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In Market Analysis on September 3, 2010 at 6:37 pm
Point and figure charts are one of the oldest and purest charting methods in the field of technical analysis. Point and figure charts are not commonly studied and practiced by technicians today as in the past. However, I use it as a simple indicator of areas of supply and demand and to indicate new trends. Warren Buffett said, “There seems to be some perverse human characteristic that likes to make easy things difficult.” Especially in the field of technical analysis, analysts seem to love making complex formulas when in reality it is completely unnecessary.
Point and figure charting is a simple method of plotting price alone. It helps the chartist understand support, resistance and specific congestion areas. Congestion areas are areas of price where there was a previous battle of supply and demand. Often times when the price reaches this area it is difficult to break through. However, when the breakout does occur a major move begins. These charts are excellent at identifying specific price and relative strength breakouts.
Silver has just made a triple top breakout which signifies a possible major trend higher. Triple top buy signals are very powerful and hint at a move higher. Unlike bar charts projections are based on a horizontal count rather than vertical. This silver triple top breakout which may occur shortly could initiate a rise to $27. This target is also confirmed by the bar chart analysis which I showed on Sunday’s update. On the point and figure relative strength chart a breakout has already occurred.
Usually relative strength breakouts precede price breakouts and confirm the move higher.
Never in history has the gold to silver ratio been so high and a reversion to the mean could mean a significant move in silver.
Disclosure: Own silver and silver mining shares.
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In Market Analysis on August 31, 2010 at 6:38 pm
The global debt crisis and the war on deflation by the Federal Reserve is causing precious metals to approach a key resistance level. Gold is nearing a 52 week high while silver is close to breaking $19. A break above these levels on high volume could be the beginning of a major move higher.
Gold and silver has been a safe haven asset. Many concerns were expressed if miners would collapse in a weak equity market. However, since the last Federal Reserve meeting, gold and silver has shown impressive relative strength compared to the overall market. The Federal Reserve discussed the increase of treasury purchases to keep interest rates artificially low. They also made it clear that every attempt will be made to prevent deflation. This low interest rate environment and weak economic outlook which may continue for some time has encouraged investors to move money out of equities into safe haven assets such as gold and silver. Gold and silver is also gaining interest as investors are realizing bond yields are too low and may be risky at these level.
The Fed’s greatest fear is deflation, high unemployment and a move into new lows in equities before the election. If the S&P continues to deteriorate and unemployment data comes in negative, I expect an announcement of more central bank interventions to reflate the economy. This next round of quantitative easing could cause a massive rush into gold and silver.
Many are concerned of the safety of fiat currencies during a global debt crisis. The global economy is built on spending and investing. Many investors were concerned if a downturn in the equity market would drag down junior miners. These past couple of weeks have proved that is not the case. Junior miners have made major moves higher. A breakout into new 52 week highs in the miners is highly probable especially as the price of bullion breaks out.
The saucer (cup) and handle pattern is the chart reader’s favorite pattern. Great performing stocks tend to have a strong base before an extended move. Gold’s (GLD) pattern is very rare and this setup tends to be very profitable. Similarly to what we saw in September of 2009, I expect a major breakout. Is this pattern showing investors that a major event may be brewing? Time usually tells the tale as news or events are announced after the breakout.
High quality gold and silver explorers are making major moves already. It is important to pay attention to the gold and silver junior miner sector as we may be setting up for peak gold and silver. High quality explorers with mineable assets should be followed as gold and silver discoveries are rare and producers are paying a premium for these properties. These miners tend to have great leverage to the price of bullion especially if we see more government interventions and quantitative easing.
Yesterday, Fronteer Gold, a stock that I have recommended to my readers bought out Auex Ventures to control completely the Long Canyon Project. The Long Canyon discovery is high grade and open pit. Fronteer is consistently coming out with impressive results from this project. Long Canyon represents continued resource growth as it is expanding and open in all directions.
A major move in bullion could cause these explorers to make large percentage gains. If you haven’t researched high quality junior miners yet, now is the time before a major move.
Disclosure: Long Gold and Silver Miners
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In Market Analysis on August 27, 2010 at 7:09 pm
The global debt crisis and the war on deflation by the Federal Reserve is causing more producers to find ways to invest their cash. This low interest rate environment which may continue for some time will force producers whom are sitting on large cash positions to acquire more reserves. Mergers and acquisitions in the mining sector have increased over this past year due to a lack of major discoveries as well as supply and demand changes in emerging economies.
We have seen a trend of investments from Asia to purchase stakes in mining companies. In 2009 the Chinese Investment Corporation, a state owned company, took large ownership positions in Teck Cominco and Penn West Energy Trust. Recently in June, China National Nuclear signed a contract with Cameco to supply 23 million pounds of uranium. Hanlong Investments took a large stake in General Moly, one of the leading North American molybdenum developers. Korea Electric Power signed a deal with Denison Mines another uranium developer. Sojitz bought a 25% interest in the Taseko’s Gibraltar Copper Mine. Then recently we saw BHP Billiton trying to make a deal with Potash Corp. and Kinross, a large producer buying Redback, an exploration company. This trend should continue through 2011.
Investors should be studying the companies that are receiving premiums and position themselves accordingly to make potentially large profits. Junior mining companies that are sitting on large assets that are still relatively cheap or overlooked should be considered. There are still many companies with strong assets that are trading way below value. This is an exciting and highly profitable time for the companies with assets close to production in the mining sector.
For producers it is more efficient to acquire explorers to replace their reserves rather than rely on their own exploration team. I am focussing on the junior mining sector whom are close to production rather than the large producers as they will receive large premiums on their assets.
Following the mining sector on a daily basis the evidence of keen interest to acquire resources is apparent. There is a search for real assets and natural resources. Foreign countries are looking for natural resources to diversify their holdings and supply their emerging economies. Large mining producers are searching for replaceable reserves of gold, silver and industrial metals. As the U.S. attempts to reflate their economy at all costs, precious metals and natural resource assets should receive a premium.
The Gold Miners are close to a major cup and handle breakout. It also appears to have set up an ascending triangle pattern. A breakout from this pattern could lead a major move into new high territory.
The strong trend in gold miners is signaling that interest rates will stay low as the Federal Reserve makes every attempt to reflate the economy. Precious metals prices should stay high which would make producing mining companies highly profitable.
Disclosure: Long Gold and Silver Mining Stocks
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In Market Analysis on August 25, 2010 at 6:14 pm
Silver had very powerful break out today as investors are seeking assets that are safe and will retain value during a debt crisis. Silver is seeing demand at these price levels as it is historically cheap relative to gold. If the ratio came down to the levels it was in 2006 it would be close to $27 an ounce. Silver is soaring because investors are realizing this is a hard asset, it is money and it is historically cheap compared to gold.
Gold has reached overbought conditions from my July 28th buy signal. Right now gold is a bit overbought while silver is at an interesting buy point, having found support for the fourth time at its long term 200 day moving average. Today’s breakout of the symmetrical triangle, a very bullish chart pattern, is a sign that silver has built up a lot of internal strength and could break out into new three year highs. Remember, silver is significantly below all time highs while gold has already broken into new highs.
While I am bullish on gold, I believe investors could see a higher percentage move in silver. I have also alerted my readers to a specific mining company which has recently found a major discovery in Mexico. Pure silver discoveries are very rare. Silver supply is mostly produced as a byproduct which makes supply very inelastic. A new pure silver discovery in a silver bull market could receive a nice premium.
I believe silver will make a major move on this break out. Investors are looking for a safe haven, protection and value in silver. Gold has already made a significant move and is quite overbought, while silver has not participated to the same extent. The gold silver ratio should move to historical norms which could mean a major move for silver.
