Fwd: Bernie Mitchell’s Fib Commentary Dec 19

Stocks had a sharp correction last week, reaching our lower downside objective of SPY 121.29. Actual low 121.30!! In fact a lower overnight spike in the futures on 12/4 took the theoretical SPY level to 120.02 — a level expected to be reached. At this point, we are moderately bearish, but expect a final year-end rally, which should be less than robust, to set up a final top at SPY maximum 125, a prelude to continued range trading with a bear market bias in 2012.

Bullion crashed $117 last week at $1595.60, a 22 week low, primarily on the resurging Dollar (UUP). which recorded a 44 week high, and an important objective. (See Dollar below).It’s likely a tradeable bottom was put in, and a strong bounce should take paper gold (GLD) to the 163 – 165 range, into mid to late January. Spot gold is now within 9% of its 55 week moving average, an extremely oversold level not seen for a couple of years.The coming rally will be led by the gold stocks which saw many of the shares recording Bullish Weekly Squats, after making an 8 week low in the XAU index, and a collapse in GDX below our target objectives, reaching 51.53. Good rallies usually start from 8 week lows.

Last week we wrote: “Major Fibonacci Cluster Resistance comes in at 22.65 – 22.83.” Actual high 22.70!! A Bearish Daily Squat formed which gives a downside target of 22.06, 21.86 (Major Fibonacci Cluster Support). This dollar decline will be supportive of a gold and stock market rally.

How long can investors seek the safety of the biggest looming bubble in history, without getting scorched — 5 year notes under 1% and 10 year bonds well under 2%? Well, it seems forever, as investors sought the “safety” of treasuries, driving rates to new lows, by a scant few ticks. In the process, a Bullish Daily Squat formed, which should trigger a rally and higher rates. As money printing cranks up to keep the banks solvent, longer term expect all fiat currencies to fall, which will drive rates much higher. Treasuries should reach 2.65% at a minimum.