If a reason was needed to start a wave 3 up in gold mining stocks, Bernanke’s Grand Experiment yesterday certainly fits the bill.

Here is a chart of the $HUI showing the most bullish of potential counts.

click on chart for sharper image

For those not in tune with the E-Wave implications of the above chart, wave 3 up which we may have started, will be long strong and unrelenting. The huge declines in the indicies last September-November is indicative of the strength of a wave 3 down.

There are other valid $HUI counts as that is just one possible interpretation. Moreover, there is plenty of room for another ABC correction lower even if the general idea depicted above is correct. Certainly, the fundamental news (Bernanke’s monetization experiment) is supportive of gold in theory.

As for the overall major market indices, there are so many possibilities that I am reluctant to post one.

Please see Another Bear Market Rally or Something More? for my March 10 ewave update and this warning to bears:

It now appears as if the S&P; 500 has traced out 5 clean waves down, ending at 666. If that is the case and wave 5 does not extend, it will not be fun to be net short at this point whether or not lower lows are ultimately coming later or not. For now, let’s party like we have profits, whether we do or not.

I did have a general target of the 50MA on the S&P; 500 and that hit yesterday and again at the open today. 666 to 800 is a pretty solid move percentage wise, yet sentiment wise hardly anyone thinks this rally is going anywhere. This is a possible warning sign for the bears.

Right now, the uptrend must be respected until proven otherwise, and that is especially true for the $HUI.

Mike “Mish” Shedlock
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