Archive for the ‘Gold’ Category
Newmont Mining (NEM) looks like it may hold the key as to whether gold and gold miners are going to finally break out to the upside. If we look at the daily chart of NEM, we can see that the 10 day ma has crossed over the 20 day ma and the price has just crossed above the 50 day ma. We saw the same thing happen in January and then February only for NEM to drop further but this move looks different. There has been steady accumulation during this phase and the RSI is at 58 and moving higher. The MACD is moving into positive territory and the stochastics are giving a buy signal in the overbought area. All this points to higher prices for NEM.
If we look at the weekly chart we can see that there is a major hurdle at $42.50 as this is the neckline of the massive head and shoulders pattern that formed since March of 2012. The technical downside if the pattern is completed is about $28. The question now remains as to whether this current move is just a re-test of the neckline and then a final plunge to the $28. area or whether the neckline will be penetrated and NEM will rally to new highs.
The MACD is close to giving a buy signal and the stochastics are already giving a buy signal. The downtrend in the RSI appears to have been broken and NEM has crossed above it’s 10 week ma of $41.49.
Conclusion: While it is impossible to be sure at this stage, the fundamental factors of what is happening in Europe at the present time combined with worldwide QE and positive technical indicators would seem to support the view that a rally in gold and miners is iminent. If NEM breaks above $42.50 and holds then we should expect the precious metals rally that the gold bulls have been anticipating for so long to finally commence. I would expect Gold to hit at least $2,000. per oz on this run up and possibly go higher. It could also happen a lot quicker than the market is anticipating.
It has been a rocky ride for gold and silver owners but the charts are bullish and are pointing to further upside.
After breaking out to the upside of a massive one year consolidation pattern, Gold is now consolidating in an equilateral triangle pattern. This pattern breaks out in the direction of the trend 75% of the time so the odds favor an upside breakout. While anything is possible, the fundamentals would also indicate that gold prices should head higher.
1) Starting January 1, 2013 banks worldwide are going to count gold as an asset at it’s full value. Presently it is counted at 50% of value. I have read that the deadline may be extended but the recognition of gold as a currency is just around the corner.
2) Central banks have been net buyers of gold and China and Turkey are huge buyers of gold.
3) Gold is no longer fluctuating in anti-relationship to the US dollar. It appears to be attempting to find its value in relation to other currencies.
4) There are serious problems in the mideast involving Syria. There is a possibility chemical weapons may be used or just obtained by hostile parties. Such an event would probably push gold through the roof.
5) The price projection for gold if it breaks out to the upside is in the 1840-1860 area. A confirmed break below the uptrend line would be bearish and could cause a 100 point drop although support may be found at the 200 day ma of 1663. The odds favor an upside breakout however.
Just as gold is exhibiting a bullish pattern Silver is also exhibiting a bullish pattern in the form of a cup and a handle. A break through the neckline at 35 has a projected price target of 41.
Conclusion: Gold and Silver are volatile but it looks like owning them will pay off sometime in the near future.
The bull market is picking up speed. There are highly bullish chart patterns on various asset classes indicating that this market can move a lot higher. With the Fed and ECB pumping money into the system it should provide plenty of fuel for further market advances.
IWM the small cap index has formed a massive inverse head and shoulders pattern that spans from May 2011 until now. The neckline of the pattern has just been broken to the upside. The projected price target is $116 with the next major resistance on the weekly charts at 98.32.
Gold has formed a large cup since February 2012 and has been on a rip for the last 4 weeks. The projected price target based upon the cup and triangle breakout patterns is roughty $2,000. with the next major resistance on the monthly chart at $1889.30. There’s a good chance gold could go much higher than $2,000. in this leg up.
Gold miners as evidenced by GDX have already broken through the neckline of an inverse head and shoulders pattern. The projected price target is $56. but I expect the index to move much higher.
Oil has been consolidating for 4 weeks just above it’s 50 day ma on the monthly charts and it looks like it is ready for another leg up. A price target of $110-$115 does not seem unreasonable. If Iran is attacked then it could go much higher.
If we take a look at SLB (Schlumberger) we can see that it also has formed an inverse head and shoulders pattern since March and the neckline has just been penetrated to the upside. The target price is $90. which corresponds to monthly resistance at $89.65.
Conclusion: Don’t fight the Fed, the ECB or the trend. The bull is charging so either ride it or get out of the way.
As I mentioned in my entry of June 8th the markets looked prime for a fall. After the Spanish bailout was announced there was a brief rally but the markets then headed lower. Today rumors that the world’s central banks are going to backstop Europe caused the major averages to complete the formation of a bullish inverse head and shoulders pattern on the major indices.
