Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
South Korea Coronavirus WARNING - R0 4.6 Outbreak Infection Rate! - 29th Feb 20
Stock Market Trend and Elliott Wave Analysis - Video - 29th Feb 20
The Greatest Economic Depression Just Began. This Is No Drill - 29th Feb 20
Stock Market Coronavirus Deviation from Overall Outlook for 2020 - Video - 28th Feb 20
Stock Market SPX to Rise back to 3350 - 28th Feb 20
Stock Performance in the Rising Coronavirus Fever - 28th Feb 20
Stock Market SPY Breaks Below Fibonacci Bearish Trigger Level - 28th Feb 20
Will CoronaVirus Pandemic Trigger Stocks Bear Market 2020? - 28th Feb 20
Dow Long-term Trend Analysis - Coronavirus Triggering a Stocks Bear Market? - 27th Feb 20
Trump or Sanders? Both will pile up the Debt - 27th Feb 20
Oil Price Is Now More Volatile Than Bitcoin - 27th Feb 20
A Digital “Fedcoin” May Be Coming… And It Would Be Terrifying - 27th Feb 20
India's Nifty 50 Stocks: Does the Bad Jobs Outlook Spell Trouble for Stocks? - 27th Feb 20
How Crypto Currencies Are Helping Players Go Private - 27th Feb 20 -
Gold and Silver The Die Is Cast - 27th Feb 20
US Economy Permanently Addicted to Zero Interest Rates - 27th Feb 20
Has the Stock Market Waterfall Event Started Or A Buying Opportunity? - 27th Feb 20
Advantages of Enrolling in a Retirement Plan - 27th Feb 20 - LS
South Korea Coronavirus Outbreak Data Analysis Warning Rate of Infection is Exponential! - 26th Feb 20
Gold Price Long-term Trend Analysis Forecast 2020 - 26th Feb 20
Fake Markets Are on Collision Course with Reality - 26th Feb 20
Microsoft is Crushing the S&P 500, Secret Trait Of Stocks That Soar 1,000%+ - 26th Feb 20
Europe's Best Ski Resorts For The Ultimate Adventure - 26th Feb 20
Samsung Galaxy S20+ vs Galaxy S10+ Which One to Buy? - 26th Feb 20
Gold Is Taking on $1,700 amid Rising Coronavirus Fears - 26th Feb 20
Is This What Falling Through the Floor Looks Like in Stocks? - 26th Feb 20
Gold Minsky Moment Coming - 26th Feb 20
Why Every Student Should Study Economics - 26th Feb 20
Stock Market Correction Over? - 26th Feb 20
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

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

© 2005-2019 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

6 Critical Money Making Rules