Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
It Feels Like Inflation - 26th May 16
Negative Interest Rates Set to Propel the Dow Jones to the Stratosphere? - 26th May 16
S&P Significant Low has Occurred – Not Likely! - 26th May 16
Statistics for Funeral Planning in UK Grave - 26th May 16
Think Beyond Oil And Gold: Interview With Mike 'Mish' Shedlock - 26th May 16
Hard Times and False Mainstream Media Narratives - 26th May 16
Will The Swiss Guarantee 75,000 CHF For Every Family? - 26th May 16
Is There A Stocks Bear Market in Progress? - 26th May 16
Billionaires Are Wrong on Gold - 26th May 16
How NOT to Invest in the Gold Market - 26th May 16
The Black Swan Spotter...Which Saw the Oil-Crash coming; now says the “Invisible Hand” will push Brent to $85 by Christmas - 26th May 16
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

General Stock Market Reinforces the Bullish Outlook for Gold Mining Stocks

Commodities / Gold & Silver Stocks Dec 10, 2011 - 05:03 AM GMT

By: Przemyslaw_Radomski

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleToday’s EU summit has been billed as the best-- perhaps the last-- opportunity to save the euro. As we publish today’s essay, we still don’t know the results, and gold, like most asset classes, will react to headlines coming out of Europe. Will “Merkozy,” (ladies first), the leaders of Germany and France, be able to pull a rabbit out of the hat and save the day? On Monday the two issued an ultimatum demanding that all 17 nations in the eurozone agree to a change in European treaties that would compel them to balance budgets or face sanctions. German officials insist that budget discipline will restore investor confidence. However, the Franco-German plan could exacerbate Europe’s fundamental problem, which is a lack of growth.


On Wednesday Germany insisted that its European partners must undertake the politically charged process of changing European Union treaties, or at the very least, accept a binding new eurozone accord. It is likely that gold will rally in the event of a positive outcome from the summit since the yellow metal has been recently trading in correlation to risk assets. If in the longer term Europeans begin to get a whiff of a eurozone breakup that would also be bullish for gold since it is likely that investors will rush to diversity their euro exposure with gold.

If you recall what we wrote in our essay on the bullish outlook for gold and silver (December 7th), you’ll notice that the crisis enters a new phase now:

It may take some time for people to figure this out, but the problem in Europe is not liquidity. The problem in Europe is sovereign debt. If we are over our heads with debt because we have spent more than we make, giving us a line of credit will not get us out of the hole. One wonders if any amount of funding support and bailouts will be enough to restore confidence as long as there are lingering doubts about the solvency of Italy, Spain and some of the other eurozone economies.

It seems that the European leaders have finally noticed that the problem is not to be swept under the rug. The question is whether they will succeed in changing the crash course the euro zone is currently on.

For whatever it is worth, a new study commissioned by the World Gold Council shows that in periods of extraordinarily economic uncertainty such as those facing investors in the eurozone, an optimal strategic allocation to gold for euro-based investors ranges from 2-3% for the most diversified and lowest risk portfolios, to between 4-9% for portfolios split 50/50 between equities and bonds, and as high as 10%, for portfolios with the majority of assets in equities. As far as our views on portfolio structure are concerned, we believe that much more of one’s capital should be dedicated to precious metals. What WGC writes about is the allocation for an investor who doesn’t really believe in sector’s bull market and wants to invest in gold/silver to reap gains from diversification. Those who had only 2% in gold in 2008 and rest in stocks are not even close to matching the returns of those who used more than half of their capital for gold and silver.

For those who have not yet purchased gold, let’s see if it’s better late than never by turning to the technical portion of our essay. We will begin the technical part of this essay with the analysis of the S&P 500 Index and then we’ll move to the mining stocks sector. We will start with the long-term chart (charts courtesy by http://stockcharts.com.)

In the long-term S&P 500 Index chart, the index moved lower this week. Although daily moves have been quite volatile, the actual decline for the week has only amounted to about 0.8%. The current index level is still above the early 2010 highs which also coincide with the 38.2% Fibonacci retracement level. This retracement is based on the decline which began in late 2007 and lasted through early 2009. At this point, since the index is still above important support levels, the short-term outlook remains bullish.

In the medium-term S&P 500 Index chart, we see a different and in our opinion even more interesting development. The current period of consolidation saw early-week moves to the upside and declines on Thursday. The index is now close to the 50-week moving average and this is a situation which was also seen near the middle of 2010. The trading patterns seen at that time were also quite similar to the price action of the past few months.

The implications here are bullish for stocks in general. Last year, when a period of consolidation was followed by a breakout above the 50-week moving average, a significant rally materialized. This rally saw the S&P 500 Index level rise from around 1125 to the 1340 level or so, a 19% increase in less than six months! A similar move could be seen once again in the coming months.

In the short-term SPY ETF, an initial target level close to the previous 2011 highs is still valid. This target ellipse is about 7% above Thursday’s closing level and is obtained by extrapolating several resistance lines created from previous local tops seen earlier this year.

The recent consolidation period has not been too big relative to the previous rally. Whereas the recent rally spanned a $17 range in this ETF price, the subsequent decline has only amounted to about $3. Price levels are still visibly above the 38.2% Fibonacci retracement level, and for this reason, the short-term outlook continues to be bullish here.

Consequently, the overall picture for stocks is bullish. Can we say the same about mining stocks? Let’s take a look.

In the very-long term XAU gold and silver miners’ index chart, we see that the index has corrected after a very sharp rally but has not moved below the rising long-term trend channel. Since this level was touched but not broken, the long-term outlook remains bullish for the miners at this time.

In the long-term HUI Index chart, we see a sharp decline, but it was far less dramatic than the rally which preceded it. Examples of such corrections are quite common in gold stocks and are often followed by subsequent rallies. Investors should not worry about catching each and every move in this sector (it’s impossible). Since it appears that a rally from here is likely, betting on higher prices at this time seems like a good idea.

Summing up, numerous signals from analysis of charts indicate that the outlook is bullish for both the general stock market and for precious metals stocks.

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, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. 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

© 2005-2016 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

Catching a Falling Financial Knife