If you do a study of the point and figure chart of the relative strength of silver versus the S&P500 since 2001, its strong uptrend is apparent. Each time silver falls back into support, it breaks out and makes significant rallies.
The break above the red bearish resistance line and a double top breakout coupled with the daily chart symmetrical wedge pattern demonstrates that silver has reached a critical juncture and could make a nice move.
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In Market Analysis on August 23, 2010 at 7:38 pm
The rise in equities from March 2009 to April 2010 lacked one key ingredient in a bull market: volume confirmation. There were many technicians who pontificated why the lack of enthusiasm of the uptrend existed. Some said that it was the 2008 de-leveraging of hedge funds that caused the decreased participation. I was never convinced of this far fetched argument because on each correction volume increased significantly. I’ve been skeptical of the claim that this time will be different. While studying charts over the years, one indicator I am always loyal to is volume. It is the enthusiasm in a market which shows if a rally or decline is convincing.
The H&S pattern is one of the most reliable chart patterns. The S&P 500 is showing an apparent head and shoulders top with volume confirmation. One way of affirming the validity of this formation is by checking the volume on the right shoulder, because the right shoulder is the first rally in the bear market. The low volume shows a lack of confidence in the previous bullish trend.
The sharp breakdown of the S&P 500 following after the rising wedge pattern tells me that this bear market is likely to continue. Several indicators, namely the bearish death cross, break in trends and poor price volume along with the bearish head and shoulders pattern and rising wedge all combine to weigh heavily against equities.
GLD is experiencing a “v” formation after coming to long term support and a 50% fibonacci retracement. On July 28th, many of you have read my views and why I believe gold was at a buypoint, contradicting the consensus of market timers at the time. Now I believe gold is in need of much needed respite in the trend and a shakeout before continuing into new highs. Gold buying has also gotten some TV airtime from a few famous commentators who are now turning bullish on the metal. That really concerns me, as it is a contrary indicator. We may see a healthy correction so that GLD can clear the previous resistance and make a move into new highs. A healthy correction could also provide an excellent market entry point for a trader who wants to add to their gold holdings before a new breakout. If you study the move into new highs from September of 2009 you will see the coil formation where it had three pullbacks to support. These formations are bullish as they provide the conditions to generate a high percentage move. For specific stock selection visit my website at http://goldstocktrades.com.
GLD is overbought and if you are trading short term, do expect a pullback to at least the 50 day moving average to find support or possibly shakeout the traders who bought in after it crossed the 50 day moving average.
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In Market Analysis on August 18, 2010 at 5:50 am
China decreased their holdings in U.S. Treasuries by a record amount in a U.S. government report issued yesterday. Treasuries at the moment are experiencing a steep rise as the U.S. is financing its staggering debt level by offering its obligations to other countries. China has historically been the largest holder of U.S. debt as a means of promoting a strong dollar, but the unattractive yield along with reckless government spending seems to be causing the Chinese to rethink the risks and benefits of holding U.S. government bonds. On one hand, they need to make sure the U.S. currency does not devalue but on the other hand they need to protect themselves from a treasury bubble.
There seems to be a major investment shift away from treasuries as the Chinese are skeptical of the U.S. debt situation. The Chinese are looking to make strategic investments in natural resources. China may not be public about their policy move, but they are taking significant steps to increase their position in mining and energy companies. In 2009 the Chinese Investment Corporation, a state owned company, took a large ownership position in Teck Cominco and Penn West Energy Trust. They are looking for mining stocks to diversify their holdings. This major policy shift from Asia transferring assets from U.S. debt to natural resources could spread. We could soon be seeing a top in U.S. Treasuries and more acquisitions for premiums in the junior mining sector. In fact, a couple of the companies I followed last year had major investments from Asia. As demand has exceeded supply, they have been compelled to import certain commodities such as uranium and molybdenum rather than their traditional role of being the exporter.
Treasuries have made an enormous run, but the recent gap up and reversal could mean that it has exhausted its move and may be headed lower. This gap up and reversal, which made railroad track-like formations in the chart should be observed cautiously. High activity days with a jump in volume or price call for close monitoring. The manner in which price reacts to the gap is crucial. If we see a two-day reversal pattern after a gap up where it closes near the opening of the previous gap, it is a sign that buyers are doubting the previous day’s jump.
Long Term Treasuries spiked higher during the “flash” crash and has proceeded higher for the past four and a half months. Although a two day price pattern is not reason enough to go short, it does raise a warning bell of caution when combined with the overbought reading.
Now the rally from April is 12.5 percent above the 200 day moving average. It has also reached its upper resistance line. As I indicated above, the buying from the Fed and overseas will abate and we may soon be at a juncture where treasuries have exhausted their move. There are negative divergences with momentum which price usually follows.
China’ s move to decrease their holdings may be starting a trend that could influence other countries as the scramble for basic commodities and hard assets continues. This commodity search should spread to U.S. mining companies, especially as the dollar and treasuries weaken. I expect an increase of acquisitions in U.S. gold, silver and base metal mining companies in the next few years.
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In Market Analysis on August 13, 2010 at 6:50 pm
Several weeks ago I wrote about the death cross phenomenon. The death cross occurs when the 50 day moving average crosses the 200 day moving average on the downside. These patterns, when combined with other technical indicators can predict major market downturns. You may have read articles from the bullish camp and from many technicians contending that the death cross is not a proven or a contrary indicator. I however assert that this warning indicator prevented many wise investors who heeded its signal from losing their life savings in 2008.
The recent Post-Fed free fall is confirming the death cross as this will be the third major failure of the 200 day moving average. When a technician starts seeing bearish signs, it is important to look for subtle clues in chart patterns. In this case the clue was the bearish rising wedge: it is a rally that trades up on decreasing volume. This bearish rising wedge took place concurrently with the right shoulder formation of a head and shoulders pattern. This breakdown coupled with bearish price volume action confirms that selling pressure far exceeds buying. When all these signals happen at the same time, you can expect a rapid downturn to follow. This correction is putting pressure on the 200 day moving average slope. If that moving average begins to slope down, it becomes a heavy area of resistance and will confirm the death cross from early July. The odds of a long term downtrend are becoming highly probable. These signals could possibly indicate the start of a twelve to eighteen month down cycle.
Gold, on the other hand, has shown great relative strength despite the general markets correcting and negative sentiment about the economy from Washington. On July 28th, I wrote that gold was reaching major long term trend support and when everyone was selling, it was exactly the time to be buying. That day proved to be a pivot day for gold.
Gold is breaking out compared to the general markets and especially to the Euro. It has significantly rallied over the past couple of weeks and has broken above its 50 day moving average which showed little resistance. Now that 50 day has been broken to the upside, it should act as support as it builds a base to challenge new highs.
Junior mining stocks that corrected significantly in the 2008 downturn have shown great relative strength during these past two weeks, demonstrating that this time will be different. July 28th was an inside bar day, or Harami pattern, which shows a loss of momentum of the previous downtrend and reversed higher. It is clear to see the uptrend and strength of junior miners during these past two weeks as the Fed has made it clear our economy is rapidly weakening. The Fed will continue to ease and print money which should be excellent for junior mining gold and silver stocks.
We may expect that during this crisis more people will become aware of the benefits some of these explorers can offer to shareholders during a currency devaluation. Some of these companies are significantly outperforming the bullion and investors should become aware of these strong junior miners.
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In Market Analysis on August 6, 2010 at 5:41 pm
The November 2010 election is right around the corner. As the Democrats praise the federal stimulus and Barack Obama as the savior of the American capitalist system, Republicans who also initiated a bailout now reveal where the money was spent frivolously and recklessly in order to gain votes. Regardless of which party gains power, the fact remains that government spending has increased exponentially and it has not positively effected the job market one iota. The job market is, frankly, terrible. Our children and grandchildren are likely to experience high inflation, high unemployment and even higher taxes, the very problems that Greece and Spain are struggling with now. The only solution the Fed is offering is to throw more money into the system to prevent a downward deflationary spiral.