If we use the SPY as an example, the head is at 127.13 and the neckline is at 134.25. A breakthrough of the neckline yields a projected target price of 141.37 which is close to the market top reached on April 2nd. The technical indicators are bullish. The RSI is above 50 and rising, positive momentum is increasing and the stochastic is overbought. The stochastic will stay overbought in rising markets so this rally looks like it is just beginning.
The VIX on the other hand has formed a bearish head and shoulders pattern. The head is at 27.73 and the neckline is at 20.83. A penetration of the neckline yields 13.93, roughly the March 16th low. The RSI is below 50, the stochastic is weak and on a sell signal and the MACD is turning down with increasing negative momentum. There is support at it’s 50 day ma which is where it is resting now and uptrend support at 19. A nice breakdown below both levels would confirm the uptrend in the overall market.
The markets are obviously anticipating a huge coordinated worldwide central bank move regardless of what happens in Greece over the weekend. Even the central bank of Canada checked in on Friday. If things don’t work out as planned however the markets could take a nosedive. Therefore we are either looking at S&P 1400 or S&P 1200 in the near future.
Gold has been acting bullishly ever since it bottomed in May. GLD is at the crossroad of the downtrend from the March major top and the intermediate minor tops. There has been talk that collateral for bailout funds for European banks will at least be partially backed by gold. If true this is an admission by central bankers that gold is a valuable asset such as real estate and this action can only be bullish for gold. If GLD can break through the current down trend resistance it should make a run to at least 174.
Conclusion: Right now is a dangerous time for both bulls and bears. If the central banks come through with their plans to prop up the European banks with liquidity the bull market should resume. If they fail to act then my original projection of S&P 1200 looks like it will be in the cards.
I seriously doubt that central banks and the Fed will allow the world financial system to fall apart so consequently they will do whatever is necessary to prop it up. My impression is that the market wants to rally and the correction may be over. All we need is some good news out of Europe and another round of QE3 to get the markets moving in the right direction.
While the market has been trending up for the past week, the pattern that is forming on the major indices appears to be that of a bear flag. To be exact these look more like bear pennants as they are triangulated. Triangles sometimes can be reversal patterns however, so until there is a breakout in either direction caution is the word.
As can be seen by the monthly chart of the SPY, the market has been finding support and resistance at it’s 20 and 50 day EMA’s. Any rally on the S&P will probably not make it past 1341 as that is also the neckline of the head and shoulders pattern. If the market breaks down further, there is a good chance that it will not bottom until it hits it’s 200 day EMA at 1181. In the declines that occured in 2010 and 2011, the market actually dropped slightly below it’s 200 day EMA before recovering.
Gold miners as evidenced by GDX look like they have finally bottomed and there are indications that they have reversed trend and are now heading up. The downtrend from the March top has been solidly broken and buy volume has been extremely strong off the May bottom.
Gold itself does not look too good however. While the double bottom from the December low has been tested twice, GLD is now hitting short term downtrend resistance from it’s May top. If it can manage to get past that line there are 2 more downtrend resistance lines that it must also get through before real progress can be made in the index. If the double bottom does not hold, with the dollar rising and banks dumping hard assets to raise cash, gold can head a lot lower.
The Euro has just broken through the neckline of a head and shoulders pattern that has been forming since September, 2010. With the neckline at 126 and the head at 148 the projected price target is 1.04. With capital fleeing the Eurozone, it appears that the only thing that will at least temporarily reverse a Euro decline is a short covering rally.
Conclusion: With chunks of Europe in a recession and captial fleeing the Eurozone, there’s an excellent chance the U.S. stock market will be dragged down until there are some signs of stability coming out of Europe. Of course another dose of QE will give the markets a lift and take the funk out of gold. Since we are in an election year, in all probability we will see more QE if the market drops too low.
The stock market has been dropping in a slow, agonizing fashion for the last 2 weeks although today it picked up a little speed. The SPY stopped it’s slide today right at it’s 200 day EMA of 1307. If the market doesn’t find some support at this level, the next level of support is 1260 which would fulfill the head and shoulders break down.
With the Facebook IPO coming up tomorrow, if some real bad news doesn’t hit the wire we will probably get a bounce off current levels. With on-going problems in Europe still unresolved and the doo at JP Morgan still hitting the fan, any bounce should be sold into as it will in all likehood be a dead cat bounce.
Yesterday GLD came within .33 of the December, 2011 low of 148.27 and today it rallied off a double bottom. The question is whether this is the start of a new leg up or if GLD will continue it’s march downward. There’s a good chance GLD will make a run to the top of it’s downtrend channel which right now sits at 158. We won’t know what the prognosis will be until it gets there as the downtrend must be broken before we can assume another leg up has started.
Conclusion: The S&P 500 looks like it may have hit a temporary level of support. The initial target of this correction is 1260 so even if we get a bounce from here the market will probably be headed lower.
