th, 2005 later today.

Trade Well
From the Desk of Savant

We have received many questions of late as to how we have chosen to profit from a "World Running Out of Gold". Those who receive our Newsletter already have the answer. However, we will be discussing the topic further in this column over the next few weeks.

Trade Safe
From the Desk of CT

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