The strategy of my choice for protecting assets is in quality junior mining companies with great management, a strong cash position and expanding resources.
The European crisis demonstrated that now, instead of the credit crisis being just a private sector issue, entire governments are defaulting. Due to reckless spending in many areas, these countries have positioned their constituents with a great burden. Spain is now facing close to 20% unemployment. There are states in the U.S. that are running huge deficits and in danger of defaulting. A downturn in a highly leveraged global society such as ours has the potential to be devastating.
In order to for the Democrats to win the November election, they will do everything possible prior to the big day to inflate the stock market. I suspect within the next couple of weeks, we will see a second “jobs” stimulus and quantitative easing actions. They need to act quickly to inflate asset classes, the stock market and Joe the Plumber’s 401k plan if they want a shot in the next election. A “jobless” recovery is going to be a major flaw to the Democrats control of Washington.
This rally is not broad based at all, lacking volume and market breadth. Market breadth tells us if this past rally was broad based, meaning that in a healthy market price corresponds to the amount of stocks participating in an uptrend. It is concerning when you observe a disparity between the stock price and the advance decline line. This usually indicates a “fake” market, because only a handful of stocks are participating. A sustainable market is one in which many participate. The advance decline line gives you a clue ahead of time if a rally can endure .
The Nasdaq is lacking broad participation. The Nasdaq’s advance decline line, which is more correlated for the small cap companies, needs to get involved with this rally before this market turns bullish. Even though price was close to three year highs, the advance decline line is not nearly the same level as three years ago. This is a false rally with a few select large cap international stocks moving progressively higher. The U.S. will enjoy a real recovery when we see small caps participating and moving higher. Obviously, we are not there yet.
Today’s negative job report could be the catalyst to start another leg down.
Over the next few months we are going to see formidable efforts by the Congress, the Federal Reserve and the White House to prevent the economic fallout that the markets were teetering on during the European Sovereign Debt crisis. If these markets are not successfully restored in time, we can expect a major political change in November. Has the stimulus really been effective? Looking at this chart, it appears that this is not the case.
Gold and silver may make a major move in the next few weeks. I’ve said before that gold was at a major buypoint due to long term trend support. The jobs report was very bullish for gold investors. The Fed is expected to make another stand and gold, silver and base metals should outperform considerably.
Disclosure: I am long gold and silver mining stocks.
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In Market Analysis on August 2, 2010 at 6:30 pm
Economic sentiment rose to a 28 month high in Europe after the panic sell off earlier this year when the Euro collapsed. A major rally has ensued after the most severe financial panic in the Euro’s history. Now the rally is pushing higher, but have the concerns dissipated? I am extremely concerned about this rally off of June lows for several reasons. I do not believe that the economies in Spain, Portugal and Greece will be saved without major restructuring, and the chance of credit defaults are extremely high. A strong Euro hurts European companies that are trying to export goods. It harms companies’ revenues and affects employment. Spain is now suffering from high unemployment, a real estate crash and the very likely chance of a credit downgrade.
It is interesting to observe the dichotomy between Europe’s handling of the debt crisis versus the United States. While Spain, Portugal and Greece have been forced to cut spending, President Obama has increased unemployment benefits and expanded social programs. The U.S. is estimating a $1.47 trillion deficit this fiscal year ending September 30, and $1.42 trillion in 2011. The U.S. is spending frivolously while the Europeans are taking aggressive steps to cut expenditures, which is weighing heavily on consumer confidence and economic growth. Over the past couple of weeks when concerns of a double dip increased, Ben Bernanke has discussed additional quantitative easing and fiscal stimulus to prevent another financial collapse while Trichet is forcing governments to cut expenditures to stem off the aggressive selling of the Euro and the concerns of a breakup of the European Union. As you can see, there is a global effort to prevent economic collapse and the manipulation at play is obvious.
I don’t believe this will continue much longer. The Europeans will have to follow the United States’ lead and devalue their currency in order to prevent political unrest and the breakup of the European Union. I suspect the rally in the Euro to come to an end soon, as the austerity measures imposed will have to be lightened. Spain has millions of people out of work already-over 20% of their population. Let’s not ignore what can happen in Europe when unemployment rates skyrocket.
The Euro’s rally and the decline in the dollar have been good for U.S. equities which were breaking into new lows in early June, with a break of 1040 on the S&P 500. The S&P has moved higher and is on the verge of breaking a major resistance point of 1130.
Comparing the Dollar to the Euro, the relative trend has just hit an important area of support at the 50% fibonacci retracement and the dollar has just hit its 200 day moving average. Due to the oversold condition of the Dollar and the overbought condition of the Euro plus important support for the dollar at the 200 day and 50% fibonacci retracement on the relative strength chart, I suspect an upcoming correction in the Euro.
Further bailouts in Europe, credit downgrades and defaults are expected to continue into the second half of 2010, which will see selling pressure on the Euro. These events could push those seeking a safe haven away from the Euro. In the past, that safe haven has been the Dollar and treasuries, but if you can tell by this game, there is only so much back and forth that can take place before the global currency crisis is revealed. At that time, true money that translates into hard assets will be extremely valued.
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In Market Analysis on July 27, 2010 at 8:08 pm
Gold is now reaching long term trend support after falling the last few weeks as investors returned to bid up the Euro and equities. The bounce in equities, especially financial, retail and real estate may be short lived as volume indicates that there is not much conviction from major investors on the upside. Gold has recently been the safe haven as investors sought shelter away from the Euro when it was having the sovereign debt issues. Now that those issues have been quelled, gold has had some selling and it has now reached an oversold condition and a long term trendline which is acting as major support.
Stock prices move in trends. In a bull market, it is quite often easy to identify the ascending bottoms. Being familiar with trendlines allows the investor to enter long term bull markets when they are oversold and at key support. An investor must always be aware of a stock’s underlying long term trend. This can be counter-intuitive and awkward, as most times when it comes down to support you have to think against the market herd and buy when others are selling. It’s like buying a winter coat in the heat of summer. Gold is on sale, and presenting a low risk, high reward trade, but it requires non conformity with the crowd which is not an easy task for anyone. Many of us like to be in what’s hot now situations, rather than seeing the bigger picture and entering into a trade when it is uncomfortable.
Gold is now at my buy point of the rising long term trend support line. GLD touched that line 6 times, which signifies that this trendline is a reliable point of support. The significance of this line is that it is not steep, which also brings a higher probability that GLD will find support here. It is also oversold. Continued weakness here and a break below this long term trend would be troubling and highly unlikely. If there is a break most likely it would be exhaustive, meaning that it will shake out a lot of shares before the next move higher. I do not see $1200 as a top in gold as there are no technical signs of a major top.
On the other hand, financial stocks may be finding key resistance here following a low volume rally. As investors are digesting earnings reports that claim credit is improving and lending is increasing, consumer confidence is weakening and the unemployment rate is still very high. A jobless recovery is what many are considering we are experiencing. It seems that this recovery has been good for wall street while main street has not seen an improvement. The financials have found resistance at the 200 day moving average and have now failed four times, significantly breaking through this point of resistance. Historically speaking, after a few failed rallies a major drop could occur.
At the writing of this article, housing has also had a significant reversal after recent data showing an increase in pricing in some metropolitan areas. Investors are selling home building stocks on positive news, which indicates that there is some caution over what the real estate market will resemble after the home buyer tax credit expires. The chart shows a clear reversal and I expect that the rally in equities will be coming to an end and that gold’s poor summer performance will be different this fall as many weak hands were shaken out. An explosive fall rally into new highs is expected as I still have a target of $1400 by year end.