The U.S. stock market is breaking down below critical support levels at the same time the VIX is starting to surge. As I mentioned in my entry of May 13, there was an inverse head and shoulders pattern on the VIX with the neckline at 21.64. The VIX has now closed above the neckline for 2 days in a row and the S&P 500 has closed below 1340 for 2 days in row. This is a strong indication that the market is heading lower. So far panic selling has not set in but the surge in the VIX indicates that it is probably just around the corner.
The S&P has a quasi head and shoulders pattern on it with a projected downside target of 1260.
In the late afternoon word came down that a run on Greek banks is underway. While the ECB claims there is a firewall around Greek banks, viruses have a nasty way of penetrating firewalls. At this point in time it is unclear as to which banks are exposed to European debt and how far things could spread. We know that MF Global made some bad bets on Europe and now JP Morgan is being investigated for trading losses. While we don’t know exactly what led to JPM’s trading losses, there’s a good chance it involved European debt.
It also looks like the really bad news may just be starting. Greece could not form a government and will require a new election in June. A run on Spanish and Italian banks could start at anytime if the citizens of those countries start to panic because of what is happening in Greece.
The U.S. Dollar has been on a rip and has broken through both short and longer term downtrend resistance. While there are horizontal resistance points at 82, 83 and 86, the multi-year downtrend resistance stands at just under 88. If the dollar were to surge that high the S&P would probably drop to about 1000. The question is will Ben Bernanke allow that to happen.
Since this is an election year the incumbents will probably do everything in their power to prop up the markets. It’s unclear at what point the Fed will step in with further easing but I doubt they will allow the markets to drop that far before the election.
Gold as evidenced by the chart of GLD may be approaching a double bottom. GLD is almost at the December, 2011 low and I would think that traders are waiting for it to get there before hopping in. While there will probably be some sort of bounce off that level, it is unclear if it will just be a blip in a larger downtrend of if a new rally will start.
Oil as evidenced by the chart of WTIC may also be approaching a double bottom. Oil broke down from a rising head and shoulders pattern and the pattern looks like it is near completion. An interesting scenario would be if the Fed announces a new round of QE just as the S&P, Gold and Oil hit their projected downside targets.
Conclusion: It looks like the stock market is heading lower. At some point the Fed and ECB will probably step in with further QE.
As can be seen on the weekly chart of Gold, Gold has pulled back to the uptrend line of the massive consolidation pattern that it has been in since July, 2011. Gold will either rally from this point or sell off further and possibly head a lot lower. The technical indicators point to a rally of some sort. Gold could rally to the the top of the pattern at about $1,700. and still remain within this consolidation pattern.
The stochastic on this chart is extremely oversold and is the most oversold it has been since 2010. Each time the stochastic hit this level of oversold a substantial rally has ensued. The RSI is at the level it was in January, 2012 when Gold staged a nice rally to the top of the consolidation pattern
If we look at the daily chart of Gold, we can see that it is culminating in a descending wedge pattern. Typically these patterns break out to the upside. The RSI is extremely oversold and is at the level it was in Janury, 2012 when a rally ensued. The stochastic is also at the level it was at other times subsequent to that when some type of uptrend ensued.
Sentiment on Gold is extremely bearish. One commentator on CNBC said Gold was heading to $700. per ounce. The talking heads are questioning as to whether the bull market in Gold is over. Even long term bulls are getting discouraged and predicting lower prices in Gold. These type of events generally mark a bottom in the underlying asset.
Conclusion: The technical parameters are pointing to either a temporary or final bottom in Gold with a rally to at least 1700 looking like it is in the cards. If Gold makes it that high it will have to be seen as to whether it can break through the upper downtrend line. If Gold fails to hold support at 1580. then the upward consolidation will have failed and much lower prices for Gold could be seen.
The technical picture however places the odds in favor of higher Gold prices in the near future. A low risk long trade in Gold could be placed at these levels with a stop just below 1580. If the trade is stopped out then a short position could be entered with a stop placed just above 1580. The target for a breakdown of the consolidation pattern would be the rising 200 day EMA which right now sits at 1310.
Last week was a roller coaster ride for gold and miners as they both got off to a strong start but then pulled back and finally ended the week on a high note. We now have specific chart patterns and price targets that can be traded for the anticipated rally.
Gold is now trading in a wide uptrend channel and the second point in the bottom trend line has been defined. The 200 day EMA was re-tested and held. I would expect gold to move to the top of the upper channel as it did between January and February. This would give gold a technical target of 1825-1850. The technical target of the inverse head and shoulders pattern outlined in my entry of March 24 is 2,100 so there is a chance gold could break out to new highs in this run.
