Michael Campbell: Mark, there is so many factors in play right now and so many potential surprises out there it is very difficult for the normal investor to figure out what is going on.  What is it like from the traders point of view?

Mark Leibovit: Well it is exciting Mike. As a commentator said a moment ago, gold is getting expensive for the average investor,  an important point and that’s why we talk about silver so much. Silver is poor mans gold, and more speculation can come into silver as gold goes higher. For me as a professional it’s easy, because this is the time of the year to be in gold from a seasonality point of view.  Basically Gold is known for a low in the summer and strength through year end, and I wrote about that in my Newsletter a few weeks ago.  We said the July rally is underway, thinking we would at least get a July pop that would pull back in August and then take off again. But I think professionals jumped the gun here, everybody was looking to buy the metals later this summer thinking there would be a seasonal pullback  in the summer as we normally get and it just exploded here in July. I think it caught a lot by surprise, so in the sense the momentum is really with us it looks pretty good.

Michael: You look at seasonality and major cycles when you  do your forecast model every year to help create a map and a blue print for yourself,  and then you have to get into what’s going at the moment. So just from a seasonality point of view traditionally I take it that August would have been somewhat weak and then strength building to the end of the year,  or it is not that specific and seasonality just called for a summer low and then you start rallying?

Mark: Yes, the problem with the seasonality, and I have lot of respect for it including it in my own model,  is that you are using historic data for the last 10 or 20 years as we don’t have hundreds of years of data on seasonality. So we‘re averaging and the last ten years the market has been basically been in an up trend and the 20 years before that in a down trend. So it’s mixed in terms of what the seasonality really is all about. But it’s a generality, you can get contra seasonal moves just as easily as a seasonal, so I am the kind of guy that watches the tape.  I look at the volume and what the buyers and sellers are doing today. I look at the sentiment out there, I look at the comment that I just made a moment ago that if everybody looking to buy in August it is probably going to turn now and it is not going to wait for the majority, one of the reasons we had this pop.  It doesn’t mean we can’t get a pull back in August Michael, we could get a pull back, maybe there will be some news here some of the moves here will retrace a bit. I would not go out and sell any of your gold, because the winds is really at our back between now and early next year. If you are a trader and you see some sort of sell  signal you may want to try to scalp it a little bit. So sure you could still get some type of pull back here and at that moment we will see what happens.  I think Monday and Tuesday are pretty critical. I think if gold can’t break through last weeks 1611 midweek on Monday and Tuesday that might be an indication we may get a little bit of a pull back. But lets watch the action,  I am long anyway and we’ll see what happens early in the week.

Michael: I just want to high-light something you said. It is certainly it is my approach here, I have talked since 2002 about a 30% core position in precious metals then outside of that you could have trading position.  You do such a great job in the VR trader and you write the VR Gold Letter getting specific about whether you are talking short term or long term. You can make daily trades within your service and you state what the longer term trend is for your subscribers. I just want people who are listening to be clear what what term you are talking about, recognize whether the analyst is talking short term or long term core position advice. You just said you are very comfortable looking for strength through the end of the year but and you’ll look at Monday and Tuesday for the short term.

Mark: I have plenty of cowboys out there Michael that are traders and I actually refer to them as the cowboys in the letter who are looking for the action. If I say go buy gold and go home for five years they obviously wouldn’t very interested in my service so when we get these swings along the way we absolutely look at the short term.  There are a lot of things happening out here right now fundamentally that could be positive and could impact the market. You do have the Hong Kong Mercantile Exchange that’s just started trading silver on Friday and that could be a big catalyst. You just had the US House of Representatives pass the National Strategic Critical Minerals Policy Act. So a lot of things here that could impact very positively to the upside.

Michael: That brings up the point I that Mark has offered a free complimentary copy of his VR Gold Letter for anyone who wants it.  Just go to www.moneytalks.net and on the front page you will see right there and offer to get Mark’s writings about the July Metals Rally.