Disclosure: I own shares in gold and silver mining stocks.
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In Market Analysis on July 26, 2010 at 1:06 am
As investors debate the validity of the stress test to gauge the financial health of European banks, the market has definitely signaled clues on the charts that we are nowhere out of the woods yet with the sovereign debt issue. Since the European Crisis began at the end of April, the news out of Europe has rattled the markets on high volume sell offs, break of trends and moving averages. It is interesting that now, with the stress test showing positive, investors are hesitant to jump back in. This is indicating there are still other major concerns and that many of us don’t have faith in the stress test or published government reports.
One lesson I’ve learned as a trader is that if you don’t know what the trend is, don’t make a guess. Even a four year old child who looks at a price chart on gold can spot the uptrend. However, in the case of the major market indices- where you have a declining 5o day moving average below the 200 day moving average, and when you are seeing poor price volume action- it is best to be cautious. There can be impressive rallies before a bear market begins. The Dow Jones Industrial Average is overbought and has crossed the 200 day moving average on light volume. This has come after major bouts of selling from institutions including the infamous “flash crash in May.”
The way I measure how excited a market is through volume. A break above key support or resistance on low volume indicates that the move was not convincing and should send warning signs as a “fakeout”. This market is indicating that the moves higher are basically due to a lack of sellers and any further news items which may be negative will bring the bears back out.
Housing is an area which is seeing very little demand right now. This is the industry which initiated the financial crisis we are in and it should be showing signs of strength in an economic recovery. Much of the rise in housing was the result of government intervention in the form of tax breaks offered to buyers. The rise in treasury prices and the weakness in housing indicates that many people are not borrowing.
Although housing appears to have a double bottom, I am a bit suspect of the lack of volume. It would be premature of me to call a buy signal on housing, especially since it has not tested the 50 day moving average as resistance after the bearish death cross of the 5o day crossing the 200 day. Housing needs to turn positive before any real rally can begin. Right now housing stocks are still bearish and a convincing break above the indices would change my mind, but the probabilities of that occurring with these overbought conditions and lack of volume are low.
There was a report this week about executives of bailed out banks who were paid $1.6 billion dollars of taxpayers money. As investors realize the staggering debt and the stagnant economy we are facing because of high taxes and increasing government intervention into the private sector, there will be major move away from cash and towards gold and silver. At that point gold and silver could move significantly higher. I believe that time may be closer than many sources would have you believe.
To summarize, some indexes have broken the moving averages to the upside but on low volume, as I have shown in the first chart. To me, this indicates that smart money is staying on the sidelines until the trends are more observable. Right now, my bias is that this rally is a fake-out and I will not become bullish again until I see a break above 10,600 on the Dow as well as a bullish golden crossover of the 50 day crossing the 200 day moving average to the upside. Volume is a crucial part of this equation. If there is some major accumulation coming coupled with the 50 day moving average sloping higher, then I will reconsider my position. However, at the moment I am still bearish on the markets and am bullish on silver and gold.
For timely updates subscribe to my free newsletter at http://goldstocktrades.com.
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In Market Analysis on July 21, 2010 at 3:59 am
Trading against the market herd, also known as going contrary can be quite profitable, but timing is another challenge entirely . Many contrarians make calls too early as irrational markets tend to stay irrational too long for most investors to stay in them. Nevertheless, when used in conjunction with other technical tools it can provide excellent market entry points that are high reward and low risk when structured correctly.
In these past few weeks since my article on the death cross and why specifically this cross is quite bearish due to other technical signs, I have been bombarded with emails and links to Barron’s and Marketwatch which claim the death cross when back-tested is a contrary indicator with no statistical advantage. Word to the wise, be careful of what you read in the widely published media reports. A technician worth his salt knows if a death cross is real and if you need to be wary of a market downturn, similar to the market decline of 2008.
Remember that Barrons, CNBC and MarketWatch are in the business of advertising, which depends on their circulation. Many of their ads are supported by major corporations who want their readers to be bullish rather than bearish.
What has concerned me lately in gold was the amount of media promoting the possibility of gold skyrocketing during the recent Sovereign Debt Crisis, where many fled the Euro to buy treasuries, the dollar and gold. Today there was speculation that may threaten banks who are not lending. This is becoming a deflationary crisis and investors are now concentrating on treasuries. Mortgage rates are at all time lows, lending is drying up and housing starts are plummeting. There are worries about U.S. Debt, higher taxes and increased government intervention in the private sector. This shakeout in precious metals is giving investors another opportunity to jump into this bull market without being caught up in the hysteria. To enter the trend with additional capital, it would be wise to buy when the conditions are oversold.
I have written about the use of oscillators to show short term buypoints in an uptrend. I am seeing this happening again with gold. Gold is about to hit an 18 month trend line, which has been successfully tested 6 times. This is a valid and significant trend line that needs to be monitored closely. Oversold conditions coupled with long term trend support leads to highly profitable times, as indicated in the chart below.
While learning to trade, I was taught to be a patient lion waiting for the best possible opportunity to pounce. Lions wait intently until they are sure of optimal results: a profitable trade. Now as a trader of gold and silver, I see opportunity approaching. The best way to play this market is by buying gold and silver when it hits the lower support trend line and is oversold, and selling as it approaches the rising resistance line. This rule forces you to enter when the conditions are oversold but still in an up market, giving you very minimal downside risk. Each time gold has rallied into new highs, the first correction to that trend line has been the counter trend bottom in the next major move.
Investors should be concerned if there is a break in that trendline as it has proven to be valid over the past 18 months. There are many similarities with silver.
I believe silver is a great buy here at $17, especially as this is a true deflationary hedge. Eventually the public will want real money, which is gold and silver. Silver has the possibility of making a major run as it is way below all time highs. During this time when it is oversold and coming in play with long term support, I would position myself for a move higher from the $17 area to $21 by the end of 2010.
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In Market Analysis on July 15, 2010 at 5:45 pm
Fears of far-reaching government oversight in the financial industry and weak economic data coming out of Philadelphia are contributing to today’s modest decline in the market. Many fear that this bill will hurt the financial sector as more government oversight is required. The bank bill implies that the government can have access to control banks when they are in a vulnerable situation.
Weak economic data from Philadelphia also disappointed analysts. I am concerned that the same people who termed “too big to fail” and bailed out these big banks causing huge amounts of debt for future generations are designing the legislation to “prevent” it in the future.
These last few weeks I have been warning subscribers about this decline and the possibility of a major drop following the very bearish death cross. For timely updates and specific recommendation please subscribe to my free newsletter at my website at http://goldstocktrades.com.
After a six day rally U.S. equities became quite overbought. I use oscillators to time market entry. Oscillators are used to identify short term market extremes. If the trend is moving lower, I will use the oscillator to tell me when the market is overbought for a short entry point. The recent market bounce with six straight up days gave extremely overbought readings. This means this recent rally went too far too fast.
The indexes now have downward sloping 50 day and a flattening 200 day moving average. Poor price volume action continues to plague this market as the rally has been on low volume which shows a lack of support from institutional investors. The slope of the 200 day moving average turning negative will confirm the death cross and a failure to break through the 200 day and continued weakness will be another bearish confirmation.
Yesterday, those overbought conditions were signaled and it coincided with the Dow reaching the 200 day moving average. Today’s downward reversal from the 200 day is indicating that this counter-trend rally is completing. Traders might want to think of going short at this point as most traders who were shorting when the index broke to new lows have covered. It is also an opportunity to move to cash if you still have long positions.
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In Market Analysis on July 12, 2010 at 3:05 pm
Moving averages are used by many traders to identify trends as they smooth out price action and act as key support on the way up, and resistance on the way down. In fact, it is one of the most widely used technical indicators and extremely popular among high frequency traders because it is so clear cut and easy to program. It allows the trader to ride a trend higher and to cut losses short.
