Gold stocks inched up yesterday while the DOW and Nasdaq finished slightly in the red. Today the market is a little nervous ahead of the August employment report due out at 8:30. For the past year Wall Street has been excited to get weak employment reports, because they would take it as news that the Fed would stop raising interest rates soon. That meant the possibility of more easy money going into the market to make it go up.

Now with a Fed pause all but assured for September we will start to enter an enviroment in which weak economic data will discourage market bulls. We may still get one last rally between now and the September FOMC pause, but after that we could very well be in trouble. No matter how weak the economic data will be the Fed is unlikely to start to lower interest rates until well into next year. That will cause a lot of angst in the stock market if the economy slows down.

Goldcorp just agreed to buy Glamis Gold for $8.6 billion in stock to create what will be one of the world's largest gold producers. According to the deal Glamis shareholders will get 1.69 shares of Goldcorp for each Glamis shares. The offer values Glamis at $51.49, for a 33% premium to yesterday's closing price.

Ian Telfer, the CEO of Goldcorp will move over to become chairman of Goldcorp while Kevin McArthur, the president and CEO of Glamis will now wear both of these hats for the company.

The new Goldcorp will become one of the largest gold companies in the world and will produce over 2.5 million ounces of gold next year.

Yesteray I spent two hours being interviewed by Traders-Talk. We discussed my trading history, strategies, and my current view on the market, including gold and what sectors I think will do well going forward. To access the interview click here:

Mike Swanson Interviewed by Traders-Talk

Also see:

Fear Returns to Gold Stocks - Mike Swanson (8/29/06)

Gold fell $10 yesterday while the XAU dropped over $2.00. It was disappointing, because going into the open it appeared that gold and gold stocks could easily breakout and start their next big rally this week, one that would take them to their 52-week highs. People are now scared again.

Gold stocks are still in their trading range, consolidating, and getting ready for another big move. Everything points to this move being up and unless gold and gold stocks were to break down and close below their supports I have to assume that they are still going to go up.

This is the type of thing that happens when a stock is in a trading range - when it gets near the top of its range it looks incredible and then when it pulls back and goes back down near support everyone gets scared. The lack of resolution drives some people to sell, but the smart thing to do is to sit, wait, and let things resolve themselves. Times of consolidation also bring multiple false signals that fool people too.

Remember two weeks ago it looked like gold stocks were going to break down and I trimmed my margin position as a result. Gold dropped one more day and gold stocks were back on their recent highs just a few days later. I'd expect something similar to happen now. In fact things looked worse then - because the drop began with gold stocks falling and gold just sitting there. This time gold and gold stocks fell in tandem, which is what happens when they are just having a quick pullback. If gold stocks were to break support with the metal going up then I'd be worried. But this didn't happen yesterday.

Support on the HUI is at 325. The XAU, HUI, and gold are now oversold on their 60-minute stochastics so I'd expect them to turn up by the end of the day. Instead of breaking out this week it looks like the gold stocks are going to consolidate another week, which would cause the bollinger bands to practically touch. Remember the longer gold stocks consolidate the greater the coming breakout will be.

It's hard for people to remember that when they watch a down day. Pessimism has now returned to the gold markets. I got several emails from people frightened by yesterday's drop. Once again people are worried about the potential head and shoulders top or a big commodities meltdown. I addressed both of these fears in these previous articles:

Shrinking volatility continues to characterize the gold market as gold stocks remained in a narrow range last week. In fact, volatility for gold stocks has reached its lowest point all year. The last time volatility indicators on the XAU, such as the bollinger bands, hit these kind of levels was last December.

This is important, because huge moves always follow periods of extremely low volatility. It is a flashing red light that is about to turn green and you need to be positioned to take advantage of what is to come right now. Everything is lined up for gold stocks to break out and go higher. The XAU/gld and HUI/gld ratios are both rising - they tend to lead the action in gold and gold stocks- while the dollar is poised to break through its 84 dollar support level and head down to 80. Fed fund futures are pricing in a mere 16% probability that the Fed will raise rates again at their next meeting. And if that's not enough to convince you, in just a week we will be in what have historically been the most bullish months for gold.

The particular fraud hides behind an exotic but valid statistical method, one used legitimately in many forecast settings, but not here in this setting. The Jobs Report has been the subject of much attention in the last few years, as the economic recovery has been scrutinized, criticized, and exaggerated. Population growth calls for 150 thousand new jobs to be created each month just to keep pace and stay neutral. Despite the political ballyhoo of strong job growth, this has been the weakest recovery in modern history....

Wave Analysis of the Gold Bugs Index
 
The bull market in gold stocks which began in late 2000 is still in progress. There is no reason to believe that it will not continue its long term bull trend. While this analyst doesn’t “own� Elliott Wave (EW) theory, an interpretation of the theory leads to strong technical evidence to suggest that the HUI is nearing the completion of a correction against the secular bull trend that will resume in a relatively short amount of time, probably measured in weeks. I’ll make my case in tonight’s article.

First, a disclaimer. Kindly disregard this analysis if the HUI swoons to where it closes a week below 250. Given that the HUI closed Wednesday at about 346, this analysis presents too much risk to utilize as a short term trading tool. Those wishing to trade would need to focus their attention on the shorter term.

As we position ourselves and wait for the coming breakout in gold stocks I read the following today on the Internet:

Ike Iossif of Marketviews.tv wrote a subscribers only report about gold stocks on Monday. I just want to quote one paragraph from it, because you should go to his site to read the entire thing:

"Last but not least, SEASONALITY strongly favors gold/gold stocks. Historically, September has been one of the best months for gold/gold stocks. Take a look at the chart below, notice that for the past 5 consecutive years the price action in gold/gold stocks has been characterized by a modest rise during the first half of August, followed by a shallow decline lasting until the end of the month, which in turn is followed by a robust rally that starts during the first 5 trading days in September, it lasts thru out the entire month, and its magnitude is between 20%-30%! If seasonality plays out this year as it has in the past, the XAU has the potential to rally to the 172-175 level in just four weeks time."

The dollar is headed for a bear market and it is exactly what the Bush administration and the leadership of the international banking cartel want. The demise of the dollar as predicted by Warren Buffett and George Soros is around the corner. The question is what are you going to do about it?

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The following is a reprint of an article I wrote in November of 2004. I think it is more important than ever to undertand the current investing enviroment and economic underpinnings of the gold bull market. To access today's pre-market comments on the market and an alert on a mining stock that I just sold please click here: WSW Power Investor Pre-Market Comments for 8/22/06

There are many gold bugs warning that gold stocks are going to fall along with the US stock market. They are totally wrong. To see some of their warnings check out some of the recent articles being posted on Kitco, gold-eagle, and 321gold.com by writers who are usually very bullish and you'll see exactly what I'm talking about.

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This article is an excerpt from Monday's WallStreetPower Investor Market Monitor. To read the full article click , with an depth analysis of this week's trend for gold stocks, click here: WSW Power Investor Monday Market Monitor