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
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
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

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Stock Market & the Gold Sector Analysis

Commodities / Gold and Silver Stocks 2016 Jan 29, 2016 - 12:24 PM GMT

By: Gary_Tanashian

Commodities

To review our stance, which is years along now, the gold sector is not going anywhere until it becomes widely accepted that developed stock markets, including and especially those in the US, are in bear cycles.  We have also drawn analogies to the Q4 2008 event that took place in what felt like a nanosecond compared to today’s long, drawn out process.  For this reason, a better ‘comp’ has been the 1999 to 2001 time frame.  That was a process as well.


Regardless, gold boosters viewing inflation as the reason to buy the sector are still out there pitching, but even they have retooled their pitches for a deflationary world.  It is now and always has been a global economic contraction environment (assuming it eventually coerces policy makers into inflationary actions) that would be the primary driver of the next gold bull market.  Say, whatever happened to all the stories about China demand, a China/India love trade, supply/demand capers on the COMEX and ‘US jobs to spur inflation driving big, smart institutional money into gold’ anyway?

What happened to them is that they were debunked as having little to no bearing on the price of gold and thus, gold’s bear market.  Incidentally, here is a gold-focused analyst who is a sound source of information amid the cacophony of opinions that have mostly led people astray post-2011.

You may recall the cool graphic from the first of our Macrocosm series posted in July.  What is the largest planet you see, eh Beuller?  What is the second largest?  Anyone?

After successfully managing the post-July process of stock market momentum loss, drop, bounce, double bottom and then rally hard (based on hysterically over bearish sentiment), and finally grinding into year-end we projected resumed bearishness, at which point it was time to gauge a new bear trend.  While other indexes like those in the second chart below established bear trends ahead of time, we awaited the grand Poo bah, the S&P 500 to turn its intermediate trend negative.

In October SPX bounced hard to challenge all-time highs above the weekly EMA 50, while the broad WLSH was somewhat weaker and the indexes in the lower panels, much weaker, never bouncing back above the moving average and thus, establishing downtrends and a bearish blueprint for the SPX, which finally followed through as well.  The bottom line is that, excepting a very few indexes, like the Dow Jones Internet index (note: AMZN is joining EBAY in getting destroyed on earnings as I write this on Thursday night) the US stock market is now in an intermediate bear trend across the board (subject to the current would-be ‘bounce’ scenario, which has well defined resistance as noted on all of these charts).

The situation is much like 2000, when certain aspects of the market had entered a bear while the average American looked at the Dow and S&P 500 and thought happy thoughts.  We are well along in the analog to the 1999-2001 time frame.  But what of gold’s ratio to these markets, which is that big planet right out front in our graphic?

Here is the simple weekly chart we use in NFTRH.  As you can see, the trend has not yet changed although constructive work is being done here and now as gold remains above the weekly EMAs 30 and 50.  A sustained breakout above the highs of last summer is needed to change the trend in ‘gold vs. S&P 500’.

Why is this needed?  Because we are managing a slow decline in confidence that the Fed has enjoyed since putting gold on the outs back in 2011 with the brilliant, inflation “sanitizing” (the Fed’s word for it) Operation Twist.  Anecdotally, I see people in the mainstream media and financial social media getting pissed off at Janet Yellen’s hard stance on policy tightening [edit: as this article was about to be published on Friday morning, we learn that the BoJ has just joined the ECB in the 2016 globally competitive inflation sweepstakes].

A decline in confidence would be good for gold, but we are not quite there yet.  If the chart above were to break out to a new trend and people were choosing gold over the conventional safe haven, Treasury bonds, gold bugs would be well on their way.  As you can see, gold is still going nowhere vs. long-term Treasury bonds.  Indeed, we have had recent NFTRH+ highlights on TLT and TIP, each of which I own.

Speaking of long-term, I took my long-term position in gold in 2002-2004 and see no reason not to stay that course for that portion of the portfolio.  It’s an anchor, a counterweight with a specific purpose of insurance and monetary value.

But for those sports fans playing in the speculative end of the sector, namely the miners, timing is everything.  This is a simplified version of some detailed charts we review consistently in NFTRH so as to be right on time when signals not only from nominal gold, silver and HUI, but their ratios to each other and other markets/assets, are triggered.

Bottom Line

The stock market is on a labored ‘bounce’ scenario and gold has not yet broken upward in S&P 500 units.  If the bounce continues, the wait could be a while longer.  But assuming the bounce fails at or below noted resistance levels (best target is SPX 2000), the Gold-SPX ratio eventually breaks out and Gold vs. Long-term Treasury bonds finally bottoms, some major signals would be in place for the next bull market in the precious metals.

There are many more signals involved than those outlined above, many of which have already become favorable; Gold-Commodities for one.  But the Gold-Silver ratio probably has to find a top and yield spreads a bottom in order to signal that inflation is starting to brew out there in a world that (ex-US lately) has been inflating non-stop [edit: again, hello BoJ].

2016 has the feel of something coming to a head and it is exciting to be gauging its progress in real time and it will be even more exciting when we are able to finally take action on the trend changes that look likely.  Consider an affordable NFTRH subscription and I promise you even though I have no crystal ball we will consistently do the work necessary going forward in order to be on the right side of events, whether they are as expected or some other scenario currently less favored.

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2016 Copyright  Gary Tanashian - 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.

Gary Tanashian 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