The death cross is a popular signal that when used properly can cut massive losses short. The death cross is so popular because many institutional investors use the 50 day moving average as a medium term average and the 200 day as the long term moving average. Basically, the crossover method signals a sell signal when the shorter term moving average crosses the longer term moving average to the downside. A buy signal is identified when the short term moving average crosses the long term average on the upside.
Crossover methods are easy to program into a computer. However, I must warn that one must use additional clues to create a sell signal. There are frequent whipsaws and failures when you use the crossover method in isolation.
Chart reading is an art that requires discipline, experience and study. Crossover methods used exclusively, such as by a computer program, will not produce the same results of an experienced technician who looks for other pieces of evidence to confirm the bearish crossover.
Similarly, back testing the results of the death cross using a computer program will not produce optimal results, since technicians look for additional signs of the breakdown than just the cross. I was recently interviewed by the Toronto Globe and Mail on this topic and explained that one must be aware of this crossover and its implications.
Although some believe this signal is nonsense, and show back-tested data with computer models, it does not show the crossovers used in conjunction with other technical signals.
If the crossover signal is confirmed with a head and shoulders breakdown, a cross into new lows, and poor price volume action, which is occurring now, I will patiently wait on the sidelines and look for prudent short points when I see a price reversal and as the price comes up to certain resistance. If all these signs are coming together the probability of a whipsaw is significantly reduced.
It is also important to note that a death cross is further confirmed if the 200 day begins sloping downwards after the break. This will act as resistance on the way down.
A look at the death cross of the Dow in January of 2008 showed many of the signs of a market top and trend change.
The 200 day which acted as previous support was violated on high volume and was followed by three failed railies at the 50 day moving average before crossing over. If not followed investors would have lost more than 60% of their portfolios.
Now is not the time to look for bargains but to protect your portfolio by selling on any bear rallies.
I believe that this rally will be shortly coming to an end and we will continue to trend lower in equities. Use these rallies to prepare for shorting opportunities.
Disclosure: Not currently shorting or investing in inverse etf’s at the time of writing this article.
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In Market Analysis on July 8, 2010 at 12:41 am
These past few days as the market indices broke through the head and shoulders neckline, I have had a barrage of emails asking if it was too late to buy inverse etf’s after my original short sell recommendation on June 21st 2010 .
My response to many readers is that if it is apparent to everyone to short that is the time to cover. It is dangerous to short when stocks are going into new lows as often time there are powerful dead cat bounces where covering takes place.
No one knows how to sell at the top or buy at the bottom. The only person who knows that is a liar. Often at tops every chart looks bullish, earnings are fantastic and every newsletter writer is bullish with new price objectives. Similarly at market bottoms charts look awful, stocks are experiencing losses and every newsletter writer is telling you to run for the hills. Be aware of the obvious because when it is evident to everyone that is when you have to be contrary to the market crowd.
Last week everyone was buying puts and shorting the market when it was an obvious head and shoulders pattern with a very bearish declining neckline. The slope of the neckline determines the bearishness of the pattern. It is important not to short when it is obvious and breaks the neckline. I look at key areas to short on counter rallies. Price volume action is very poor and I expect a few more days as it rallies to the resistance trendline and 50 day moving averages for additional short sale points.
The goal of a trader is to find key areas of support to buy when the stock is moving up and specific points of resistance to sell short. Markets don’t top or bottom in a day. Often there are several signals to show that a market trend is changing. During those times there are often major counter trend rallies to shakeout the weak or inexperienced short traders who bought as the index dropped into new lows.
The cross of the 50 day and 200 day is called the cross of death for a reason quite often there is a major break to the downside over the next few weeks.
This past week as many analysts and publishers recommended to go short as the index broke the neckline of the head and shoulders pattern. I disagreed. I would definitely not recommend shorting into new lows but shorting at the end of a counter trend rally or where there is overhead supply where many investors want to get out.
If you are looking for possible points to go short stay tuned over the next few days as I will be sending out an alert to free subscribers.
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In Market Analysis on June 29, 2010 at 8:45 pm
Stocks went down sharply today on concerns over consumer confidence and indications that show that the economy is stalling in China. China has been a leading market in this recovery and its bull market has helped the price of industrial metals and base metals.
Over the past few weeks I have highlighted that the market has given signs of a major deflationary crisis and economic slowdown. Today these signs became apparent with a significant sell off on high volume and a break into new lows for the S&P 500 and Nasdaq.
Today major institutions sold equities and sought shelter in treasuries and the dollar. Gold and silver both sold off early in the day but gold fought back and closed up and silver was able to recoup some of its losses. Gold and silver are still in a uptrend and above both the 50 day and 200 day moving average. Gold and silver miners also appear to be close to a major breakout.
The S&P 500 and Nasdaq had a significant break of previous lows on high volume. I alerted readers several days ago to buy inverse etf’s when the markets failed to regain the 50 day moving average for the second time. Many times after this second failure the market has a major breakdown. The time to short is when the averages fail at the 50 day not when it makes new lows as many less experienced traders are doing now.
Many traders are fearing that silver and gold may be a top here as they are comparing 2010 to 2008. I understand that fear and am monitoring that situation closely. I have received a lot of requests to comment on the situation.
At the moment I believe that we will not see a correction in precious metals like we saw in 2008. There has been a global concerted effort for governments to devalue currency and assist the economy with unprecedented spending and cheap dollars. The Euro is on the verge of a collapse and there are major sovereign debt issues that is spreading to more countries. I do not believe the U.S. government will be immune from those debt issues. The United States has high unemployment, weak consumer confidence, a huge amount of debt and poor GDP growth.
Gold miners appear to be on the verge of a major breakout into new pre credit crisis highs.
The chart above shows the relative strength of the gold miner etf to the S&P 500. A break to 51 on that chart would show great relative strength to the market. During this market downturn since May 6th miners and bullion have shown good relative strength which does not make me conclude that we are having a repeat of 2008.
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In Market Analysis on June 25, 2010 at 2:41 pm
Major mining indexes appear to be approaching a major breakout point fueled by the sweeping overhaul and takeover of banks. Banks have been under pressure from a continuing recession, high unemployment, a weak housing market and now more government oversight and audits. This does not help a recovery process for housing or financials. These are two industries where I need to see strength to believe in a real economic recovery.
Financial are under a lot of pressure. In the past 6 months, the financials have had 7 major weekly distributions verse 1 major accumulation which leads me to believe that this bearish crossover could lead to a major financial decline. Notice how the financials when it broke into new 52 week highs it was on low volume which means it didn’t have the momentum to really hold those highs. This is also evidenced by the declining momentum indicators. The financials had 5 major weekly sell off in the 8 weeks of April and May. The bearish crossover pattern plus the failure of the financials to hold the 200 day leads me to be long term bearish.
On the other hand Silver, Gold and Miners all appear to be reaching new breakout points.
Silver is very close to a 3 year breakout and I would not be surprised if over the next couple of weeks silver makes a move into new 36 month highs. If this move breaks $19 on silver, which is a major resistance level my target would move to $30 an ounce. Silver has shown increasing demand as it has found support at the rising trendline support and is at the verge of a major breakout.
The connection between the financials and silver is showing that more investors are moving away from investment vehicles which are exposed to debt, government regulation and weak economic growth. Investors want their assets in real money which is silver and gold. Keep an eye on $19 silver and a breakdown of XLF past $14.
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In Market Analysis on June 22, 2010 at 8:44 pm
The United States is facing a crisis of a rising dollar and a recession where basic industries over the past several months have experienced a nasty decline. This condition is a concern for policy makers as the federal stimulus appears to be wearing off. The economy seems to be slowing and cash, treasuries, silver and gold appear to be the area of strength.
