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Posts Tagged ‘best silver stocks 2010’

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U.S. Economy Breaking Down, Attempts To Prevent Deflation Failing

In Market Analysis on June 22, 2010 at 8:44 pm

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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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Is Gold In A Bubble? No Way! Classic Cup and Handle Pattern

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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Buy U.S. Gold (UXG) Price Moving Higher After Cup and Handle Breakout

In Stock Movers on June 10, 2010 at 4:22 pm

The cup and handle breakout is a classic pattern which stock market traders search for constantly. A cup and handle pattern means that the stock has made a consolidation where many of the weaker holders sell their shares. Then as the stock breaks into new highs a handle is formed. It is formed because many investors who bought at the previous high are now trying to get back the capital that was initially invested at the previous high. Then a handle is formed. A handle should move sideways or slightly down so investors who bought at the previous high can get back their capital. Once this handle is completed the stock has very little selling pressure and buyers now gain control and push the stock into new highs. Many times the percentage gains are impressive.

Sometimes a stock forms a triangular pennant after a breakout as in the case of U.S. Gold (UXG). These triangular pattern in a handle are bullish and provide investors an opportunity to get in before a major run.

My ideal buy point is after the breakout of the cup when the handle pulls back to key support.  Right now is a good opportunity to add shares before a breakout at $4.31.

There are four upcoming events that could make this stock move.

1) 20 drilled hole results from El Gallo in 2 weeks.

2) El Gallo Initial Resource Estimate in 4 weeks.

3)Additional Results From Regional Exploration in 6 weeks.

4)El Gallo Economic Assessment by year end.

I am excited by the results coming out in mid July from the regional exploration.  UXG invested a lot into Mexico this year knowing that this land package could contain a massive amount of silver.  I am excited for the next few weeks both from a technical and fundamental perspective.