Gold miners as evidenced by GDX recovered from what looked like a break down below critical support levels. GDX is now trading within a wide sideways trend channel. The target on GDX is 58 or the top of the utrend channel.
Bearish sentiment on gold and miners is now unwinding and should provide fuel for this rally. The fact that oil has broken down from a flag formation is another positive sign as lower oil prices are positive for miners.
Oil has sold off because the U.S. and Europe have stated that they may tap into their strategic oil reserves in an attempt to keep oil prices down. This is a band aid approach that may help in the short term but in the long run it will not have a major effect on the price of oil. Oil is going up in the longer term but it may take a quick drop to it’s 200 day EMA at 98. Then again this could be a false break down and when the news wears off oil will be back in the 105-110 trading range.
I mentioned in my entry of March 24 that TLT bonds were having a counter trend rally and would hit resistance at the 115-116 area. Well TLT didn’t make it that far as it got hammered at 114. Friday’s action formed a bearish outside candlestick that encompassed the prior 3.5 days worth of gains. TLT may find some short term support at it’s 200 day EMA of 111.01 and the March 19th low of just under 110. but this looks like a broken trade. There is longer term uptrend support at about 95 and that is where TLT looks like it is headed.
My guess is that the 30 year bull market in treasury bonds is officially over. One way to play rising interest rates would be to buy TBT. While there can be pricing problems with double inverse ETF’s this particular one has formed a rounding bottom and with interest rates coming off almost 0 it looks like the only direction this ETF can go from here is up.
The dollar has not been exhibiting any great strength lately as many analysts had been anticipating. The Euro has in fact been slowly rising as the perception is that Europe has at least temporarily solved it’s debt crisis while the U.S. has a potentially larger one looming in the future. There are countries like Russia, China, India and Brazil that are actively working to undermine the dollar as the universl currency of exchange.
If a sovereign debt crisis were to hit the U.S. it seems unlikely that the dollar and treasuries would be the main beneficiaries of it as the entire fiscal system of the U.S would be under fire. I would anticipate that gold, silver and other hard commodities would be the primary asset classes that capital would flow into.
Conclusion: It looks like the rally in gold, silver and miners is underway. In any event some gold and silver should be a long term holding in any portfolio.
Gold miners as evidenced by GDX double topped at 58. at the end of February and now appears to have bottomed at a major support level. Negative momentum is waning and while we do not have a completed MACD crossover, the MACD is turning up at a higher level than at the end of December when the index made a higher low. I have found this short term MACD divergence to be extremely reliable in calling turning points in the markets.
There was a breakdown of the rising head and shoulders pattern on GDX and the downside target of approximately 48 has been fulfilled. The minimum upside target of this run should be to the 200 day EMA at the 55-56 area. What happens past that point will depend upon the price action of oil and gold.
One way to play the rally in miners would be to buy Yamana Gold (AUY) either the stock or options. AUY has pulled back to the bottom of it’s well defined uptrend channel. The next move up should take it to the top of the channel at about 18.50.
Rising gold prices are good for miners but rising oil prices are not as they eat into the cost of production. Of course if the price of gold increases faster then the price of oil or the price of oil drops the 2 factors can negate themselves. Right now it appears that the price of both oil and gold are on the rise.
As I mentioned in my entry of February 22 GLD had broken through the neckline of an inverse head and shoulders pattern. That quickly reversed as JP Morgan apparently dumped a huge amount of gold on the open market. Any attempt at manipulation of the precious metals markets is doomed to failure as the laws of supply and demand will eventually win out. Central banks around the world are loading up on gold and China is an especially heavy buyer. China will be opening up it’s own gold exchange in June and the government is encouraging it’s citizens to load up on gold.
As a result of JPM’s actions there is an even larger inverse head and shoulders pattern forming on GLD. We have a left shoulder and head and the right shoulder is now forming off the 50 day EMA support line. If the pattern were to complete a successful break out of the neckline would bring gold to $2,100 per oz. With China opening up a gold exchange combined with the fact that Hong Kong will be opening up a silver exchange it seems highly likely that both gold and siver will be hitting new all time highs this year.
WTIC Oil has also formed an inverse head and shoulders pattern as evidenced by the monthly chart. The neckline has already been broken and the projected price target is 125.
Oil has been flagging since February as evidenced by the daily charts. Once oil breaks through the top of the flag formation it should make a quick run to 125.
As I also mentioned in my entry of February 22 bonds were in the process of breaking down but were taking quite some time to do so. Bonds as evidenced by TLT finally broke through critical support this past week and are now staging a counter trend relief rally. I expect TLT to hit stiff resistance at the downtrend of 116 or it’s 50 day EMA at 115.42. From that point on TLT should head lower and the stock market should continue to rally.
Conclusion: The Technical indicators are pointing to higher stock, oil and precious metals prices while bond prices are headed lower.