One bellweather blue chip Alcoa is down over 25% the past 6 months.
In January after breaking into new 52 week highs Alcoa experienced a nasty reversal and has been in a 6 month downtrend. Meanwhile, the U.S. dollar is rallying as well as gold and silver. This is a major deflationary sign.
Yesterday’s move to disconnect the yuan to the dollar was a mutual decision for both governments to stem the global deflationary crisis by devaluing the dollar. The U.S. government has done everything they can to prevent a deflation by keeping interest rates at all time lows, buying back treasuries to keep mortgage rates low and a massive federal stimulus. Now this latest move is another attempt to use China to decouple its currency, devaluing the dollar.
Although yesterday’s attempt appeared to be bullish as every media outlet believed that this would help global economic growth and the U.S. Economy, the market showed that government intervention can not subdue nature’s law of supply and demand.
The reality is years of bad debt and easy money need to work its way through the system. Eventually the markets and forces of supply and demand will reach equilibrium. Now investors are protecting their wealth by moving into gold and silver and I have done the same.
Economically sensitive equities and basic materials need to be avoided. It is an important time to preserve wealth by being in gold and silver during this next downturn.
Gold appears to be making a very bullish crossover pattern on its relative strength chart compared to the S&P 500 index. Each time it has made this pattern over the past 3 years with both moving averages pointing upwards has been very lucrative to gold investors.
The transportation averages had a nasty reversal today to further prove that movement of goods is under pressure. Transportation is the clue to see if economic recovery is continuing. Today’s reversal is evidence of weakness and further proof that businesses and individuals are holding onto their cash.
Today showed strong resistance and failure at the 50 day. This is an extremely bearish pattern. We must be defensive.
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In Market Analysis on June 21, 2010 at 6:31 pm
There are key points and days to consider heavily when following markets and deciding which direction to play. If you study charts you are able to see patterns that repeat themselves over and over again.
One key shorting opportunity that I have seen before major market declines is the second failure of the 50 day moving average. Today’s nasty reversal where it closed down after being up for most of the day fits this criteria especially when it coincides with the failure of the 50 day moving average.
The volume was above average and this leads me to once again be bearish on the market. Now is the time to short or buy inverse etf’s such as REW or SH to protect against another decline. It is not wise to be long this market. Trailing stops should be monitored closely. Now is the time to short not when the market reaches new lows.
Gold mining stocks will be monitored closely.
Stay tuned.
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In Market Analysis on June 15, 2010 at 8:20 pm
Today the major indices made an important move to regain the 200 day moving average and clear resistance on higher volume. After making 2 previous attempts to cross the 200 day the markets are appearing to have made a successful double bottom. The double bottom pattern would be more confirmed if the volume on today’s breakout was above average.
Nevertheless, it was higher than the previous day which means the bulls have won the short term battle and are in charge.
Also the Dow made a double top breakout on the point and figure and a break of a trend line.
Many leading stocks are showing bearish signal reversals on today’s rally which means it may have legs especially aerospace and defense stocks as the Middle Eastern Situation between Iran and Israel intensifies. Any short positions need to be covered and additional buy recommendations will be coming shortly.
The rally was good for gold today and I expect a breakout to new highs shortly. Gold is making an ascending triangle and I expect a breakout to new highs in the short term. $122.50 would be the next breakout with a measured move expected to $137.5.
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In Market Analysis on June 15, 2010 at 12:39 am
In baseball if you swing and miss three times then you are out. On a chart if you see three failed attempts to break resistance…get out or short.
Each time the SP5oo tries to regain the 200 day moving average it fails and it is immediately hit with selling. Sellers are in control and the market is still in correction mode.
Today Moody’s downgraded Greece’s debt which caused the market to give back early leads. The chart shows a picture of a move up to the 200 day on low volume. This means there is very little buying going on. In order for me to gain confidence in the markets I need to see a break through major resistance levels with conviction and that moment is not apparent yet.
Quite contrary three failed attempts to regain major support has failed. This causes me great concern because in a bull market the 200 day acts as support. In this case it is acting as resistance, which is typical of bear markets..buyers beware!
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In Market Analysis on June 11, 2010 at 1:13 pm
On the front page of all the media outlets is the question if gold is in a bubble. I ride bubbles and look for beginning signs of bubbles. Bubbles are irrational, but there is an old saying that markets are irrational a lot longer than one can stay solvent.
I believe gold is nowhere near a bubble top and believe now is the time to profit on the next major asset class ready to run through finding the strongest mining stocks in the sector. I use relative strength to find those companies.
Gold is in a classic cup and handle pattern. The cup and handle pattern has historically led to major market moves.
You can see by the graph the major breakout from the six month saucer on excellent volume. Notice how the volume dries up on the handle. Now I expect a major breakout and a run to $136 on GLD or $1375 an ounce.
Compared to other bubbles gold appears flat.
This a chart of the oil index verse the gold and silver index. Notice the run in oil before the credit collapse. This run lasted almost 5 years before it topped. Meanwhile for the past 15 years the XAU has been relatively flat and yet it has had a nice run we have not seen the run up like other asset class bubbles.
I believe there are signs that we may be moving into a peak gold area and would not be surprised if there is a global rush to gold as investors lose faith in fiat currencies.
The recent collapse of the euro only preludes what will eventually happen with the dollar and treasuries. Now many people have run from the Euro to dollars, but I believe that is temporary. Now is the time, before the masses rush in, to buy gold and specifically the strongest mining shares which I highlight here. This is not the time to be bottom fishing other markets. I believe to stick to strength. This chart above gives me the confidence to know that we have not entered bubble territory yet.
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In Market Analysis on June 8, 2010 at 8:40 am
On May 28th I wrote to subscribers to monitor the Dow Jones Transportation Average for failure at the 50 day or a break below the 200 day moving average. If any of these two signals occur then this will confirm we are changing trends and will be followed by a bear market where we could have a major retracement of 2009’s impressive rally.
The Dow Jones Transportation Average failed at the 20 day and yesterday broke the 200 day with strong downside volume. The bears are in charge and I hope all subscribers are in defensive mode with inverse etf’s and gold and silver stocks.
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In Market Analysis on June 1, 2010 at 9:11 pm
The failure to regain the 200 day moving average and the market breadth is very negative. Indicators remain very sold but the overall bearish breadth and the breakdown of many indices I use make me bearish.
I am opening positions in short inverse etf’s such as DXD and SDS to protect my equity positions. I have been stopped out of everything except TGB, GMO, UXG and NGD.
Gold is very strong right now, but I expect silver to follow soon. With all the debt the USA is getting itself into I can not buy treasuries or the dollar.
The chart I want to highlight is the investment grade bonds etf. These are the top most secure investment instruments and when I begin to see a major trend change that is telling me smart money is extremely cautious over sovereign debt and the overall global economy. It also tells me the market is concerned over debt downgrades from major companies.
The investment grade bond etf LQD which invests in the most secure debt of major blue chip companies has finally broken below the 200 day moving average and long term trend support. Momentum is waning and price volume action is poor.
Markets are showing continued weakness and an inability to rally off these extremely oversold levels. There are signs of a major market downturn from the global credit concerns.
I recommend holding good gold and silver investments and to protect now using inverse etf’s such as SDS the short SP500 and DXD Short Dow.
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In Market Analysis on June 12, 2009 at 11:22 am
As we can clearly see that the dollar is having a bear rally. The moving averages and the trendline is acting as resistance. The dollar opened up today and is testing the 20 day moving average which is the short term “magnet” for the stock.
The GDX has come back right where I thought it would come back to which was the previous resistance that is now its support. Please see my archived analysis of GDX. This teaches us not to chase after any positions as there will be second chances which is now.
