Best of the Week
Most Popular
1.The Greatest Stock Market Crash Of Your Life Is Just Ahead… – Warns Harry Dent - GoldCore
2.Budget 2016: Borrowing, Lifetime ISA, House Prices, Economy, Syria, Brexit and Stocks - Nadeem_Walayat
3.Gold Price Intermediate Top - Clive_Maund
4.Brussels Terror Attacks, Death of the European Union, BrExit Wake up Call - Nadeem_Walayat
5.Stock Market Maybe This Time is Different? - Tony_Caldaro
6.UK House Asking Prices Break Above £300k! Housing Market Paralysis - Nadeem_Walayat
7.A Big Reason Why Silver Price Is Set To Soar - Hubert_Moolman
8.The Financial Crisis Has Just Begun; Is The American Dream Is Over? - Chris_Vermeulen
9.Gold Stocks Spring Rally - Zeal_LLC
10.GLX, GLDX, Baby Gold Bull Market Stillborn? - Rambus_Chartology
Last 7 days
Central Planners Versus Contrarian Logic - 5th May 16
Euro Desperation will achieve Self Destruction - MAP Wave Analysis - 5th May 16
Stocks Extended Their Short-Term Downtrend But Will They Continue Lower? - 5th May 16
Monetary Liquifaction, Gold And The Time Of The Vulture - 5th May 16
US 2016 Election Is a Global Risk - 5th May 16
A Few Facts About Gold That Nay-Sayers Conveniently Ignore - 5th May 16
Save the Environment and Your Retirement: Sell Tesla - 4th May 16
Silver Bullion Has Key New Player – China Replaces JP Morgan - 4th May 16
Gold Stock Picks Up Over 400%, What's Next ? - 4th May 16
U.S. Treasury Secretary Jack Lew: Puerto Rico Needs Urgent Action - 4th May 16
Technical Trading Mastery for Traders & Investors - 4th May 16
Derivatives Crisis Of Banks…Worldwide - 3rd May 16
Bank of North Dakota Soars Despite Oil Bust: A Blueprint for California? - 3rd May 16
Stock Market Technical Analysis - 3rd May 16
Central Banks Need a Higher Gold Price : Hello GATA - 3rd May 16
A Currency War Battle That Europe and Japan Can’t Afford To Lose - 3rd May 16
When the Truth is Found to be Lies, Confidence in Currency Dies - 2nd May 16
How Brexit Could Help All of Europe - 2nd May 16
US House Prices Outpacing Official Inflation Rate, Household Income - 2nd May 16
USD Still Declining... - 2nd May 16
Gold & Silver Rally Huge as Central Bankers & Analysts Flub - 2nd May 16
Stock Market Bounce Day - 2nd May 16
Stock Market Uncertainty Following Two-Month Long Rally - Will It Continue? - 2nd May 16
Stock Market Correction Underway "Upside Objective Reached" - 2nd May 16
USD, Yen and an ‘Inflation Trade’ Update - 2nd May 16
Gold Commitments of Traders and More - 1st May 16
The Magic of Gold Ratio Charts - 1st May 16
Consensus Forming: China Heading Back Into Financial Crisis - 30th Apr 16
The Next Technical Price Targets for Gold & Silver - 30th Apr 16
Stock Market Downtrend Should be Underway - 30th Apr 16
Gold And Silver – A Clarion Alarm Call For All Paper Assets - 30th Apr 16
US Economic Statistics LIES, LIES AND OMG, MORE LIES - 30th Apr 16
Stock Market Strong Elliott Wave Relationship is Developing - 29th Apr 16
Fed's Kaplan: Brexit to Factor in US June Interest Rate Decision - 29th Apr 16
Silver Miners Strong in Grim Q4 - 29th Apr 16
Is Silver a better bet than Gold in the Near Future? - 29th Apr 16
How to Use the CoT Report in Gold Investing? - 29th Apr 16
Sri Lanka is Intriguing: Areas to Consider for Value Investing - 29th Apr 16
Gold “Chart of The Decade” – Maths Suggest $10,000 Per Ounce Says Rickards - 29th Apr 16
Are We or Are We Not in a New Gold Bull Market? - 29th Apr 16
Silver: The “Five Year Plan” and the Great Leap Forward - 28th Apr 16
Michael Hudson: The Wall Street Economy Has Taken Over The Economy and Is Draining It! - 28th Apr 16
AUD/USD - Trend Reversal or Just a Bigger Pullback? - 28th Apr 16
A Gold Revaluation Could Transform Your Financial Status - Overnight - 28th Apr 16
Monetary Policies Misunderstood - 28th Apr 16
Gold Bullion vs Gold Miners - 28th Apr 16
OECD Suggests BrExit Would Cut Net Migration by 1.2 Million by 2030 - 28th Apr 16
MP Naz Shah Punished for Tweets Made During Israel's Genocide of Gaza Palestinian People - 28th Apr 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Catching a Falling Financial Knife

China Stocks Continue to Lead Financial Markets and Gold Lower

Stock-Markets / Financial Markets 2010 Jan 24, 2010 - 04:13 AM GMT

By: Douglas_V._Gnazzo

Stock-Markets

Best Financial Markets Analysis ArticleLast week's report started with China's announcement to raise reserve requirements for bank deposits. The news sent markets into a tailspin. China continued this week to lead world markets down.