Mark, I want to come to silver for a second because on July 6th, using the methodology that you use you sent out a bulletin that says that silver had posted  a positive volume reversal, your proprietary measure for movements in the market, and it was a positive one. You said look your are looking for rally in silver and obviously that ensued because we came from that $32, $33 mark and touched $40. Where is silver for you right now and we’ll talk short term not long term?

Mark: Well we are right on the cusp here, my personal feeling is it’s ready to break out.  Particularly with this development on Friday with the Hong Kong Mercantile Exchange now trading silver. I am little bit on the conspiracy side. I am unhappy with what the COMEX has done here, we’ve heard of a lot of rumors that GATA has been talking about,  gata.org for a long time has been saying  there is not enough contracts to back the physical silver if you actually ask for delivery on the COMEX. Then I write al lot about the plunge protection team in the US and there was no accident. It might feel they raised margin requirements to try to cut the speculation in silver a few weeks ago and that’s the only time you get government intervening like that. It’s only going to be a temporary and unsuccessful strategy as the world demand is just too great. A classic example has just been the last few weeks where we started selling some of the crude oil strategic reserves in the US that was gobbled up immediately and crude oil ended up going higher anyway, so government intervention here is only going to have very temporary if any impact. Plus this Honk Kong Exchange that’s trading silver, I wouldn’t be surprised to see Silver break out here and move into the low 40s relatively quickly, and of course we just have to take it from there. To take out the 49.74 high that we saw a couple of months ago is very possible here between now and year end and possibly moving to the 60s. So I am in there, I am bullish and I am not worried about it suddenly collapsing into the 20s.

Michael: So again the other way to be playing this  is to be buying on dips because you are comfortable longer term on this issue and now?

Mark: Putting your foot in the door, that’s part of the issue. I refer to dollar cost averaging, maybe we could get in the door, get a position in there and you actually hope that it pulls back because of the big 20 year up trend that we are in commodities and the big cycle that we talk about. But if everyday we wait for pullback sometimes there could be a one day pull back and start saying oh well maybe it’ll go another dollar or two and you end up missing the move. So yes at least I would advice listeners if they are not in, at least get in. To buy and take deliver of some physical silver, buy an ETF like Central Fund of Canada CEF which is one of my favorite stocks in which you get a participation in gold and silver.  At least don’t sit there and watch it go up.

Michael: I love that you are bringing up this point because I have got a ton of people I know who ask me about silver or gold.  The primary mistake they make is they think in terms of all or none. They’ll say I have $10,000 I want to invest and their thinking either I get in or I get out as opposed to the dollar cost averaging you have just described. In a bull market you might want to step in the market because otherwise you will miss the boat.  At least take a core position.

Mark: Just get in the game just get in there.  Don’t a fool around, the trend is obviously up. I have to tell you this, I got a call from a reporter last week asking me to give all the reasons why a bear move in Gold and Silver is about to begin and I basically responded I am not even going to cooperate with him on this article. They are long term contacts of mine and I just have the sense that the sentiment out there is still negative, that we are climbing this wall of worry. It’s really incredible and its super bullish that reporters are out there looking for a way to talk down the gold and silver markets.

Michael: I had a chance on the air to talk to Peter Grandich last week and Peter was saying one of the tough things to do is when gold  hits the final top  it will be the toughest time to sell. Just like when things drop it’s the toughest time to buy, just an interesting psychology. If you are in an on going bull market you want to be buying the dips.

Can you give me a quick take on oil?

Mark: I am positive. We had a nice correction from that 114 a barrel in US Western crude oil down to that 89 level,  volume came off the low. The government tried to dump oil on the market it was unsuccessful. The big trend is up no question about it, and  I think we’re ultimately we are going to work our way up to that 114 level and go through it.  It doesn’t mean it’s going to be as dynamic as the silver and gold play but the ETF OIL which I trade is looking pretty good.  So I am a bull,  it’s not my number one market for trading but the charts are positive.

Michael: I want to come back to gold and silver, what kind of target numbers are you ultimately seeing in the gold and silver?

