Last week's commodity market decline was the most severe since 1980; which of course begs the question "is the correction over"? We don't believe that to be the case, as follow on selling will materialize taking prices far lower than one can believe.
In that vein, we think it wise to take a technical look at gold prices - ostensibly the leader of the bull market in commodities. From a longer-term perspective, we use the monthly chart, and we don't want to get to fancy with it. Right now, the 20-month moving average is rising sharply and crosses at $521; we think this level in combination with a normal 50%-62% "box retracement" of the entire bull since 1999 moves puts our comfortable buying zone between $520 to $550. Hence, another -10% to the downside will "clean the baffles" as late-long positions have been pushed harshly; thereby granting the gold market a healthy dose of skepticism as to whether the bull market is over. In our opinion at this point in time...it is not. Keep your eye on $520-to-$550 and prepare to buy.