Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20
China Recovered in Q2. Will the Red Dragon Sink Gold? - 23rd Jul 20
UK Covid19 MOT 6 Month Extensions Still Working Late July 2020? - 23rd Jul 20
How Did the Takeaway Apps Stocks Perform During the Lockdown? - 23rd Jul 20
US Stock Market Stalls Near A Double Peak - 23rd Jul 20
Parking at Lands End Car Park Cornwall - UK Holidays 2020 - 23rd Jul 20
Translating the Gold Index Signal into Gold Target - 23rd Jul 20
Weakness in commodity prices suggests a slowing economy - 23rd Jul 20
This Stock Market Stinks - But Not Why You May Think - 22nd Jul 20
Protracted G7 Economic Contraction – or Multiyear Global Depression - 22nd Jul 20
Gold and Oil: Be Aware of the "Spike" - 22nd Jul 20
US Online Casino Demographics: Who Plays Online For Money? - 22nd Jul 20
Machine Intelligence Quantum AI Stocks Mega-Trend Forecast 2020 to 2035! - 21st Jul 20
How to benefit from the big US Infrastructure push - 21st Jul 20
Gold and gold mining stocks are entering a strong seasonal phase - 21st Jul 20
Silver Eyes Key Breakout Levels as Inflation Heats Up - 21st Jul 20
Gold During Coronavirus Recession and Beyond - 21st Jul 20
US Election 2020: ‘A Major Bear Market of Political Decency’ - 21st Jul 20
Summertime Sizzle for Gold and Silver - 21st Jul 20
Overclockers UK Custom Built PC Review - Delivery and Unboxing (3) - 21st Jul 20
Will Coronavirus Vaccines Become a Bridge to Nowhere? - 20th Jul 20
Stock Market Time for Caution?  - 20th Jul 20
ClickTrades Review - The Importance of Dynamic Analysis and Educational Tools in Online Trading - 20th Jul 20
US Housing Market Collapse Second Phase Pending - 20th Jul 20
Capitalising on the AI Mega-trend - 20th Jul 20
Getting Started with Machine Learning - 20th Jul 20
Why Moores Law is NOT Dead! - 20th Jul 20
Help the Economy by Going Outside - 19th Jul 20
Stock Market Fantasy Finance: Follow the Money - 19th Jul 20
Did the Stock Market Bubble Just Pop? - 19th Jul 20
Quick Souring of the S&P 500 Stock Market Mood - 19th Jul 20
The Six-Year Jobs Recession - 19th Jul 20
Silver Demand Exploding! - 18th Jul 20
Tesco Scraps Covid Safe One Way Arrow Supermarket Shopping System - 18th Jul 20
The Rise of Online Pawnbroking - 17th Jul 20
Gold Rallies Together With U.S. Covid-19 Cases - 17th Jul 20
Gold & Silver Measured Moves - 17th Jul 20
The Bizarre Mathematics Of How Negative Interest Rates Create Stratospheric Profits - 17th Jul 20
From a Stocks Bull Market Far, Far Away, Virus Doomsday Scenerio! - 16th Jul 20
Fiscal Cliffs and the Self-destructing Treasury - 16th Jul 20
Dow Stock Market Crash Watch - Update - 16th Jul 20
Gold & Silver Gaining on US Dollar Weakness - 16th Jul 20
How to Find the Best Stocks to Invest In - 16th Jul 20
Overclockers UK Custom Build PC Review - 2. System Build Changes Communications - 16th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Precious Metals Stocks Lagging Performance About to End...

Commodities / Gold & Silver Stocks Feb 22, 2009 - 02:02 PM GMT

By: Clive_Maund

Commodities Diamond Rated - Best Financial Markets Analysis ArticleAlot of subscribers have been perplexed by the relatively miserable, laggardly performance of Precious Metals stocks in recent days as gold and silver have soared, especially against various major world currencies. This is one thing which is easy to explain - they have been held in check by a massive wall of overhanging supply that dates back to the extensive trading around the current price for much of 2006 and 2007, which we have looked at earlier on the 4-year chart for the HUI index.


The restraining influence of this has been aggravated by gold majors reporting surprisingly poor results. The situation remains very finely balanced with both the HUI and XAU indices trading in an increasingly tight range cornered between a rising trendline and an almost flat line of supply that is being steadily eroded. We are at a crossroads RIGHT NOW and this market must tip its hand very soon, probably within days. There are factors in play that could cause it to break either way. Until now we have interpreted the pattern forming in these indices as a bearish Rising Wedge, which implies a breakdown, but there is increasing evidence that it may instead be a bullish "running correction", and if it is then it will break out to the upside, signaling that the bulk of the overhanging supply immediately above the current level has been absorbed.

Note, however, that there are circumstances that could yet cause it to break to the downside, as for example, a combination of gold and silver, which are now getting critically overbought, turning down temporarily along with a crash phase in the broad market, which could be triggered by one or several of the unexploded bombs waiting to go off doing just that.

Looking at the 1-year chart for the HUI index we can see that in addition to the convergence of the trendlines already mentioned, the 50-day moving average, which is rising steadily beneath the index, is rapidly converging with the 200-day moving average, which has been falling steadily overhead and until now has had a restraining influence - but with gold's strength in recent days the index has been challenging the 200-day moving average, and may be on the point of overcoming the strong resistance that this average symbolizes. The simultaneous convergence of these trendlines and moving averages points to an explosive breakout very soon.