Mark: This is the shocking numbers that I have been throwing out for long time, ten years ago I wrote 3,000 for gold and that was based on my feeling we are going to see a ten time increase from the 99 low so that’s at least minimum target I see. I think once we get to 2,000 acceleration is really going to begin, the non-believers are really going to jump on board.  If you adjust for inflation you can come up with numbers anywhere from 2,500 to 3,000 anyway. I am not saying you can’t go beyond that,  I am sure you have read reports where people are talking about all kinds of numbers up to 10,000,  it depends whether governments of the world or the US decides to do something intelligent and peg gold to currency which they are not prone to doing to often. But this ultimately what we need if we are going to stabilize the currency, if we are going to have some value.  I think that’ s what China is doing by the way, I think this is their strengthen the Won, they are accumulating gold, they are going to back their currency with gold and that’s why they are probably going to ultimately be the preferred currency in the years to come. My bench mark number is a 3,000,  maybe the 3,600 level and I don’t know if it ‘s going to take one year or five years to get there. With a 20 year cycle up to the year 2020,  I have written about this in the news letter, we have eight or nine year for that happen. I have a funny feeling that it’s going to happen well before that. As far as the silver is concerned,  this is really speculative play. I mean Silver can go nuts, I would like to see it take out that 49.75 high and the next target would 57 to 62.  Our work tends to be a little incremental so we get projections as we go up. Of course in Silver I read that all kind numbers up to $200 an ounce or more, I don’t know if we could get there or not but if it goes up on increasing volume and I get higher projections A QW  then I certainly would join that camp. Right now the bench mar is 3,000  for Gold and 70 – 80 for silver and we’ll take it from there.

Michael: What are you seeing in the stock market?

Mark: We are in this summer doldrums. Until the fall, until August September you could assume a some what choppy market. I don’t know whether you noticed or not the NASDAQ 100, the NDX broke out to a new all time high on Thursday or Friday, so I am waiting for the Dow Transports which is my other big confirming indicator that I write about. If that breaks out the move could be starting earlier as we saw in the metals. The markets could be jumping the gun here and taking off to the upside. Much depends on the legislation in the US Congress on the debt ceiling issues that we are all hearing about and there are all the other fundamental factors out there.  Ultimately I think we are going higher but the question is whether we get a little bit of shake out first.  Iif we do I think its probably a buying opportunity for the market. Why? Well basically Bernanke has been telling us he is targeting a higher market, he said this in front of congress. We know the QE3 is going to happen in one form or another as long as jobs are where they are at and even though the fundamentals  are really lousy out there I think the strategy is to get the market higher in the hope that companies hire people. So I am sort of on the line thinking that a shake out, a little correction in the next month or two with the seasonality issues into September maybe, is possible but I would bet you that the S&P is going to be into new all time highs within the next six to 12 months just because of these factors and an election next year in the US.

Michael: We are so inundated with government that virtually all the analysis you read a huge percentage of analysis on issues is about the politics first and the issues seconds. There is so many example I could turn blue in the face and give them for the next 12 hours. What it does is its create a really interesting dilemma for people and I don’t think they recognize that governments are in a complete bear market right now, the early stages of a bear market.  That doesn’t mean the private sector is and what is confusing for people they go look at all this bad news and then look at how the market has performed on the upside. They don’t get that t if you do get the bear market in government it doesn’t mean an uninterrupted private sector but that’s where the funds are flowing and that’s why I think it makes perfect sense to me over time that the stock market cam actually go up against the backdrop of really bad news in government.

Mark: It’s called the wall of worry … that’s what it is and again  we have the plunge protection team in there and people laugh at me when I talk about it but you know we found out secretly that Bernanke was giving General Electric and Harley Davidson of all companies money until Bloomberg sued the Federal Reserve to get information. We found this our several months ago. The government is in there, it is funding the private sector as they want the stocks to go up. The last thing they need now is a stock market crash that would that would steal confidence so they are out there and they are aggressive and they will do what they need to do. So it makes no sense, but you know the game plan my not work, maybe stocks are going new highs and there is still a high unemployment. Maybe it won’t work but they’re going to try and see if it works,  they are going to give it a shot.

