Louise Yamada continues:

“So we have started to see selling into the strength of the rallies, but it’s been a slow process.  Now you have many of the support levels that have been broken, and I think you’re looking at many of the global markets forming 3 year head and shoulders tops.

This was the reason we sent out a rare ‘interim tech-alert’ on May 9th to our clients, suggesting further weakness and imminent declines in equities, and advising them to be very risk-averse....

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“We are in the process of unwinding not just the cyclical bull, but we also have to ask the question, ‘is the 2009 advance coming to an end?’ 

The answer will depend on whether we are down 10% or greater as this unwinding progresses.  But we think the market will be coming lower and that was the purpose of our alert.  At this time, we think the S&P could come back toward 1,200, which is the 2009 uptrend.  (This would represent a 10% decline from current levels).

At that time we will see what the indicators look like.  1,280 on the S&P is the 200 day moving average and 1,200 currently represents the uptrend.  So those are key levels.”

When asked about gold and silver, Yamada replied, “KWN published a portion of my report which covered gold and silver on May 4th.  At that time I wrote, ‘A break of 1,600 and the uptrend line would suggest further risk toward 1,500 or lower.’  When gold broke the $1,600 level, which represented the 2008 uptrend, it triggered the additional selling we anticipated. 

It’s also broken the cusp of the 2011/2012 low.  So, I suspect, given the profile of the momentum, which is negative, that it could go lower, notwithstanding interim rallies.  If gold were to break the $1,487 level, you would probably see gold move to $1,400.  However, there is a decent amount of support (at $1,487), almost six months support between the latter part of 2010 and later.  We’ll take it step by step, Eric.

As long as the momentum continues to be negative, and the price doesn’t recover, I suspect gold may go that far.  When you’ve had this kind of a run, and it was pretty straight-up until the $1,900 level in 2011, you need to have a corrective phase.

I think it’s disappointing that gold did not hold at $1,600.  But there’s been a lot about India in the press regarding the rupee and the (gold) tax.  All of that was working against one of the largest buyers of gold jewelry (India).  So they were pulling back on their gold purchases. 

To what degree that affects the breakdown, I can’t say.  It does suggest their has been an absence of demand (from India specifically) which, historically, has been there.  You have the concept that you are still in the bull market in gold, but you are going to have to respect any serious breaks.  So you have to watch it carefully, there is no question about it.

With silver, we suggested $25.  It’s approaching that level relatively quickly.  If it breaks that, you are really coming under the trendline for silver, and the momentum studies have turned negative again on the weekly basis.  If for some reason $25 doesn’t hold, you go all the way back to the 2010 breakout.  Meaning silver could make its way back to $20.”

Yamada had this to say about oil:  “Crude oil appears to be on its way to $90.  We targeted $90 to $95 area if oil breached $100 and we reached that zone quickly.  Brent crude is holding right at the uptrend line at 110.  If that support breaks on Brent crude, we should see it come back to the 100 level, which has really been a support all the to the beginning of 2011.  It’s provided almost two years of support.”

Yamada also added:  “The US dollar is in a trading range, but it’s at the upper end of the trading range that it’s been in between 77 and 82.  If it breaks out here, then you are going to see higher levels.  I will say that at this moment, the dollar is looking constructive.”

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© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

For KWN readers globally, you have to remember this is a long term secular bull market in gold and silver.  As was the case in the 1970s bull, you are going to have periods of intense volatility.  We are experiencing one of those times right now.  I am using weakness in the price of metals to pick up physical metal and I’m using severe downdrafts in the mining shares to accumulate shares of quality mining companies. 

The Rick Santelli and John Embry audio interviews are available now.  Also, be sure to listen to this week’s incredible line-up of other KWN interviews, which include Rick Rule, Bill Fleckenstein, Michael Pento, MEP Nigel Farage, James Turk, Pierre Lassonde and more by CLICKING HERE.

Eric King

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rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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