DUG update.

My Thursday post on DUG seems rather well timed in retrospect.  It goes to show that even a blind squirrel finds a nut every now and then. 

The left chart below was the model provided in that post.  The right chart is actual as of Friday's close.   The blue count is my primary count but this could also count as 1-2-3-4 and now working on 5.  IF this turns out to be the case, the chart will form a higher high than the Oct high and then come back down to the $44 level because that will be the level of the prior 4th.  If that happens then it is a very, very easy setup to go short on oil using DUG because it will be the clearest indication you will ever get that a 3rd wave up is likely to explode in oil shorts.

What will be interesting is what happens to gold at that time because Avi's model as I currently understand it does not allow for gold to continue trading in locked step with commodities downward very much longer.  According to his model, GLD will hit ~105, HUI will hit ~119 and then that will be the bottom of a massive 2nd wave in a broader bull market that will propel gold and silver to incredible new heights in a new 3rd wave up over the coming decade or more.

Either the waves down in oil right now are corrective 5-3-5 in nature and when they finish we will enter into a period of massive inflation OR there will have to be a decoupling of gold from oil.  It will not surprise me to see that happen because it has long been one of my views that during the end stages of this debt Ponzi, gold will decouple from commodities and be treated as money (which is what it really is and always was even if the herd chose to forget that fact for many decades under the hypnotizing influence of paper currency).  Keep in mind what the dollar really is: the petro debt dollar.  Gold of course is completely unassociated with anything else.  It is simply money even if the herd doesn't understand that fact today.  In 10 or more years, people will wonder how gold could ever have been treated as anything except money.  While the con is running you can fool all of the people some of the time and some of the people all of the time but when the con is exposed you suddenly can't fool anyone ever.