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
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Ready for Further Growth? What Impact on Silver Price?

Commodities / Gold and Silver 2013 Aug 24, 2013 - 12:10 PM GMT

By: P_Radomski_CFA

Commodities

According to Bloomberg, the Fed stimulus helped in pushing the S&P 500 up as much as 153% from its March 2009 low, as better-than-estimated corporate earnings also fueled equity gains. Of the 483 companies in the S&P 500 that have reported quarterly earnings this period, 71 percent surpassed profit estimates.


On Wednesday, the S&P 500 fell 0.6% to the lowest level since July 8 as minutes from the Federal Reserve’s July meeting showed officials support stimulus cuts this year if the economy improves. In this way, the Standard & Poor’s 500 Index extended its decline to 3.9% since closing at its latest record on August 2. 

Despite this decline, yesterday, U.S. stocks rose on data showing improvement in global manufacturing and the American labor market. The S&P 500 index gained 0.9% and climbed to 1,656.96.

Will they keep rallying? Let's take a closer look at the charts to find out what the current situation in the general stock market is (charts courtesy of http://stockcharts.com).

On this week‘s long-term S&P 500 chart we see that the situation hasn’t changed much.

The correction is still shallow from the long-term perspective, and the S&P 500 Index reached the rising support line based on the November 2012 and January 2013 lows (in terms of weekly closing prices).

Please note that there is another rising support line based on the November 2012 -January 2013 lows (on an intraday basis), which may stop a correction even if the current support doesn’t hold. Therefore, the downside seems limited.

Before we examine the Broker-Dealer Index chart to see what the financial sector is doing, let’s take a look at the DIA ETF chart, which is another proxy for the general stock market.

Earlier this week, the DIA ETF moved lower, and the RSI based on it moved below 30 - almost to the 26 level. Since the beginning of 2008, there have been exactly 7 cases when we saw something similar. In 4 of them, this meant that an important bottom had just been formed. In the remaining 3 cases, a major bottom was formed in a short time anyway.

The short-term implications are bullish and the medium-term ones are very bullish.

We turn now to the financial sector, which in the past used to lead the rest of the general stock market.

On the above chart, we see that the recent decline took the financials to the previously broken resistance level of 130. Despite this fact, the financials still remain above this level, which also corresponds to the 2011 top, and the outlook hasn’t changed here.

The breakout above the level of 130 has not been invalidated, which will likely lead to further growth in the financial sector and the general stock market.

Once we know the current situation in the general stock market,  let’s see how it may translate into the precious metals market. Let’s take a look at the Correlation Matrix.

The Correlation Matrix is a tool, which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector (namely: gold correlations and silver correlations).

What’s very interesting is that the correlation between silver and the stock market is strongly negative. It’s negative in the short and medium term. This is so interesting because, theoretically, silver used to be positively correlated with the stock market most of the time, which you can see in the very long-term, 1500-day column. This was because of silver’s industrial uses. With the bullish outlook for the stock market suggesting higher values, it seems that the outlook for silver is quite negative for short and medium term.

It seems that we will need to see silver moving higher regardless of what the stock market is doing before we can say that another huge upleg is in the cards for the white metal.

Summing up, the outlook for the general stock market is very bullish in the medium term and more bullish than not in the short term. As we previously mentioned, the S&P 500 Index reached one of the rising support lines and even if stocks drop below it the next one may stop a correction. Therefore, the downside seems limited. Another bullish factor is the RSI indicator based on the DIA ETF, which  moved below the 30 level.

Even though the very long-term correlation between silver and the general stock market is positive, it seems that the above has negative implications for the white metal for the short and medium term (even though based on past price patterns, we could see some short-term strenght in silver).

To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

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

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold & Silver Investment & Trading Website - SunshineProfits.com

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA 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, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, 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