Downside momentum increased, spurred on by the President's comments on more regulation for Wall Street, which, needless to say, didn't sit too well with the boys.

However, stocks were overbought and looking for an excuse to correct. They found one. The World Stock index shows that markets around the world are getting whacked. Trend line support has been broken, and the Dec. lows are coming up fast.

U.S. stocks were down about 4% for the week. Last week's report discussed that the S&P 500 was bumping up into significant resistance marked by the 50% retracement of its entire 2008 decline.

Coupled with the market's overbought readings, China's announcement to raise rates, Greece's bond debacle, and President Obama's remarks, and it was more than the market could bear.

Now the question is - is this just a short term pullback, or is this the start of something more significant? The chart below shows 4 waves descending from the 2008 highs. It's possible that a 5th wave down of a secular bear market is still lurking in the shadows. I suspect it is.

Up next is a daily chart of SPY. Overlaid on the chart are two sets of Fibonacci retracement levels: the blue lines are from the November lows up to the January highs; while the red lines are from the Sept. lows up to the Jan. highs.

Note the intersecting levels between the two sets around 109, which is the 38% retracement out of the Sept. lows, and the 50% level out of the Nov. lows.

Overlapping Fibonacci levels can mark important support areas, which have been highlighted. Prices have broken below their rising channel, and MACD is under a negative crossover - both suggesting lower prices.

Commodities

Commodities fell across the board with stocks and precious metals, leaving the dollar and bonds to carry the day. From last week's report:

Note the black dotted vertical lines that connect CCI overbought readings that drop below 100, with the beginnings of past corrections and negative MACD crossovers at the bottom of the chart. We may be at one of those junctures now. Horizontal support is noted by the yellow band near 475, with further support offered by the lower diagonal channel trend line (460).

The CCI commodity index got clobbered for the week, losing over 7%. The above still applies.

Gold

With the dollar rallying up, gold continued down, losing -3.38% for the week, so downside momentum lessened somewhat. The daily chart has price falling well below its rising flag and fast approaching the Dec. lows. If the Dec. lows are taken out, the next target is the Nov. low.

MACD is under a negative crossover, suggesting more downside yet to come. However, CCI is below -100 entering into overbought territory. Look for CCI to enter back into positive territory for a sign of an impending rally.

Gold Stocks

Last week's report mentioned that it would be hard going for the gold stocks if both physical gold and the overall stock market corrected. Unfortunately, that is exactly what occurred, and the gold stocks responded in kind, dropping over 7.65%.

The dark blue vertical lines connect oversold CCI readings to the start of past rallies; while the black dotted vertical lines connect overbought CCI readings with the start of past corrections.

Price has dropped well out of its rising price channel and below lower horizontal support at 44, suggesting the Nov. low may come under fire.

On the above GDX chart, MACD is still under a negative crossover and volume expanded on the decline. More downside is likely, although an oversold snap back rally is possible.

It is interesting to note that several times in the past the GDX broke below diagonal trend line support and still came back to rally strongly and continue its bull market ascent.

All the market did in the process was to shake the weak players out and allow the strong hands to accumulate more shares at bargain basement levels.

The above excerpt is from this week's full market wrap report (+40 pgs) available only at the Honest Money Gold & Silver Report website. Included in the full report is a detailed analysis of stock, bonds, currencies, commodities and the precious metal markets. This week's report includes a list of the biggest winners from the 2009 stock watch list. Stop by and check it out. A free trial subscription is available by emailing your request to: dvg6@comcast.net.

Good luck. Good trading. Good health, and that’s a wrap.

Come visit our website: Honest Money Gold & Silver Report
New Audio-Book Now Available - Honest Money  

Douglas V. Gnazzo
Honest Money Gold & Silver Report

About the author: Douglas V. Gnazzo writes for numerous websites and his work appears both here and abroad. Mr. Gnazzo is a listed scholar for the Foundation for the Advancement of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

Douglas V. Gnazzo © 2009 All Rights Reserved


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Jake Smith
25 Jan 10, 00:55
Thanks

I really love to read some articles that have great positive impacts on its reader and benefit by reading such article especially concerning Gold and the stock market. I admire these writers in sharing their views and or opinions that can enlighten the mind of the readers. Great Job and continue inspiring readers.


Post Comment

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

Catching a Falling Financial Knife