Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold, Silver And The US Dollar Analysis and Forecasts

Stock-Markets / Financial Markets 2011 Oct 10, 2011 - 06:11 AM GMT

By: Willem_Weytjens

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleLast week, we wrote that gold and gold stocks could be at – or very close to – a bottom. So far so good, as the miners rallied out of oversold conditions.

Gold found support at the 35 weeks Exponential Moving Average, and RSI held above 50. That’s a good sign so far:


Chart courtesy stockcharts.com

Sentiment in Gold is back at very low levels, which should be bullish for Gold (although it could always drop some more):

Chart courtesy sentimentrader.com

However, when we look at the daily chart, we can see a bear flag forming right now, and the move out of oversold conditions is accompanied by decreasing volume. That’s a negative sign, and it looks like the Bear Flag could be taken out to the downside anytime now. That would cause both the RSI and MACD to turn down again.


Chart courtesy stockcharts.com

Sentiment in the mining companies, as measured by the Bullish % Index is also at historically low levels, indicating that miners are severely oversold.
However, in 2008, the index fell to ZERO, so we still have the possibility that we haven’t seen the rock bottom yet. If that’s the case, last week’s bottom would only be a temporary bottom in order to work off the oversold conditions.
When we look at Fibonacci Retracement levels, we can expect 450 on the HUI index once the pink support line would break. So far, the pink support line should provide support until proven otherwise.


Chart courtesy stockcharts.com

That brings us to silver. Here we can see that sentiment reached extremely low levels (30.03%), which COULD bode well for silver prices going forward.
However, we have to see things in perspective. Back in 2008, sentiment remained very low for a couple of months, as silver kept falling.


Chart courtesy sentimentrader.com

When we look at patterns of “higher highs / higher lows” and “lower highs / lower lows”, we can see that sentiment is a good indicator of what will happen to silver:
I have highlighted 3 times with a blue circle whereby the price movement was not supported by sentiment. Either we had a higher low in price and a lower low in sentiment (bearish), a lower low in price and a higher low in sentiment (bullish) or a higher high in price and a lower high in sentiment (Bearish).
Based on these patterns, we would like to see a higher low in sentiment accompanied by a lower low in price.

In the chart below, we can see that Silver recently retraced exactly 50% of the move from 3.50$ (the 1993 low) to the top of $49.82. The next Fibonacci Support level comes in at $21.18


Chart: Prorealtime.com

Although the low $20′s might seem unlikely now, it’s definitely something we have to keep an eye on. Even if silver drops towards the low $20 (or even slightly below), it would not harm the long term uptrend at all, as can be seen in the following chart (the yellow pattern is based on the price action of 2008):


Chart: Prorealtime.com

When we look at the CFTC COT reports for silver, we can see that the Commercials A.K.A. “Smart Money” have reduced their net-short positions substantially, to bull-market lows.
This seems to be bullish for silver, because if the smart money moves out of silver short positions, this could mean they are foreseeing higher prices.
Look at the chart below to see what happened during this bull market when Commercial Net short positions were this low.
It looks bullish, doesn’t it?

However, perspective is everything. Of course we are in a bull market (since the early 2000′s), but if we look at the COT reports going back to 1986, we can see that the Commercial Net Short positions have been this low on several occasions, and it didn’t always mean higher prices:

However, as the Open Interest fluctuates, it might be better to look at Commercial Net Short Positions as a Percentage of Open Interest (CNSPOI).
We can see that during the bear market, the CNSPOI was setting higher highs, while during this bull market, the CNSPOI is making lower highs.
The CNSPOI has also dropped to historically low levels, which MIGHT forecast higher prices, although this has not always been the case:

We think that everything comes down to the US Dollar. When the US Dollar falls, metals generally rise, and when the US Dollar rises, metals generally fall.

We can see that the USD Sentiment is very positive, meaning we could see a pullback. However, the fact that we had a lower high in Price early 2011 combined with a higher high in sentiment, was foretelling us that something was going on in the USD market, just like in 2008 & 2009:


Chart courtesy sentimentrader.com

One last thing: when we compare FXI (a China ETF) with the Nasdaq Bubble, we can see that FXI is imitating the Nasdaq Index:

Chart: Prorealtime.com

If China drops a bit more, it might be time to buy China and everything China-related (read: COMMODITIES)

For more analyses and trading updates, please visit www.profitimes.com

Willem Weytjens

www.profitimes.com

© 2011 Copyright Willem Weytjens - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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