Looking at the individual commodity stocks, it seems as though they are ready for another move. Last night I sent out a free bulletin of two recommendations that have the possibility to make huge gains.
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In Market Analysis on June 11, 2009 at 7:46 pm
The spread of the price of gold to oil is extreme and there seems to be some interesting opportunities in the energy exploration and energy services area. Recently a lot of money has been flowing into both of these areas and the trends are changing. Projects that would not work at $40 a barrel would certainly proceed at $80. I would want to find companies that offer leverage to the price of oil. In one area there have recently been major mergers. Some of the smaller players have the opportunity to be taken over at huge premiums.
One area that is still quite undervalued and out of the headlines is uranium. Uranium powers 16% of the world’s energy supply and there are many nuclear power plants being built across the world and many more filing applications. Power plant projects are costly. There is bipartisan support in the US for nuclear plants due to reduction of carbon emissions.
I have great opportunities in both areas. Stay tuned to my free newsletter to hear of these two opportunities.
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In Market Analysis on June 10, 2009 at 8:17 pm
I posted a few days ago that DIA is approaching resistance at 9000 and this rise has been on light volume. Some people have said that is because of summer where trading decreases. However, there is a lot of money sitting on the sidelines. If it was a true beginning of a bull then it would appear in the volume.
Therefore, I have been skeptical of this rise and I am very skeptical of this market after three days of increasing selling. I expect a sell off.
This begs the question what about our stock positions in TGB, NGD, GMO, and UXG. We need to be aware of the overall U.S. Market, however there still is strength in emerging markets so I am not prepared to sell my positions in these companies. Stay tuned and I will notify if we have to take our trailing stops.
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In Market Analysis on June 9, 2009 at 7:17 pm
On a previous update I mentioned not to get too excited by buying the miners when they are overextended. Look for strength as the mining index will come back to support which was previous resistance at 37.50. Notice the upward sloping trendline that will act as support as well. Coincidentally it appears as the 20 day on the weekly chart is very close to this trendline.
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In Market Analysis on June 9, 2009 at 8:10 am
Thompson Creek came out with a news item today which states that it will increase production of molybdenum due to the improved market conditions. This is what we saw here a few months ago in the charts of Thompson Creek and General Moly. We believe that this is an opportune time to get into commodities as prices have not fully reflected market conditions. We will be issuing recommendations shortly on a few more trades. Stay tuned.
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In Market Analysis on June 8, 2009 at 8:53 am
Major resistance is being approached for the DOW. Notice the trendline and resistance where it failed three times in December of 08. Overhead resistance and lack of volume on the recent rally tells us to be careful and to be ready for a shorting opportunity. Stay Tuned! Make sure you have trailing stops set up.
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In Market Analysis on June 8, 2009 at 8:36 am
China is buying gold like crazy!
http://www.chinamining.org/News/2009-06-08/1244423563d25443.html
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In Market Analysis on June 7, 2009 at 8:40 pm
Notice the thick blue line and how FXI (25 largest and most liquid China Stocks) crosses that trendline on the point and figure chart. This shows us the strength of the most leading emerging market and how this market had impacted this rally for the past three months since the March bottom.
It is clear that China is buying up natural resources and stimulating their economy. The real estate market and construction industries in China are heating up. They are building power plants, mines and roads.
There are a few signs that there might be a slight short term pullback the next few weeks from the non confirmation in relative strength and low volume. However, this is the time to get into companies that the Chinese need which have huge amounts of natural resources.
The secret is out China is on the search for precious metals and natural resources. These next couple of days will give second chances to get into companies that have those assets.
We know what the Chinese need and are able tom make huge gains in finding the companies that have the greatest leverage to these necessities.
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In Market Analysis on June 4, 2009 at 11:51 pm
We wanted to show a 2 year chart on GDX gold miner etf. There is major resistance at the $45 dollar area which needs to be broken. In order to do that I would not be surprised of a short term correction to the $39 area. This is where I would wait so that the GDX comes off its overbought status and prepare for the next leg up.
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In Market Analysis on June 4, 2009 at 10:25 am
How hypocritical! Bernanke came out yesterday requesting Congress to curb budget deficits after increasing the money supply exponentially. Use this time period to look for additional opportunities to get into the best commodity opportunities. NGD, TGB, GMO and UXG are great low priced positions that will move higher in an inflationary environment.
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In Market Analysis on June 3, 2009 at 8:45 am
Dollar is exremely oversold and will bounce. Mining stocks are overbought. Place trailing stop losses to lock in gains. Be careful not to take new positions if stock is overextended. Wait for a pullback to get into positions. We believe we will have second buypoints for our position as a shakeout of weak hands will take place now. We will inform when our stops are hit. We will not be giving out new positions until we find more opportune buying points.
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In Market Analysis, Stock Movers on June 2, 2009 at 9:57 pm
Let’s review our picks so far.
1)
TGB (Taseko)
Bought at 1.60
Now it is 1.91
19% Gain Recommended on 5/26/09
2)
NGD (New Gold)
Bought at 2.50
Now it is 3.04
22% Gain Recommended on 5/28/09
3)
GMO (General Moly)
Bought at 2.00
Now it is 2.68
34% Gain Recommended on 5/28/09
5 trading days goldstocktrades subscribers made 25% on there money.
We are still long on these positions but we keep trailing stops and we will post as soon as those sell signals are triggered. Please keep checking in.
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In Market Analysis on June 1, 2009 at 10:11 pm
This appears to be an inverted head and shoulders pattern which means that a break to the upside is highly probable. Look for a breakout of the previous top with good volume.
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In Market Analysis on June 1, 2009 at 8:42 pm
Since the March low the Nasdaq rally has lacked volume and appeared to make a rising wedge. After a breakout to the downside on low volume the Nasdaq appeared to make a rectangle sideways pattern. This battle between buyers and sellers was resolved today to the upside. Today the Nasdaq broke out of resistance so buyers are in control where bad news is shrugged off and any good economic news sends stocks soaring. At the moment we need to stay long and continue looking for the best trading opportunities.
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In Market Analysis on May 31, 2009 at 9:54 pm
The S&P 500 remains above the 20 and 50 day moving average. The S&P has moved sideways making a base after breaking out to the downside of a rising wedge pattern. This rally has been on low volume. So this rise has been on the back of other factors such as a seriously declining dollar, a bear market in treasuries and a major rally in the emerging markets.
If you remember when the stock market crashed last year everyone was running into treasuries and the dollar. Now the opposite is the case people are running out of treasuries and cash. The stock markets have rallied and companies with real commodity assets are soaring. It seems as though the opinion that a deflation will precede inflation has been confirmed.
The dollar was hit hard on Friday leading to a huge rally in gold mining stocks and basic materials. 
As you can see the rally is impressive, however it is extended. Investors need to be cautious in chasing after this sector.
Last week I showed the chart of TBT which is the short etf fund and I mentioned not to get to excited and wait for a pullback. That pullback has come and from the high volume sell off it seems as though the pull back could take longer as it is extremely overbought. I would wait until it approaches the 50 day moving average before taking new positions.
The rally in China is strong and hope has come back that the worst is over which has caused a major upturn in commodity industrial stocks. As you can see the I Shares Hong Kong is much more impressive than the US indices. Other emerging markets such as Brazil and India are also outperforming.
That’s it for this week.
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In Market Analysis on May 28, 2009 at 8:57 am
“Our nation’s system of retirement security is imperiled, headed for a serious train wreck. That wreck is not merely waiting to happen; we are running on a dangerous track that is leading directly to a serious crash that will disable major parts of our retirement system.”
– John Bogle, Feb. 24, 2009
Many people we come across tell me they are invested in the market with a financial adviser and they don’t even look at what they are invested in are how they are invested. They place their hard earned money in load mutual funds where they pay huge fees in ignorant bliss.