The action of recent days, with the continued rise of gold and silver leading to both the HUI and XAU indices challenging their respective lines of resistance and 200-day moving averages is creating a bullish impetus that lead to an upside breakout soon, and thus the pattern from December is now thought to be a bullish "Running Correction" rather than a bearish Rising Wedge, which was the earlier interpretation. The traditional running correction is a very bullish pattern, because the market actually rises somewhat as it undergoes a corrective process, implying underlying strength. As we have already observed, it has been appropriate for this pattern to form here because of the concentration of overhead supply at these levels. The poor results being reported by the majors, which have been another inhibiting factor, will soon become irrelevant, as the market looks ahead and will soon not be interested in "water under the bridge".

What about the fact that gold is already extremely overbought, as highlighted in yesterday's Marketwatch, especially against currencies other than the dollar? - doesn't this mean that there is a high risk of a reversal, which would result in stocks breaking to the downside? Well it does and it could, and normally that is what we would expect soon.

This is why we will hang on to the Put options in big golds that we bought on the site in recent days. However, the present global situation is CATASTROPHIC and we have already arrived at the point where GOLD AND SILVER ARE THE ONLY GAME IN TOWN. Like an idiot throwing water at a chip pan fire, governments and central banks around the world, such as the Federal Reserve are desperately trying to avert disaster by dropping interest rates to zero and creating monopoly money in astronomic quantities to throw at failing banks, institutions and large corporations right, left and center, and in so doing are practicing even more of the incompetence and stupidity that created the mess in the first place.

This video, The Crash of 2009 IS COMING TO YOU should make it clear to even the most complacent and obtuse individuals that the United States is facing financial disaster. The taxpayer will pick up the tab for all of this in the form of a hyperinflationary depression. This is the reason why GOLD IS RISING AGAINST VIRTUALLY ALL CURRENCIES. This is why you can almost forget about what the dollar's doing these days.

Speaking of the dollar, the price of gold in dollars got a boost on Friday when the dollar suddenly dropped sharply, backing off from its November highs. The reason for the strength in the dollar index since mid-December is not that would be Treasury buyers are piling into dollars to flee into Treasuries, as was the case last year which fuelled the big dollar spike, but rather that THE EUROZONE IS IN BIG TROUBLE and the European Union may ultimately disintegrate as a result. The Euro is a very big component of the dollar index and it has been very weak recently.

It is worth considering the US Treasury market briefly. We called the exact top in this market on the site in mid-December, since which time Bills and Bonds have completed Head-and-Shoulders top patterns and broken down from these patterns, and in the case of Bills have in recent days rallied back towards the "neckline" of the pattern before turning lower again. US TREASURIES ARE DOOMED for the simple reason that the United States thinks it can go on manufacturing money out of nowhere and get stupid foreigners to pay for it all by buying Treasuries. While there is no denying that foreigners have been played for suckers for years, and have warehouses full of atrophying US dollars, debt and other rubbish to show for it, they are slowly beginning to wise up, a process that has been greatly assisted by having been fleeced on a grand scale by the sub-prime mortgage scam, so that the prospect of countless trillions more of crisp new Treasury issues heading their way is going to meet with a diplomatic but firm "thank, but no thanks.".

That means that the Fed and the Treasury are going to have to monetize this new debt - buy their own rubbish - which means creating more money in order to pass the cost off on to the US taxpayer via inflation. WELCOME TO THE ERA OF HYPERINFLATION. Is it any wonder that gold and silver, the traditional stores of value in times of crisis, are taking off against all currencies? Hot new degree course topics for business students around the world will surely be "The Weimar Republics of Germany and the United States, 1920 and 2009", and "Zimbabwe and the United States - from riches to rags". So US Treasuries are the ultimate sucker play - zero yield and a bear market to boot - why not save yourself the trouble and walk out into the street and stuff your money straight down the drain?

We will now return to the consideration of tactics for trading Precious Metals stocks at this juncture, with reference to the 1-year chart above. A buy or sell signal will be given depending on which way it breaks out from the rapidly converging trendlines. However, in taking positions stops should be placed below the lower trendline if it breaks out upside, and above the upper tendline for any short positions opened if it breaks down. Note that new short positions are generally not advised if it breaks down as we are in a major bullmarket in this sector. Rather after perhaps several sharp down days in a row, we would be looking to buy aggressively and close out Puts.

We sold out most of our positions about 10 days ago, which were largely silver stocks in which we had for the most part made good gains, having bought them near the lows in November and December and thus captured most of the advance to date. Selling out has provided us with the chance to redeploy into the stocks that currently look the strongest, and a new list is in preparation which will be actionable immediately should the indices break out upside. This list will be posted on the site shortly. Note that the list will of course include some of our old favorites, which were only sold to sidestep a possible reaction. An additional factor that may need to be taken into account in regard to small silver stocks is the increasing political risk in Mexico which is likely to become increasingly unstable and chaotic in the wake of the economic collapse of the United States, with silver mining companies possibly becoming vulnerable to the kidnapping of employees and extortion.

By Clive Maund
CliveMaund.com

For billing & subscription questions: subscriptions@clivemaund.com

© 2009 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Clive Maund 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