One way to make a killing in gold is to forgo blueberry picking. I read an article in this week’s New York Times about two Swedish grandmothers who found, what experts say, may be one of the richest gold deposits in Europe. The blueberry crop failed that summer, so instead of looking for blueberries, as they did every summer, these amateur geologists went prospecting around their small village. They went to a place where trees had recently been felled, exposing rock. Using their hammers, they cleared soil, digging for about six hours until they found a rock with a dull glimmer. Analysis showed that the stone contained more than 23 grams of gold per ton whereas most active mines in Sweden yield less than 5 grams. The grannies were smart enough to obtain the mineral rights for a large area around the find and to negotiate, alone and without lawyers, with about 20 mining companies from Sweden and abroad. Luck is always welcome, but we won’t depend on it. Instead we will rely on good-old technical analysis, along with other important tools, which will give us indications on how to make our money in precious metals. Let’s start this week with the chart for the general stock market using the SPY ETF, as it allows me to analyze volume. General Stock Market The reason I sent my Subscribers a Market Alert this week was the action we saw in the main stock market indices. In the alert I cited the invalidation which took place on Monday of the head-and-shoulders pattern. It was further verified on the following days. The invalidation I referred to in the latest Market Alert was accomplished after an intra-day downwing move that touched the 200-day moving average. In the previous essay I wrote: Unless we see a sharp move above this line (89 level) on Monday or Tuesday, the technical picture remains bearish for the general stock market. In fact, the bounce above the head-and-shoulders neckline on Monday and Tuesday was not only sharp, but also took place on high volume, making it even more significant. It had some momentum traders believing that after four weeks of downside the bulls are back in the market as earnings season begins in earnest. Moreover, prices moved even higher in the following days, also on relatively high volume. I marked the second breakout on the above chart with the upper blue arrow - price broke above a declining trendline created by using the head and the right shoulder portion of the now invalidated pattern. On Friday stocks ended little changed but held onto an enormous rally for the week in which the Dow Jones industrials and the Standard & Poor's 500 index posted their best weekly performance since the week ending March 13. All the major stock indexes rose about 7 percent for the week. Both the breakout and the consecutive daily move took place on significant volume, which suggests that higher prices are possible from here. Had we seen higher prices along with visibly declining volume, we could have inferred that a correction is likely. Volume was very small on Friday, which would normally make a correction likely (thus creating a shorting opportunity), but this time it was not confirmed by analogous values in the indices themselves. Additionally, we see that prices did not increase substantially on Friday, so it is difficult to say that the prices rose on a small volume, as they were barely higher. The underlying index (S&P 500) was down on Friday by only 0.04%, which means that this week’s last session was in fact a small consolidation, implying that small volume is a natural phenomenon and does not itself signal lower prices. The reason why I emphasize the general stock market is that recently this market has shown a high correlation (30-day column) with the precious metals sector.

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