So many have lost their retirement or as Madoff has shown these so called advisors are emperors with no clothes. Buy and hold investors have been destroyed or in some cases duped.
In this blog we highlight specific companies that are breaking out using technical analysis. Technical analysis gives one of the tools to know which direction the market is going. We look at price and volume. We also look at key fundamentals of a company that has the ability to grow. Staying on the right side of the trend and managing risk is crucial to make good returns and have a retirement.
Finding small companies that are about to grow exponentially gives one the opportunity to make huge gains. Please follow along as we recommend low priced companies that are about to explode higher. I’m sure you won’t regret it. We do our research, we take chances, and we admit when a trade or stock has went against us and we preserve capital. Straight talk…no double talk from other so called financial experts.
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In Market Analysis on May 28, 2009 at 8:11 am
This chart is showing the short long term treasury ETF. What TBT is showing is that higher long term interest rates and risk of inflation is here. Look at the breakout on May 7th and the beautiful retest at the 20 day moving average to give a secondary buypoint. Interest rates will be rising and prices of treasuries will continue to decline. If you want to follow this trade look for a pullback to the 20 day moving average or around $53.
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In Market Analysis on May 27, 2009 at 6:09 pm
The Nasdaq remains above its moving averages despite have light volume to support it. It is concerning because Nasdaq and Dow Jones appears to making a descending triangle pattern after a rising wedge formation. A break on volume at this point would cause the indexes to retest the March low. It would be nice to see some volume on a break down to 82.25 on the DJIA Diamonds and 32.75 on the Nasdaq to confirm the descending triangle. The lack of volume on this run up from March is quite concerning.
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In Market Analysis on May 27, 2009 at 2:51 pm
Investors are nervous of the government sales of treasuries which is causing the late afternoon selloff. The oversupply of treasuries and Fed’s balance sheet is a concern we should all have. How long can the government be bailing out and spending like there is no tomorrow?
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In Market Analysis on May 27, 2009 at 8:12 am
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In Market Analysis on May 26, 2009 at 11:19 pm
Taseko is on the verge of a major breakout. Great project…there is a little opposition to the Prosperity mine but that is minimal to the economic benefits to the region. This is a great managed company. Notice it closed on higher volume then the previous day even though it was below average volume. Look for volume through 1.60.
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In Market Analysis on May 26, 2009 at 6:05 pm
The Dow was up and regained to stay above the 20 day moving average even though volume remains quite light. It does look that the market is rounding and price volume action is poor. Be careful. 
Look at GLD. Gold closed near the high of the day after opening up lower. Price volume action is good as it approaches all time highs. Look for GLD to pull back to 20 day before breaking out into new high territory.
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In Market Analysis on May 26, 2009 at 3:07 pm
We are broke…dollar has fallen significantly as well as long term treasuries. Look at the chart of the TLT versus GLD. I believe this trend will continue and now with a lower price of oil and labor select mining stocks will make nice returns.
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In Market Analysis on May 26, 2009 at 9:23 am
Symmetrical Triangle
The copper chart above shows a potential breakout which could lead copper significantly higher. The dollar’s chart as well as the long term treasury chart is extremely bearish this is due to two major reasons the excessive debt the USA is getting itself into and the fear that it will not pay back its debts. Also the copper chart is showing that the global economy is improving which is also bearish for cash as institutions want to invest that cash. There is a huge amount of cash on the sidelines about to be put into key stocks that will protect against inflation. Taseko (TGB) already has a great copper mine that will only be more profitable as copper rises and they are at the ground floor of the major Prosperity project in British Columbia which is one of Canada’s leading undeveloped gold-copper mines. This is a great way to be leveraged to the price of gold and copper.
I want you to take a look at this chart of the dollar and the long term treasuries. They are both very bearish charts. The dollar has a head and shoulder reversal pattern. In December there was heavy institutional selling followed by a retest of the high on low volume. Each time it has tried to retest its 50 day moving average it fails. 200 day in danger of turning negative meaning that inflation is on its way. Both treasuries and dollar appear to be very bearish on the GDX which tracks mining stocks is giving a very bullish picture as we just had a breakout. I would wait for GDX to pull back to its 20 day moving average or the 38.50 are before buying.
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Gold Breaking Out Vs. Euro, Relative Strength Chart Shows Trend Change
In Market Analysis on August 12, 2010 at 3:04 amThe trade deficit widened unexpectedly this month after the dollar reached extremely oversold levels, which was quite surprising to Wall Street. Usually, a weaker dollar should lead to an increase of exports of U.S. goods; however, the exact opposite occurred. This further signifies the global economic slow down despite record government stimulus, a devalued dollar and artificially induced low interest rates. The market and the employment situation are no better off now than they were previously.
Despite Washington’s attempts to prevent a depression through spending, investors are beginning to lose hope in what the Fed and Congress are doing to prevent a collapse of the markets into new lows. Yesterday, as predicted, the House created a $26 billion job bill that will supposedly prevent government layoffs and expand the job market for government workers. Washington is trying to alleviate high unemployment by creating more government jobs. That is not real job creation. Incidentally, the previous employment numbers were mildly inflated due to the recent influx of temporary Census workers and did not accurately reflect the true numbers of unemployed Americans.
Investors believe that sustainable job creation is through small business growth. The markets, as well as the American people are looking for leaders who will cut government spending and institute tax cuts for small business owners. Entrepreneurs who are trying to innovate and meet consumers’ demands in a struggling economy should be supported with meaningful tax breaks. This spurs authentic growth and innovation. I expect the market and the American People to vote in candidates who are committed to these principles. The people are losing their faith in the current leadership, as evidenced by President Obama’s approval ratings dropping to their lowest point in his entire tenure.
The Fed has committed to buying long term treasuries, which would artificially keep interest rates low. They are desperate to get capital flowing again, but it comes at a cost. Eventually, markets move back to their former equilibrium and long term trends. If you push down a spring as far as it goes, it eventually snaps back harder than before and reverberates. We may not see it for a while, but eventually long term treasuries will crash. Right now investors are flocking to treasuries for security and safety. However, just as the market is losing faith in the Fed’s handle on the economic situation, bond holders will ultimately lose faith in government bonds. We may see a drop in treasury prices along with continued high interest rates over the next several years and possibly even decades as our children and grandchildren face the burden of credit downgrades.
My fear of a devalued currency and lack of confidence in Obama’s handling of the economic situation are the reasons I am bullish on specific mining exploration stocks that are converting their strong cash positions into high grade copper, silver and gold resources. I have been following this sector for over nine years. I gather that during the next five to ten years, precious metals will see a lot of growth as investors seek hard money and hard assets.
Today’s major collapse in the equity market was significant. Last week, I mentioned that the dollar was extremely oversold and that the Euro and U.S. equities were about to correct considerably. Today we are seeing the beginning of a new downwards trend in global equities and a flight to safety. Investors are worried that efforts from Washington will do nothing to prevent a slowing economy and a huge trade deficit.
Yesterday’s weakness in gold was only relative to the dollar and U.S. treasuries. Compared with the Euro, there are technical signs of a major move upward in the price of gold. We could see a resumption of the market patterns that we saw in April and May when gold and the dollar rallied together as investors were seeking shelter from government defaults and sovereign debt crises. The relative strength trend of gold versus the Euro is an important indicator of the true price action of gold. Right now, it is showing signs of a bullish move higher after finding long-term support.
Although Gold was down slightly to the dollar it gapped up today versus the Euro after reaching an important 38.2% Fibbonaci Retracement and Long Term Trend Support. MACD supports that Momentum has shifted. RSI Crossed 50 today also a bullish sign.
Disclosure: Long Gold and Silver Mining Stocks