Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Mining Stocks XAU, GDX Finally Resume Up Trend

Commodities / Gold & Silver Stocks Dec 15, 2010 - 01:32 PM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleIn our previous essay we've covered the situation on the gold market, however since rallies (and declines) often correspond to the rallies (and declines) in the mining stocks, this time we will focus on the latter and check if we can spot any divergences or confirmations.

Let's begin with looking at the very-long-term XAU Index (proxy for gold- and silver mining stocks) chart (charts courtesy of http://stockcharts.com)


The above chart shows a decisive move above previous highs, which means that the uptrend has finally been resumed. The post-breakout correction is barely visible so but a move down to the 210 level would be both normal and healthy at this time. This breather could very well precede yet another rally and unless this 210 level does not hold, the medium-term sentiment for the mining stocks remains bullish.

Let's take a look at the GDX chart for more short-term details

The GDX ETF chart shows a pause in the recent decline. In our recent Market Alert we mentioned that we have been looking for a low volume move to the upside. It seemed as though this was a good possibility at the time and would provide Subscribers with an excellent opportunity to short the market. No upturn has been seen however (the 0.38% move up is more of a pause) and therefore, implications of the volume analysis are not meaningful. The chance to short did not arise yet.

Support levels, which will likely hold on the downside, are at 60 and the 57-58 range. Either of these levels could become the next local bottom for the GDX ETF and a rally from there is quite possible.

Let's not forget that there's more to the mining stock sector than just the big senior gold and silver producing companies - there are also juniors. In the previous essay, we've mentioned volume spikes for the GDX:SPY ratio and their implications for the short term.

The volume spikes are significant not only in the relative performance of the senior sector, but that is the case also with juniors. 

The GDXJ:SPY is a ratio between a proxy for the juniors and a proxy for the general stock market.

The GDXJ ETF is the junior counterpart of the well-known GDX ETF, and its performance relative to other stocks quantifies the part of the performance of junior sector (small-cap, small-volume, early-stage companies) that can be attributed to individual investors' perception of the market.

Most institutional investors are not involved in this market due to company size, monetary constraints, and other regulations. The buying pressures, therefore, lie mostly on individual investors who are naturally more emotional most of the time (!). It is likely that this ratio is very much an emotional barometer of individual gold and silver investors.

Since the general stock market drives the prices of these small cap companies, the ratio is calculated by dividing by the SPY. This isolates the influences of other stocks. If the ratio rises, the indication is that investor's sentiment is high. This, in turn, allows us to analyze moments when the optimism is excessive in order to take the opposite position as it means that the current move will soon end. In this case, it means that everyone, who wanted to enter the market, is already in it and there is nobody left to support further rallies - new capital needs to enter the market if the price was to rise.

Yes, the GDXJ:SPY ratio take the individual investors into account only, and the gold market is driven by many other entities, but - once you take into account the fact that the public enters the market mostly at the end of a given move - it occurs that it doesn't really matter.

While the sentiment is not extremely high in absolute terms (we don't see much gold-related headlines in the major financial portals), on a relative basis we see an upswing confirmed by volume. This could be viewed as a bearish factor.

Namely, volume levels were extremely high last week. This is important to note because in the past, high volume levels such as this have been an indication that downtrends have not yet completed.

Speaking of juniors, we would like to take this opportunity to comment on this sector in general.

Our SP Junior Long-Term Indicator has been moving slowly higher since July 6th (except a single day downswing which was so insignificant that we specifically advised to ignore it). As of today we did not see a sell signal (suggesting switching from junior stocks to senior stocks) in the form of a decline in the indicator. The above indicator suggests switching from big senior gold/silver producers to juniors if it is below the lower dashed line and starts to rise, and it suggests switching from juniors to seniors if it is above the upper dashed line and starts to decline. It was designed to catch the major moves, not the short-term ones. Please note that juniors (GDXJ ETF) moved over 60% higher since July 6th, while seniors (here: GDX ETF) moved up by only 25% since that time. Consequently, this indicator alone generated substantial value for those who took it into account while making their investment-related decisions.

Right now it is above the upper dashed line, but it did not start to decline visibly. Consequently, holding juniors still appears a good way to go. The situation could change in case of a plunge on the general stock market - as you may see in the correlation matrix, main stock indices are one of the main drivers of the junior prices.

Summing up, the ratios point to an overall weakness at this time in the mining stocks and consequently in gold and silver. This confirms our analysis from the previous essay - namely, that the situation remains mixed, with a slight bearish bias.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2019 http://www.MarketOracle.co.uk - 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