Major market moves imminent …

Video Transcript

Good morning! This is Larry Edelson with my Uncommon Wisdom video market update for Monday, August 20.

The last couple of weeks have seen the markets almost act as if they were paint drying on a wall — very, very quiet; low-volume, lackluster trade; and very tight trading ranges.

However, don’t be fooled by this.

Typically that is the kind of action you see before very big moves unfold. And I do believe that we’re on the verge of some very significant trending moves in many markets.

The trends I’ve been speaking of that, lately, remain in effect are still largely defined by a disinflationary mode beholden by the ongoing crisis in Europe … which is deflationary for that part of the world and will cause quite a bit of asset liquidation and risk off, if you will, in markets all over the world.

Having said that, let’s go to the charts …

Gold: This is the updated gold chart. As you can see in this chart here, gold is really very tightly wound up in a very tight trading range that’s getting even narrower by the minute.

But according to my short-term cycles, we should see a big move occur soon. It’s likely, in my opinion, to be to the downside to the $1,522 level and then even lower. But I cannot as of yet rule out another stab at $1,680, even the $1,700 level before gold moves lower.

The long-term trend for gold remains very much intact to much, much higher prices. But we’re not going to see that next leg up in gold unfold just yet.

Silver: It’s pretty much the same thing with silver. Silver, as you can see here, is coiling up just like gold.

Silver, because of its character, could stage a sharper short-term rally than gold. But all of my indicators suggest that even if silver does rally a bit further, you want to be a speculator selling short into that rally.

I still believe silver can plummet to well-below $26 an ounce before the next leg up in silver unfolds.

U.S. Dollar: The U.S. Dollar Index is holding up quite nicely. We’ve seen a correction (and) then some sideways action in the dollar as the euro has stabilized. That won’t last too long.

The euro is due for its next leg down, and conversely the dollar should stage a significant rally to new highs. So I am still short-term bullish on the U.S. dollar.

The Dow Industrials: As you can see from the chart, the Dow Industrials have paused in the 13,000 region.

They might attempt another move up to about 13,284. I do not think it will get through there this time and, instead, we’re still way overdue for a little pullback.

The volume of the stock market has been very, very light. The number of advancing stocks versus declining stocks has been falling, the momentum has been falling.

Everything tells me we are still in the process of seeing a sharp, surprising correction unfold in the Dow.

I will emphasize, however, that the resiliency that we’ve seen in the U.S. stock market is a telltale sign of what I’ve been saying all along: We are on the verge of a new, long-term bull market in U.S. stocks — one that will be driven largely by capital flight out of the U.S. and other foreign bond markets as a sovereign-debt crisis unfolds.

Investors will actually look to park their money not necessarily under the mattress or exclusively in gold, but in cream-of-the-crop stocks as well.

This is not your typical analysis or logic that everyone is telling you, but I’m very confident that over the next three to four years, we will see the Dow Industrials move to at least 21,000, if not much higher.

Until next time, have a good week!

Larry

Larry Edelson has over 34 years of investing experience with a focus in the precious metals and natural resources markets. His Real Wealth Report (a monthly publication) and Power Portfolio provide a continuing education on natural resource investments, with recommendations aiming for both profit and risk management.

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