Bernie Mitchell’s Fib Commentary Jan 3, 2012

The SPY closed lower, but fell short of our initial downside target 124.25, but should reach it as the New Year begins. Actual low 124.73! Further downside targets remain 123.70 with a maximum 121.50, before another rally, which should take the market to a cyclical peak around January 6. No new highs are expected, as our “weight of evidence” remains bearish. Once our cyclical peak is achieved, downside targets increase dramatically. ADX readings have reached “big move” potential, with SPY downside targets increasing to 118.03, 116.86 to a maximum 112.04.

Ugh! We were a week early on this call. Bullion plunged to a low print of 1528, and the XAU gold index fell to 173.96on Thursday, before bouncing back on Friday to 1570 and 182.65 respectively. The rally in gold should now begin! Ashort term cyclical peak in bullion is expected around January 19, with paper gold GLD reaching 160 – 161. Targets in the GDX gold share ETF remain 55.94 – 57.49.

The Dollar (UUP) recorded a 6 month high vs gold last week, closing at 22.47. Downside targets remain 22.06 – 21.86, and are expected to be reached.

The saga continues with investors seeking the safety of US Treasuries, driving rates to a record year-end closing low under 2%. The sheer size of the treasury market seems to be the lure for investors cashing out of riskier assets. Near term TBT targets remain 20.36 – 21.83. Longer term 27.31 – 29.97, the latter major Fibonacci Cluster Resistance.