Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Measuring The Likely Strength Of This Gold Stocks Impulse Wave

Commodities / Gold & Silver Stocks Dec 08, 2008 - 01:45 PM GMT

By: Captain_Hook

Commodities Best Financial Markets Analysis ArticleAs promised Friday, here we are with a look at the Amex Gold Bugs Index (HUI) in an effort to gauge the likely strength of the anticipated impulse into the first quarter of next year. And as you will see below this move could get quite impulsive if Bollinger Band (BB) widths begin to expand during the move. Certainly such thinking would not be a stretch considering Friday's 45 point move higher in the HUI, however we are not making any assumptions in this regard as option expiries often cause violet moves if prices are either too far above or below equilibrium thresholds. So you see the true test of how strong the present impulse will be is likely better judged by what happens this week, along with other considerations which will be dealt with below.

In terms of factors that will influence the trade we have a few, with the dominance of these various factors depending on all intermarket relationships that make up the nexus. As for the dollar ($), you will remember from last week it's the stock market that is driving it's direction, which in turn is driven by speculative betting practices of options players. So, it's important to realize that if open interest put / call ratios remain low, any bounce in the equity complex (including precious metals) should be viewed as suspect, where profits on the rally will be taken sooner than later. I will publish the post expiry open interest put / call ratios for US indexes (including the XAU) on Wednesday morning, along with an opinion as to how things look at the time. 

This is all new in terms of degree of the larger cycle, so although history can be used as a guide, which would point to a good corrective rally into next year that would take the HUI back above 400, we will not make any assumptions in this regard. We will watch our indicators very closely so not to give back as little of our trading profits as possible, attempting to sidestep any future collapses. And I think there will be continued future stock market calamity, where if we are in the midst of a Grand Super-Cycle correction, for example, the S&P 500 (SPX) could head all the way down to 100, a 99% retrace of the entire move from 1982. Make no mistake about it; such an outcome is possible given the challenges we have before us, not the least of which are peak oil, an aging population, and credit cycle gone bust.

Not getting too far ahead of ourselves however, first things first, where again, now that we have this apparent turn higher in the equity complex, we will be watching closely this week for continued follow-through, $ weakness, and confirmation speculators are finally growing some respect for stocks, which will in turn affect their betting practices. That's right, we will be looking for confirmation options players have finally had a change of heart and will start betting bearish on stocks so that a sustainable short squeeze can counted on. It's either that or the reaction higher will be exactly that, a fleeting reaction, done on or before week's end. So again, this is why we will be taking stock of open interest put / call ratios mid-week, in gauging whether we should hold on to our trading positions longer or not.

This is because once we get past Thanks Giving Day trading machinations, the largest of which being a natural tendency for stocks to finish higher around holiday weekends due to lower trading volumes, the influence of put / call ratios will come back into play next week as expiry approaches once again. Enter the possibility of tax-loss selling, along with a bunch of unfilled gaps on the charts, the most prominent being on precious metals shares / indexes across the board (except juniors), and believe it or not we have a recipe for a retest, as demonstrated in red on the HUI plot below, which from a longevity point of view, would in actuality be the preferred outcome because these gaps (hourly, 10-minute, etc.) will need filling at some point. So, if they are not filled now, you know what that means. (See Figure 1)

Figure 1

Of course given the child-like mentality traders have developed over the years, spoiled by a fiat currency monetary system gone wrong, where bailouts are common to avoid inevitabilities, if it were left to this market, and given ample opportunity, anything is possible, so we cannot discount something more substantial prior to a meaningful correction (denoted in black), with all the little question marks positioned along a possible path higher, defined by Fibonacci retracements primarily. At this point however, given the above gap / tax-loss selling concern, along with the fact the Gold / Silver Ratio was actually up on Friday to accompany the big moves higher in equities, even before we see them one must assume put / call ratios remain low.

Do put / call ratios control that much / many markets? Answer: You bet they are. They are the center of the universe. They control the outcomes in the equity markets, which in turn control debt, currency, and commodity markets via intermarket relationships. Just look what the permanently bullish players in Citigroup (C:NYSE) did to that stock, which was telegraphed by the ‘crash signature' in the trade, a topic that was broached here just last week , prior to its collapse. At the time it was stated not to expect a lasting rally until the lower reaches of the accumulation / distribution pattern was vexed, and sure enough over-zealous speculators brought the mighty C to its knees within the week. The great C would be gone right now due to its inability to raise financing , which again, is a function of it's share price / equity. (See Figure 2)

Figure 2

So if you can believe it, the speculators control the economy, which is a natural development in a mature fiat currency based system, this, and all the bailouts , which of course will not work . In the meantime however, the fact C has likely hit bottom, as can be deduced by observing the fact the ‘crash signature' in the trade has been removed, along with the traditional run-up into Thanks Giving Day weekend expected in the broads, facilitated by the lack of influence by open interest put / call ratios being this far away from expiry, gives rise to the observation no matter which scenario in Figure 1 prevails, more strength in the equity complex should be anticipated, with precious metals leading the way if this picture of the HUI / SPX Ratio is to be believed. (See Figure 3)

Figure 3

Thus, if you are already positioned for the larger move, please don't get twitchy and sell to early. Even if we need to fill gaps before going higher, the point is higher prices are in the offing. And there are more reasons to be concerned about the longevity of the present rally sequence in addition to those already mentioned above, including lack of response in Asian markets , a stable $ (it should be declining to support equities), and the fact we just had a fresh break lower on the monthly Nasdaq / Dow Ratio. And while it's always possible this could be accounted for by financials lifting the Dow faster during reflation, such an assessment is unlikely, because remember, what this ratio is measuring is speculator zeal, which has only very recently broken. (See Figure 4)

Figure 4

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our continually improved web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. For your information, our newly reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts ,   to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented ‘key' information concerning the markets we cover.

And 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 matters.

Good investing all.

By Captain Hook

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

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 Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by 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.

Captain Hook Archive

© 2005-2019 - 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