Here's what I see in the above S&P chart covering the crash and what follows:
- The absence of volume between 1050 and 1200 operates basically like a gap. There's nobody who can get a sense of relief, psychologically, by selling anywhere in that area. Technically this makes me expect the rally to continue until we get to some resistance (volume of buyers who have been trapped as losers and can feel like they "broke even" by selling.
- At 1222 is the last fibonacci and also the resistance just discussed. I expect serious resistance at that point.
- Generally the chart looks pretty bullish above the 50 and 200 day moving averages.
- The RSI doesn't look overbought at all.
- The volume, while not high, seems steady from June onwards.
- A rising stock market has been good for commodities and precious metals.
- Overall this looks like a pretty bullish chart to me at least for another 10% or so. Party on Garth.
The US dollar is in a nice, steady downward channel that pretty much lines up with the 50-day moving average. Its oversold according to the RSI and could jump up to the top of the channel and the 50-day, but the downward trend looks pretty well established. A falling dollar is good for commodities and precious metals.
The baltic dry goods weekly chart seems to have bottomed. Indicates that global industrial activity has bottomed and is picking up.
The CCI commodities index has broken out to the upside and is targeting a further rise of another 10% of so. At this point, prices are already up 30% year over year. If/when the target is achieved prices could be up 50% (or more) year-over-year. This, plus the falling dollar, plus the stock market rising on injected liquidity (not earnings) together paints a picture of rising inflation. More about this later.
The copper chart is a really nice looking chart at this point (ok, I've been wrong about copper):
- Breakout above the psychologically significant $3.00 point after consolidating a couple of months. This breakout took place during what is seasonally a weak point in the calendar year.
- It also has a confirmed breakout about the 50-day moving average and is securely above the 200 day moving average.
- The RSI is not overbought.
- By the way, both Zinc and Lead (Pb) are back above $1.00.
- So metal prices are back at the point where miners can make serious profits.
- I expect I'll buy, in my mother's account, some PCU (nice dividend yielding copper producer).I bought some Fortuna Silver (FVI.TO) this week (a Peruvian silver miner with a lot of zinc and lead byproducts) [hat-tip to Inca Kola News (IKN) news letter which has been recing this stock for quite a while).
The Gold / Silver ratio is trending downward nicely residing securely under the 50 and 200 day moving averages. A falling gold / silver ratio indicates an absence of fear (observe what happened during the end of 2008 when fear was rising). This is occurring while both gold and silver are rising. Together this is another "inflation is coming" indicator.
What can I say about the gold chart that hasn't already been said. Here's some notes from the weekly chart:
- Gold has a confirmed breakout above its all time high with three weekly closes above that high.
- The pattern preceding this breakout is a flat-top triangle formation which targets $1400. I don't know if it will go there or how long it will take, but that is what the chart says.
- The 10-week moving average (and the corresponding 50-day moving average) are at $1000. That leaves a tonne of support at $1000.
- On the daily, tick-by-tick 24-hour a day action I see buying coming in on every dip.
- Reports indicate that the Indians are buying at roughly the $1050 price and we believe the Chinese government is accumulating as much as it can without driving up the price. That leaves immense support for gold.
- Pretty darn bullish.
The HUI to Gold ratio is trending up nicely with the 50 day moving average as support and residing well above the 200-day moving average. This means that large-cap gold stocks are providing leverage (as they "should") and are rising faster than the price of gold. Junior producers / near producers (such as my favorites: Gold Resource Corp, Dynasty Metals And Mining, Troy Resources, Oceana Gold and Apollo Gold) have been enjoying even higher leverage.
Uranium had an excellent week (and month of October) breaking out above the 200-day moving average, 50-day moving average (earlier this month) and a multimonth trendline. I don't hold any Uranium miners, but perhaps I should.
The crude oil chart looks a little overbought but is trending upwards very nicely (just like the rest of the commodities). I'm not an expert on this but I hear that the short-term fundamentals are not really that good with a decent amount of excess capacity and brimming inventory levels. If my perception is right it fits right into my overall macro outlook.
So, my overall macro outlook is as follows:
- The commodity, inflation trade is "on" with the charts for everything that does well with inflation (commodities, stocks, precious metals...) trending upwards nicely (and the US dollar trending downwards nicely). It looks like it can drive the S&P 500 at least another 10% higher and then we'll see what happens next. The trend is definitely on with no obvious signs in the charts that I see pointing to a reversal.
- I know that there is a strong argument that the USA economic outlook is really dismal, but it appears to me that the rest-of-the-world has bottomed and is recovering (or at least that all that liquidity is flowing into commodities).
- I think that my Jr producer gold holdings (I know, I'm a broken-record) are a great place to be with excellent upside based on pure value (asset and P/E) at anything close to current gold prices and with a very bullish technical and fundamental outlook for the price of gold.
- Although the charts say the inflation trade is "on" and I may start edging back into base metals, I'm more confident with the gold Jrs based on valuation and the technical and fundamentals supporting the price of gold.
Hope you found this helpful. I found it quite helpful for myself. The charts actually paint a much more bullish picture than I had when I started looking at them today.
MontyHigh, www.worldofwallstreet.us
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