Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
FED Balance Sheet Current State - 5th Mar 21
The Global Vaccine Race Against Time and Variants - 5th Mar 21
US Treasury Yields Rally May Trigger A Crazy Ivan Event (Again) In Stock Market - 5th Mar 21
After Gold’s Slide, What Happens to Miners? - 5th Mar 21
Racism Pandemic Why UK Black and Asians NOT Getting Vaccinated - NHS Covid-19 BAME - 5th Mar 21
Get Ready for Inflation Mega-trend to Surge 2021 - 4th Mar 21
Stocks, Gold – Rebound or Dead Cat Bounce? - 4th Mar 21
The Top Technologies That Are Transforming the Casino Industry - 4th Mar 21
How to Get RICH Crypto Mining Bitcoin, Ethereum With NiceHash - 4th Mar 21
Coronavirus Pandemic Vaccines Indicator Current State - 3rd Mar 21
AI Tech Stocks Investing 2021 Buy Ratings, Levels and Valuations Explained - 3rd Mar 21
Stock Market Bull Trend in Jeopardy - 3rd Mar 21
New Global Reserve Currency? - 3rd Mar 21
Gold To Monetary Base Ratio Says No Hyperinflation - 3rd Mar 21
US Fed Grilled about Its Unsound Currency, Digital Currency Schemes - 3rd Mar 21
The Case Against Inflation - 3rd Mar 21
How to Start Crypto Mining Bitcoins, Ethereum with Your Desktop PC, Laptop with NiceHash - 3rd Mar 21
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Financial Sector in Crisis as Gold Stocks Set to Go Ballistic

Commodities / Gold & Silver Stocks Jul 22, 2008 - 09:38 AM GMT

By: David_Petch

Commodities

Best Financial Markets Analysis ArticleRight now, those holding financial stocks can be viewed as a frog in a pot of boiling water. As long as the water does not boil, the frog is safe…but mark my words, before the year closes out, the water will boil.

Trying to have a realistic and “contrary view” when someone is directly involved in a particular market is extremely difficult, especially when being stuck in the pot. This will apply to those in the commodity market within 3-4 years, so everyone involved will have to try and have a level head. As gold bugs, we are trying to stick are toes into the water but are repelled by the heat. It will be important to make sure all participants are carrying a thermometer in their pocket to realize when the markets become overheated to a near boiling point, causing everything to spill over.


Our thermometer will be tracking the market sentiment, market psychology and numerous technical indicators tracked currently employed. Boiling a liquid involves transition into the gaseous phase, which creates a mist. Anyone still in the pot (commodity market) when it begins to boil will literally get “lost in the mist” amidst fear in the market, such as “The world is ending” and “All assets must be transferred into gold and silver”. When I was much younger, my father was making chicken soup and left it on the stove for 6 hours on MAX. Later that evening, the inside of the house was a thick fog with the smell of burnt chicken bones. Metaphorically transfer this image to those holding stocks near the end of a bull market (think NASDAQ) and it does not take much thought to the outcome.

At present, the pot of water for gold and silver investors is on the back burner at room temperature. Only once the main market pot begins to boil will our pilot light be activated. When this event occurs, keep the thermometer handy and do not drop it because when the heat really gets turned up in the drive for owning gold and silver someone could find themselves running with the pack, which is the wrong thing to do. Be objective, set exit points for 50% of stock and ride the rest courtesy of the house. We try to constantly develop this theme and expand upon it, so please ensure to keep a mental note of this.

Update of the AMEX Gold BUGS Index

Upper Bollinger bands were all pierced by a sharp upward move in the index, which previously has not occurred in all of the shown. Whenever Bollinger bands are pierced, especially the upper 55 MA Bollinger band, a sharp retracement should follow, accompanied by an extended consolidation before the next up- occurs. Lower BB's are just starting to rise, fitting with the thought that a potential window exists for the HUI to make a sharp move…hold tight, because at some point between August and January 2009, it will occur. Fibonacci time extensions of various waves are shown near the lower portion of the chart, with a cluster of Fib dates occurring near the end of September 2008. A time accordion is shown near the base of the chart, with numbers indicating the number of “time blocks” beyond the initial measurement (wave [1].III). The 9x area is about as long as a wave [2] move can extend beyond wave [1], which does not occur until December 2…still 5 months before the HUI has to make a move to keep the Elliott Wave count valid. Short-term stochastics have the %K beneath the %D, with the potential for another 2-3 weeks of the present decline before a bottom is put in place.

Figure 1

Red lines on the right hand side represent Fibonacci price projections of various upward trending waves, projected off the termination point of their subsequent corrections. Blue lines on the right hand side represent Fibonacci price retracements of wave [1].II. Areas of line overlap form Fib clusters, which indicate important support/resistance levels. The Fib cluster around 450 has been strong resistance the past 10 months, as noted by the recent attempt to spike above it. Moving averages are in bullish alignment (50 day MA above the 155 day MA above the 200 day MA), with the 50 day MA acting as support at 432. Notice how a rising trend emerged from early 2006 until August 2007, only to be back-tested twice over the course of the past 8 months. The pattern from late September 2007 until present has been forming a lower Degree rising pattern similar to the 2006-August 2007 rising pattern, thereby setting the stage for an extremely powerful move in the coming months. Full stochastics have the %K above the %D, but note the short-term weakness stated in Figure 1. Expect anywhere from 3-5 weeks of downside/consolidation before the HUI explodes to the upside, excluding any global event that ignites the fuse beneath the gold market.