Michael: I think there are very few arrows left in it’s quiver,  I mean it’s not like they could lower interest rates by any significant portion. With them having done the sort of the QE1, QE2 programs. in other words printing money a few major times that they need that stock market up for a whole myriad of reasons we don’t have time to go into.  That’s certainly the bias and I think Bernanke has also told us this. As you said earlier Mark, he has made it very clear in public statements that they are targeting a higher stock market because that’s the last bullet in the box. If something happened there they don’t really have the means in terms of policy initiatives to really rescue at that point. I think a lot of the work that you have done over the years has been validated by some of the statements, especially over the last six months.

Mark: Well thank you , we’ll keep doing it. A bit contrary opinion and looking at those volume patterns and if something changes of course we’ll report it. Anyway the bottom line is possibly a correction next month or so, but I think the trend’s up with the NASDAQ into new highs on Friday and at least one index needs to paint a real bearish scenario here.

Michael: Thanks as always.  Mark Leibovit can be found at www.vrtrader.com and you can also go to www.moneytalks.net, center column. There we also have a Freee Copy of his VR Gold Letter report for anyone that wants it.

About Mark Leibovit:

This Excerpt from Mark Leibovit’s VR Silver Newsletter covering Stocks, Bonds, Gold, US Dollar, Oil CLICK HERE

Marks VRTrader Silver Newletter covers Stock, TSE Stocks, Bonds, Gold, Base Metals, Uranium, Oil and the US Dollar.

More kudos – Mark Leibovit was named the #1 Intermediate Market Timer for the 10 year period ending in 2007; the #1 Intermediate Market Timer for the 3 year period ending in 2007; the #1 Intermediate Market Timer for the 8 year period ending in 2007; and the #8 Intermediate Market Timer for the 5 year period ending in 2007. NO OTHER ANALYST SURVEYED APPEARED IN ALL FOUR CATEGORIES FOR INTERMEDIATE MARKET TIMING AS PUBLISHED IN TIMER DIGEST JANUARY 28, 2008!
For a trial Subscription of The VR Silver Newsletter covering Stocks, Bonds, Gold, US Dollar, Oil CLICK HERE The VR Gold Letter is available to Platinum subscribers for only an additional $20 per month, while for Silver subscribers the price is only an additional $70.00 per month. Prices are going up very shortl, so act now! Separately, the VR Gold Letter retails for $1500 a year! The VR Gold Letter is published WEEKLY. It is 10 to 16 pages jam-packed with commentary and charts. Please call or email us right away. Tel: 928-282-1275. Email: mark.vrtrader@gmail.com

The Bottom Line
Technicals, fundamentals and seasonal influences point to another volatile week in equity markets around the world. Preferred strategy is to continue to hold sectors that benefit from favourable seasonal influences (gold, gold equities, biotech, fertilizers) and to continue to hold a “healthy” position in cash equivalents.

The TSX Composite Index improved 195.09 points (1.47%) last week. Intermediate trend is down. The Index moved nicely above its 50 and 200 day moving averages last week. Short term resistance at 13,474.89 was broken on Friday. Intermediate resistance exists at 13,901.56 and 14,329.49. Strength relative to the S&P 500 Index remains negative. Short term momentum indicators turned higher last week and have returned to overbought levels.

The Canadian Dollar gained 0.59 cents U.S. last week. Its intermediate uptrend was confirmed on a break above resistance at 105.49 cents U.S. Short term momentum indicators are overbought, but have yet to show signs of peaking.

Silver gained $1.03 per ounce (2.64%) last week. It broke resistance at $39.35. Short term momentum indicators are overbought, but have yet to show signs of peaking. Strength relative to gold has turned positive, an encouraging sign for both.

Crude Oil gained $2.49 per barrel (2.56%) last week. Short term momentum indicators are overbought, but continue to trend higher. Crude moved above its 50 day moving average last week.

….read and view more of Don’s last Report with 40+  Charts analysed and links to his EquityClock seasonal charts HERE