Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14
Ukraine: What To Do When Economic Growth Is Gone - 24th July 14
Stock Market Clear and Present Danger Zone - 24th July 14
The Five Elements to Creating a Something-for-Nothing Society - 24th July 14
Instability is the New Normal? - 24th July 14
Israel's Suicide Bombers Over Gaza - 24th July 14
EUR-AUD Heads Into The Danger Zone - 24th July 14
Tesco Supermarket Death Spiral Accelerates as Customers HATE the Mega Brand - 24th July 14
Ukraine MH17 Crisis - Best Remember Who Your Friends Are - 24th July 14
Three Reasons Why Gold Price and Gold Stocks Will Rise - 24th July 14
HUI Gold Bugs Fighting To Break Downtrend - 23rd July 14
What Putin Knows About Flight MH17 - 23rd July 14
Why Microsoft Will Continue to Rebound, Huge Upside Potential - 23rd July 14
Will Putin Survive? - 23rd July 14
MH17 Crash Next Phase Economic Warfare - 22nd July 14
The TRUTH about China’s Massive Gold Hoard - 22nd July 14
Forex Multi-week Consolidation in EUR/USD Ended - 22nd July 14
Bitcoin Price Medium-term Trend Being Tested - 22nd July 14
Beware Of The Flash Mob - 22nd July 14
Can Putin Survive? - 22nd July 14
Israel Assault on Gaza: A Historic Crime, Nazi Like Final Solution - 22nd July 14
Zionist Israel an International Pariah - 22nd July 14
Reflections on the Global Misery Index - 22nd July 14
GDP Economic Statistic : A Brief But Affectionate History - 22nd July 14
TransTech Digest: Super Battery Bio-Power vs. Dirty CleanTech - 21st July 14
How to Find Trading Opportunities in the Currency Markets - 21st July 14
Stock Market One More Pull Back - 21st July 14
The Conquest Of Real - Degenerate Philosophies of the Book - 21st July 14
A Clear Way to Profit from a Graying Population - 21st July 14
Last Chance Critical Financial Market Forecasts Special Total Access - 21st July 14
Stock Market Crash Nightmare! - 21st July 14
Why the Stock Market Is STILL Cheap - 21st July 14
From Gore-Bore To Gore-War - 21st July 14
Gold Price Looking Drab - 21st July 14
An In-Depth Look at Gold Chartology - 21st July 14
The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - 20th July 14
AUD NZD Taking The Forex Bull By The Horns - 20th July 14
US-backed Israeli Invasion of Gaza Unleashes Death and Destruction - 20th July 14
The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - 20th July 14
Stock Market in DANGER of Strangling the Bears to Death - 20th July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold and Silver Stocks No Retest of June Lows

Commodities / Gold and Silver Stocks 2013 Sep 06, 2013 - 12:46 PM GMT

By: Jordan_Roy_Byrne

Commodities

Recently I’ve received some emails from those who are concerned about a retest of the June low in the precious metals complex. That prompted me to look at how rebounds develop from significant bottoms. In recent months we focused on historical bottoms in gold stocks and it helped us to pinpoint the best buying opportunities. In this editorial we broaden the scope and examine how certain bottoms play out and why they play out in a particular manner. The length and depth of the preceding bear market helps us to understand how the ensuing bull market evolves during its initial rebound.


Below is a chart that shows the S&P 500, CCI (commodities) and Gold from 2007 through 2009. The S&P 500 declined for nearly 18 months without any major rallies. It was extremely oversold and enjoyed a V bottom. The March bottom was actually somewhat a retest of the November low though it did form a new low. Meanwhile, commodities were very oversold but for only a short period of time. Therefore, after the market bottomed it “based” for about four months before accelerating. (This is somewhat similar to what occurred following the 1987 stock market crash). Gold was oversold but only for a short period of time. Its bottom took a few weeks to form and then within a month had a retest.

Next, look at the 1974 bottom in the S&P 500. The market was cut in half over more than an 18-month period. It was very oversold and oversold for a long period of time. The retest occurred within two months of the bottom and then the rebound accelerated.

The chart below (from nowandfutures.com) plots Gold from today with Gold from 1975-1976. Back then Gold declined by nearly 45% and over an 18-month period. Gold was extremely oversold and oversold for an extended period of time. That could be why Gold didn’t have a retest. This time around Gold was in a similar position. It declined over 35% over a 20-month period but has since rebounded over $200/oz. It’s not a coincidence that the two rebounds occurred without a retest.

These studies provide great examples and a great education with regards to post-bottom price action. Here is our interpretation. If a market is extremely oversold and has declined for a long period of time then it is more likely to have a V-type bottom. If a retest doesn’t occur (in this case) within two months then the bottom is most likely in. If a market is extremely oversold but has only declined for a short period of time (1987 crash, 2008 crash) then a base building process (or two steps forward, one step back) should be expected over the coming weeks.

If a market is extremely oversold for an extended period of time then the selling has been exhausted, therefore leaving little resistance to the rebound. This explains the V bottom. Conversely, if a market hasn’t been oversold for an extended period then there are still some sellers that come in after the bottom and slow down the rebound.

It’s been two months since the bottom in precious metals and the sector remains comfortably above its lows. Silver is still $5/oz above its lows while Gold is nearly $200/oz above its lows. It’s too late to expect a retest of the lows. In fact, the miners already tested their lows in early August which was five weeks after the bottom. Given what we’ve studied, the severity of the 2011-2013 cyclical bear market, and the recent strong rebound, there is no compelling reason to expect a retest or any major decline.

The chart below plots Gold as well as various miner ETFs with arrows emphasizing the 50-day moving averages.

Last week we wrote:

The bottom line is the current correction or consolidation is quite healthy for the sector. Many stocks have made huge runs in a very short period of time and are set to digest those gains and correct short-term overbought conditions. Be patient over the coming days and weeks and use the 50-dma as a guide for support and potential lows.

The above chart shows that gold and silver stocks of all stripes are quite close to testing the now upward sloping 50-day moving averages. We should see a test of that support over the next few days. Don’t fret over recent weakness as its an opportunity. If you are kicking yourself for not buying the June or August lows, then you may get another chance very soon.

If you'd be interested in professional guidance in this endeavor, then we invite you to learn more about our service.

Good Luck!

Email: Jordan@TheDailyGold.com
Service Link: http://thedailygold.com/premium

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2013 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.

Jordan Roy-Byrne Archive

© 2005-2014 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

Free Report - Financial Markets 2014