Figure 2

The weekly chart of the HUI is shown below, with Fibonacci time extensions of waves I and II shown at the top of the chart. Red lines on the right hand side represent Fibonacci price projections of wave I projected off the termination point of wave II. Notice the cluster of Fib dates occurring on January 30 th , 2009 , which intersect the upper channel line around 1200-1300. The lower 55 week MA Bollinger band is at 305.3, up from last week's value of 299.9. The continued advancement of this setting by 4-5 points per week would suggest that another 8-10 weeks of further consolidation is required to see enough of a contraction in volatility to trigger the next upward move. Full stochastics have the %K beneath the %D, but appears to be trying to reverse and cross above it; for now, this indicator suggests further consolidation.

Figure 3

The mid-term Elliott Wave chart of the HUI is shown below, with the preferred count shown in colour and the alternate market path denoted in grey (same count, different path). The count required modification to take into account the sharp spike of wave F which invalidated the extended flat structure I was following. The newly labeled structure is a diametric triangle, resembling a bowtie (contracting triangle followed by an expanding triangle. At present, wave G is the last wave structure to complete this pattern and could last anywhere from 4-8 weeks, pending market conditions. Should things go awry with this count, another (X).[2] wave will form, followed by another corrective leg (wave (Z).[2]) that would take the corrective structure of the HUI into the end of January 2009. Patience is a virtue and was the main lesson for anyone whoever when fishing when they were a youngster. Remember that lesson because it still requires practice for present market conditions, particularly those holding gold and silver stocks.

Figure 4

The long-term Elliott Wave chart of the HUI is shown below, with the preferred count shown in colour and the alternate pattern (same count, but longer time frame) denoted in grey. Wave II terminated above the termination point of wave I, thereby classifying it as a running correction. Running corrections always precede the strongest move in 2/3 of time, price and complexity (price and complexity are likely to be the 2/3 that occur for wave III now underway). Since the pattern in the HUI is a terminal pattern for human civilization, it is possible to label it as a corrective structure that will complete with a total of 7 or 9 legs. I have avoided showing the structure to avoid confusion to those following standard Elliott Wave methodologies, so be aware that this possibility exists. The pattern developing to my unrevealed count is a diametric triangle (bow-tie formation), with wave [F].(V) presently developing. This pattern would have a final sharp rise in wave [G].(V) lasting 2-3 years. I may decide to show this pattern in the next few months…but again, this stuff is confusing enough and for most it would not make sense.

Figure 5

The gold/silver ratio is shown below, along with accompanying statistics. The ratio is presently at 52.64, up from last week's value of 51.04. It appears that gold will be outperforming silver for the next 1-2 months, fitting with expected weakness in the HUI. By time this bull market is complete, the gold/silver ratio will be around 11-16.

Figure 6

The gold/oil ratio is shown below, with accompanying stochastics, displaying a value of 7.40, up from last week's value of 6.59, suggestive that it about to embark on a journey to the historical ratio value of 21. Should oil remain at $140/barrel, then gold would be $2940/ounce. If oil goes to $300/barrel (which is a strong possibility with Peak Oil kicking in), then it goes to $6300/ounce. If the financial crisis reaches the epic proportion I expect it to, the ratio could spike to 35, which would lead to $10,500/ounce. The above examples should be clear cut as to why it is important to at least own gold and silver bullion, alongside high quality junior stocks.

Figure 7

The gold/HUI ratio is shown below, with accompanying stochastics, displaying a present value of 2.19. I am going to get a longer-term chart of this ratio in the coming weeks to assess optimal times to buy and sell the HUI based upon the ratio (I am sure this already exists out there, but it is a new concept to me). If anything, the ratio rising to present levels is highly suggestive that a reversal to the 1.65 area is not far off…this suggests the HUI is about to go ballistic once the present corrective structure is complete.

Figure 8

By David Petch

http://www.treasurechests.info

I generally try to write at least one editorial per week, although typically not as long as this one. At www.treasurechests.info , once per week (with updates if required), I track the Amex Gold BUGS Index, AMEX Oil Index, US Dollar Index, 10 Year US Treasury Index and the S&P 500 Index using various forms of technical analysis, including Elliott Wave. Captain Hook the site proprietor writes 2-3 articles per week on the “big picture” by tying in recent market action with numerous index ratios, money supply, COT positions etc. We also cover some 60 plus stocks in the precious metals, energy and base metals categories (with a focus on stocks around our provinces).

With the above being just one example of how we go about identifying value for investors, if this is the kind of analysis you are looking for we invite you to visit our site and discover more about how our service can further aid in achieving your financial goals. In this regard, whether it's top down macro-analysis designed to assist in opinion shaping and investment policy, or analysis on specific opportunities in the precious metals and energy sectors believed to possess exceptional value, like mindedly at Treasure Chests we in turn strive to provide the best value possible. So again, pay us a visit and discover why a small investment on your part could pay you handsome rewards in the not too distant future.

And of course if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line . We very much enjoy hearing from you on these items.

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2008 treasurechests.info Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by treasurechests.info Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

David Petch 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