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We Could Be Looking at an Explosive Gold Stock Rally

By Jeff Clark
Tuesday, December 6, 2011

The Fed just killed the dollar rally.
It wasn't a quiet, stealthy, ninja-like maneuver where Ben Bernanke snuck up behind the greenback as it sat alone watching TV in its apartment... and plunged an ice pick into the back of its head. No, our Fed Chairman marched the dollar to the center of the village square, doused it in gasoline, and then – with the whole town looking on – torched it with a flame thrower.
Last Wednesday, the Fed – along with other central banks around the world – announced a coordinated effort to increase liquidity in order to lessen the stress on the global financial markets. In other words, they're going to print more money.
That's bad news for the dollar. And it's horrible news for savers.
But a falling dollar is good news for gold and gold stock investors.
Take a look at this chart of the U.S. dollar...
Last week's action caused the dollar to break down from a rising-wedge formation. This is a bearish pattern and often leads to a swift and severe decline.
Just look at what happened when the dollar broke down from the exact same pattern back in October. The greenback fell nearly 5% in just four weeks. That's an enormous move for a currency... and it led to large moves higher for gold and gold stocks.
The shiny yellow metal rallied 6% in October. Gold stocks, as measured by the Market Vectors Gold Miners Fund (GDX), rallied 14%.
If the current pattern in the dollar plays out the way it did in October, we could be looking at an explosive rally in gold stocks over the next few weeks.
The dollar rally is dead. And with the Fed making sure it stays that way, there's not much resistance overhead for gold stocks.
Best regards and good trading,
Jeff Clark

Further Reading:

Back in October, Jeff told Growth Stock Wire readers that we were approaching a 'back the truck up' moment for the gold sector. Based on one of his indicators, gold stocks were headed higher. Two weeks later, the Gold Miners Fund was up more than 18%. Read more here: The Best Gold Stock Opportunity I've Seen in Two Years.
Another one of Jeff's indicators is a popular stock that acts as a "canary in the coal mine" to determine which direction stocks are heading. "I don't know exactly why it works this way," he admits. "But you don't have to know why something works to profit off it..." Get the full story here: I've Found the Market's Newest Timing Indicator.

In The Daily Crux
Market Notes
Copper is trying to break a downtrend... prices are up 20% over the past two months, while big copper miner Freeport-McMoRan is up 33%.
Discount store uptrend continues as Dollar General and Dollar Tree hit fresh all-time highs.
China "glamour stocks" Sina and Sohu plummet more than 35% over the past three months...
Solar stocks are also big losers... First Solar, SunPower, and Suntech Power are down more than 40% in three months.
Market Watch
Symbol Price
S&P 500 1257.08 +1.0% +2.6%
Oil (USO) 39.01 -0.1% +1.8%
Gold (GLD) 167.32 -1.5% +21.2%
Silver (SLV) 31.05 -1.9% +8.6%
U.S. Dollar 78.56 -0.1% -2.0%
Euro 1.34 -0.4% +1.3%
Volatility (^VIX) 27.84 +1.2% +54.6%
Gold Stocks (^HUI) 561.06 -0.8% -3.5%
10-Year Yield 2.05 +0.5% -32.1%

World ETFs
Symbol Price
USA (SPY) 126.22 +1.1% +4.8%
S. Korea (EWY) 56.40 +1.5% -0.8%
S. Africa (EZA) 64.17 +2.1% -7.6%
Canada (EWC) 27.41 +0.8% -8.6%
Japan (EWJ) 9.40 +0.8% -10.3%
Singapore (EWS) 11.78 +1.0% -11.0%
Lat.America (ILF) 44.79 +2.0% -13.9%
Taiwan (EWT) 12.39 +0.4% -14.5%
China (FXI) 36.87 +1.3% -15.3%
Israel (ISL) 13.66 +0.4% -16.7%
Russia (TRF) 15.95 +0.8% -27.0%
India (IFN) 22.32 +0.3% -32.1%

Sector ETFs
Symbol Price
Utilities (XLU) 35.02 +0.8% +16.8%
Big Pharma (PPH) 69.09 -0.3% +12.6%
Retail (PMR) 21.72 +1.1% +11.7%
Health Care (IYH) 69.13 +0.2% +9.2%
Consumer Svcs (IYC) 71.55 +0.8% +7.4%
Big Tech (QQQQ) 57.24 +1.1% +7.1%
Real Estate (IYR) 55.18 +0.9% +3.7%
Internet (HHH) 73.36 +0.3% +2.3%
Industrials (IYJ) 63.97 +1.1% +2.2%
Software (PSJ) 24.74 +2.1% -0.2%
Defense (PPA) 18.18 +0.8% -0.5%
Transportation (IYT) 89.83 +1.6% -0.6%
Media (PBS) 13.10 +1.1% -3.3%
Telecom (IYZ) 21.16 +0.9% -3.6%
Construction (PKB) 11.85 +1.2% -4.0%
Insurance (PIC) 15.12 +0.5% -4.2%
Biotech (PBE) 19.63 +0.5% -4.4%
Oil Service (OIH) 126.86 +2.5% -6.4%
Water (PHO) 17.12 +1.3% -6.6%
Basic Mat (IYM) 67.25 +1.1% -8.0%
Financials (IYF) 49.22 +1.7% -9.3%
Semis (PSI) 14.21 +0.7% -12.3%
Nanotech (PXN) 6.36 +2.1% -36.4%
Alt. Energy (PBW) 5.63 +2.2% -43.4%

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