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This has been a hectic and exciting week as you well know if you have been following the action live at CFRN.

Let me try to bring you up to date...

Blockbuster Opening to 2006 - 0920 EST Wednesday January 04 2005 Vol 16 Issue 002

Good Morning: What a start to 2006... Perhaps the most un-reported and yet most surprising openers of the day were the Reuters CRB Inflation index and Amex Gold Index HUI both surging and closing at new all time record highs. If that isn't making strong statement, then what is? As Wall Street folklore often dictates, as goes the first day of the week, so goes the first week and as goes the month and so on, so goes the year.

We will have to see if these indices can close out this week and month as powerfully higher as the first day, but it is definitely a strong trend and as we have reminded readers in the past, the last time the inflation index was hitting all time record highs 26 years ago some-what lower than where we closed today, Gold was soaring towards $875 Dollars. So is the inflation index leading Gold higher or is Gold still lagging and has to play catchup? Either way its powerful and is the opening and strongest trend going into 2006 thus far. What is indisputable is that Gold prices adjusted for inflation in today's dollars versus 1980, should be trading up around $2,200 per ounce and that figure could begin to magnetically attract Gold prices progressively higher over the coming weeks, months and years and perhaps a major driver that was not behind the surge to $875 in 1980, is already in place and may have been partially responsible for the impressive first day moves for Gold and Silver Tuesday, that being the fact that the World really is starting to run out of Gold and other resources.

As we suggested yesterday morning, Equities might rally some into the New Year and it looks like they most definitely saved the rally for 2006. We stressed the importance of the test of 10,700 some time back as a point from which the Dow might try and mount a new assault on the 11,000 barrier and yesterday's powerful rebound re-set that objective in motion in what was for many an unexpectedly strong rally which we did suggest might occur in the New Year, saying that if the Dow held the 10,700, if a decent enough rally could ensue, it might actually foment some renewed upside activity. What we don't know yet however, is whether this can last a day or two and resume in earnest later in the month or whether the start of 2006 will mark the start of renewed upside action. Given the strength of the renewed upside action we would expect some follow-through, but even if some pullback occurs, we still expect later month strength.

Global Equities Extend Their Gains - 0920 EST Thursday January 05 2005 Vol 16 Issue 003

Good Morning: Continuing with the blistering opening to 2006, our old faithful and most reliable friend the S&P 400 MidCap once again did not disappoint soaring to new all time record highs yet again, as it has done progressively since becoming the first US index post 9/11 to set new all time record highs in the fall of 2003. The little engine that could that represents the underbelly of the US Economy keeps chugging higher and yesterday it dragged its elder brother, the venerable S&P 500 up with it to within a hair's breadth of new multi-year highs and the Nasdaq Composite and 100 Indices and numerous others are all within stones throws of new multi-year highs. What a difference two days can make. Meanwhile, Natural Gas Futures have continued to plunge as warmer than expected conditions have been supplemented by increasing supplies of Natural Gas coming out of the Gulf as production slowly but surely is returning to normal.

In just the same way as the Island Bottom we talked about has conspired to propel Gold prices sharply higher over recent days, those Natural Gas futures are having to deal with a potentially massive Island Top formation, that could force Natural Gas prices down to their July lows around $9 per 1000 Cubic foot at a minimum to as low as their May 2005 lows coming in under $8. This kind of action could put the rest of the Energy complex in some serious jeopardy, if they start to break down from their recent surprisingly strong rally. That is the trouble with Energy components, when they are all in synch it is easier to make investment decisions, but when Natural Gas is plunging and Crude Oil is soaring that tends to be an anomaly and is very difficult to deal with. For example, should Crude Oil rally any further, it might be enough to finally reverse the Natural Gas back to the upside, but as we've seen in past days, it ain't necessarily so...

The Amex Gold Index HUI and the CRB Inflation Index both set new all time record highs yesterday and Gold was impressive in its new ability to come roaring back from a $10 plus correction effortlessly and almost as if it never happened, it all happened so quick. This sort of action tends to be very bullish as it is inclined to reveal that the shorts are desperate to cover on any dip as they are starting to get scared by the relentless strength in Gold. Whilst there is no guarantee that we will move immediately higher as a result of this, some more backing an filling could occur. But what is particularly interesting here is, that should Gold experience another strong day over the next few days or weeks or so, it could very well turn into a "Limit Up" move with significant consequences that would in all likelihood be interpreted as a monumentally strong buy signal with the potential to send Gold prices soaring quite rapidly towards $650 ~ $750. The fact is we have not had Limit Up move (maximum daily permissible limit of $25 in forward months) in Gold in about 23 years and so this would have to be interpreted as exceedingly bullish. In 1979 and 1980 the Gold and Silver markets were locked limit up for days on end!

We even made the point that a limit move would be such a rarity today and such a powerful wake-up call because of that as a great many young traders on the Comex floor were probably not even born or were in diapers the last time Gold had a Limit Up move. So it is likely to be a very big deal indeed and something that has been lacking for this entire bull market thus far, but we feel that the likelihood of Limit Up moves sometime ahead is likely to put after-burners on the Gold bull market and thus could accelerate upside dramatically...

It is time to stay focused on Gold and remain exposed to as many Gold related assets as possible, as some believe a powerful two year bull market breakout in Gold lies directly ahead and as history has shown, Gold has an amazing capacity to surprise and exceed most investor expectations in extreme ways that can be breathtaking to say the least and can be especially so too with Silver. Platinum and Palladium: Therefore the surprises going forward may well be on the upside, especially if some Limit Up moves begin to manifest soon.

Among our most favored Global Equities Markets, Mexico has exploded to new all time record highs towards 19,000 and Japan soars...

We will update you further as events unfold.

Trade Well
From the Desk of Savant

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