Gold & Silver Stocks Hit Downside Targets

The $XAU, gold and silver sector has taken a beating like I haven't seen.  This selloff is brutal, straight down from 210 to 110, in a matter of 8 weeks.  The head and shoulders top formation that I mentioned a few months back is nearly complete.  The technical damage is actually alarming but, as Tim Ord mentioned today, gold stocks are near the cheapest levels that they have ever been in relation to the physical metal itself.  If we are going to bottom, it will be right here.  There is huge support here in the form of the Head and Shoulders target, the lower boundary of the previous 2 year range in the XAU, and also from the 2004 highs.  Sentiment is as bearish as it gets and this is bullish.  If this market fails here, it could be ready to make a move back to the 90 level but we will take it one step at a time.  I may start nibbling at the GDX here; however, I am not looking to initiate any long positions until a sharp move down comes in the broad markets.  I believe a sharp move down in the broad markets will take everything with it.