Best of the Week
Most Popular
1.RED ALERT: Paris Terror Attacks - What to Expect Next - STRATFOR
2.Paris Terror Attacks, Death Pangs of a Dying Religion, and Impact on BrExit EU Referendum - Nadeem_Walayat
3.Paris Terror Attacks, Islamic State Attempting to Spark Civil War in France - Nadeem_Walayat
4.Three Shocking Charts That Prove Gold Price Rally Is Coming - Sean Brodrick
5.Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - Mike_Shedlock
6.Africa Population Explosion - Why Europe's Migrant Crisis is Going to Get A Lot Worse - Video - Nadeem_Walayat
7.Gold Mining Stocks May Be The Buy Of The Century - Jeff_Berwick
8.Grandmaster Putin Beats Uncle Sam at His Own Game - Mike_Whitney
9.BRICS? No, CRISIS - Raymond_Matison
10.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
Last 5 days
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15
Investors Watch Out For The Auto Industry… - 24th Nov 15
BEA Revises 3rd Quarter 2015 US GDP Economic Growth Upward to 2.07% - 24th Nov 15
Stock Market Supports Are Being Broken - 24th Nov 15
Is Gold Price on the Verge of a Breakout? - 24th Nov 15
Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - 24th Nov 15
Silver Price, COT, US Dollar Updates and More - 24th Nov 15
UK Regional House Prices Analysis - Video - 23rd Nov 15
Crude Oil Swinging For The Fences - A 20 to 1 Option Play - 23rd Nov 15
US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - 23rd Nov 15
UK Regional House Prices, Cheapest and Most Expensive Property Markets - 23rd Nov 15
Stock Market Rally Losing Momentum? - 23rd Nov 15
Will Gold Price Drop Below $1000 Soon? - 23rd Nov 15
Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - 23rd Nov 15
Limits to Economic Growth - Challenge and Choices - 22nd Nov 15
Long Dollar Trade and Current Copper Price Below Cost of Production - 22nd Nov 15
UK Housing Market House Prices Affordability Crisis - Video - 21st Nov 15
The Fed Has Set the Stage for a Stock Market Crash - 21st Nov 15
Stock Market Primary V Wave Continues - 21st Nov 15
Gold And Silver - Value Of Knowing The Trend - 21st Nov 15
UK Footsie Bulls Set To Foot The Bill - 21st Nov 15
UK Housing Market Affordability, House Prices Momentum and Trend Forecast - 21st Nov 15
GDX Gold Miners’ Strong Q3 Results - 20th Nov 15
End of Schengen, Stock Market’s Technical Strength Grows - 20th Nov 15
Justice for All and The Curious Case of Zambia - 20th Nov 15
Paris, Sharm el-Sheikh, and the Resurrection of Old Europe - 20th Nov 15
Silver Prices and The Management of Perception - 20th Nov 15
Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman' - 20th Nov 15
Waiting for Goldot Again - 20th Nov 15
Michael Curran Goes Down-Market Shopping for Gold Stock Winners - 20th Nov 15
Why Isn’t This Incredibly Bearish Bond Market Development Making the News? - 19th Nov 15
SPX Appears to have Stopped its Rally - 19th Nov 15
The Great Fall Of China Started At Least 4 Years Ago - 19th Nov 15
Using Elliott Waves: As Simple As A-B-C - 19th Nov 15
Has Deflation Been Ddefeated? - 19th Nov 15
Dow Jones Stock Market Index is Not Going to Crash - 19th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

Gold and Silver Marketwatch- This Time It's For Real...

Commodities / Gold & Silver Stocks Jul 22, 2007 - 02:04 PM GMT

By: Clive_Maund

Commodities The powerful rally by large Precious Metals (PM) stocks over the past couple of weeks is believed to be the start of a "breakout drive" that will vault the sector indices out of the large holding patterns that they have been stuck in for past 18 months, for these patterns date back further than the actual highs to the start of last year, ushering in a period of rapid and substantial advance.

There are two crucially important points to appreciate at this juncture. The first is that PM stocks, being the province of speculators much more than the PMs themselves, tend to lead the latter, so that the current vigorous advance in the big PM stocks can be expected to translate into strong rises in gold and silver soon, which are still way below their highs of last year. The second point is that the big PM stocks tend to take the lead and perform best early in a PM sector uptrend, while the small exploration stocks behave like the sediment at the bottom of a river - it takes quite a current to get them stirred up - and so they tend to perform best towards the end of a sector uptrend when the uptrend has been underway for sufficient time to attract increasing public attention.

This is why the largest stocks are performing really well at this juncture, which is made obvious by placing the charts for the HUI and XAU indices one beneath the other - the HUI index is comprised of lower cap stocks than the XAU. When we do this we see immediately that although the HUI index has not made a clear breakout above its key resistance level, it can be expected to do so shortly, because the XAU index has staged a clear breakout.

We had turned bullish on the sector earlier this month because of the substantial improvement in the COT charts for gold and silver, and because of the strong evidence of accumulation observed in the individual charts of large PM stocks, which is why a raft of large PM stocks have been recommended on the site over the past week or so. Both of these crucial factors have implications far beyond the rise we have witnessed thus far - A major uptrend is believed to have begun that is still in its infancy - and before its done it can be expected to take the sector indices - and most PM stocks way, way beyond the highs of last year.

For sure a short-term overbought condition has now developed that may lead to a reaction, and we will have to contend with various reactions as the uptrend progresses, but these reactions should for the most part be minor and short-lived, thus if the sector reacts next week the opportunity should be seized to complete desired purchases at better prices.

While it is interesting to attempt to figure out the fundamental reasons why gold and silver should enter a period of strong advance right now, and possible reasons are set out in a plethora of articles by other writers, technically, it is not necessary to know - regardless of fundamentals the language of the market itself is pointing to an imminent strong advance in gold and silver.

One potential big reason for a powerful advance by gold and silver is the lurking possibility of a disastrous breakdown by the dollar below its crucial long-term support at 80 on its index, which it is now just above. Such a development would be expected to lead to a rapid retreat by the dollar towards 70 that would send financial shockwaves around the world. It is simply not known if the PPT, the Plunge Protection Team, has the strength in the face of the enormously powerful bearish forces at work, to prevent this happening or at least put it off for a while longer. Currently, the dollar is very oversold on a short-term basis, so it is as good a time as any for the PPT to stage a rally.

Gold and Silver are both at a critical point having risen over the past couple of weeks to contact the Dome Distribution lines drawn on their charts in the last Gold and Silver Market updates.

While a short-term reaction is possible next week because of the oversold condition of the dollar, any reaction should be minor, after which they would be expected to quickly regroup and smash through the resistance. Once they break out above their dome patterns the rate of advance is likely to accelerate. Those who acted on the last Gold and Silver Market updates would have bought gold at about $665 with a stop below the early March low and be waiting on a breakout by silver above its dome pattern, maintaining stops below $12.

"Plenty of material has been amassed for another in the series "Now try telling me that charts don't work (Part N)", using examples of past stock recs on the site, the most recent addition to the collection being the rec to take profits in Golden Chalice last Wednesday - it caved in on Friday."

By Clive Maund

© 2007 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund Archive

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History