Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Price Back Below $21

Commodities / Gold and Silver 2014 Mar 11, 2014 - 10:06 AM GMT

By: P_Radomski_CFA

Commodities

Briefly: In our opinion short speculative positions (half) in silver and mining stocks are justified from the risk/reward perspective.

We previously emphasized that the situation in Ukraine was the main bullish factor for higher precious metals prices (mainly for the price of gold) and that remains to be the case. However, even though the situation didn't improve, precious metals moved decisively lower on Friday. This does not bode well for the precious metals market, but let's examine the key charts before making the final call (charts courtesy of http://stockcharts.com):


Based on Thursday's closing prices, we wrote the following:

The volume was very low during yesterday's upswing, which has bearish implications. We wrote the same yesterday, but this time the implications are clearer as the rally was clearer as well. Bigger rally + very low volume have more bearish implications than a rather small rally on the same volume levels.

On Friday gold declined on relatively strong volume, which is another confirmation of the bearish outlook. The yellow metal now follows the rally-on-low-volume-but-decline-on-high-volume pattern, which is a bearish phenomenon. High volume usually tells the true direction of the market and in this case it's down.

The same was the case in the silver market and for mining stocks. Let's take a look at the latter.

GDX Market Vectors Gold Miners NYSE

As you can see on the above chart, the GDX ETF moved higher on low volume but declined (on Friday) on relatively high volume. Again, the implications are bearish, especially that the past few weeks have been similar to the July and August 2013 topping patterns.

Silver also moved lower - in fact, most decisively in the whole sector. It is now well below the 2008 high and it was the second weekly close below it. Silver is currently below the $21 level. For the bearish outlook to be confirmed (and for us to increase the size of the short position in silver), we would like to see a move below the rising long-term support lines - marked in black and grey on the above chart. They are close to where silver is now, so we may see further deterioration relatively soon.

Meanwhile, what we wrote about the USD Index regarding the medium-term perspective remains up-to-date:

The USD Index declined below the previous 2014 low (while gold, silver, and mining stocks didn't move above their 2014 highs), but this "breakdown" doesn't really have bearish implications. Similar "breakdowns" were followed by significant rallies back in October and December 2013. The breakdown is not confirmed in a technical sense, and it seems doubtful that it will be followed by more weakness or that it will really be sustainable.

From the short-term perspective, we see that the USD Index declined on Friday but quickly moved back up. It moved to the December 2013 lows, which proved to be support. The most important thing visible on the above chart is the presence and proximity of the cyclical turning point. The USD Index is now right after the turning point, and the preceding move was definitely down, so a turnaround here seems very likely.

All in all, what we wrote previously about the outlook for the precious metals sector remains up-to-date. It doesn't seem that keeping a full long position in the investment category is justified at this point in our view. Based on last week's events and what had happened over the weekend it was likely that gold would move much higher - but its reaction has been very weak. It looks like there will be no rally in gold before a bigger decline. We are keeping half of the funds in gold, though, just in case the next days bring improvement (or perhaps the tensions in Ukraine would increase). If not - things will become even more bearish and we will likely adjust the position once again.

We might suggest changing the short-term speculative position and / or the long-term investment one shortly, based on how the markets react and what happens in Ukraine.

In other news, we have recently posted an important report on the role of rebalancing in the case of the mining stocks sector. You can often read that one should do "some rebalancing" but we went much further than that. We dedicated months of research to comparing the classic buy and hold approach with rebalancing and you will find results in our latest report. It's available free of charge.

To summarize:

Trading capital (our opinion): Short position (half): silver and mining stocks.

Stop-loss details:

- Silver: $22.60 - GDX ETF: $28.9

Long-term capital (our opinion): Half position in gold, no positions in silver, platinum and mining stocks. Insurance capital (our opinion): Full position

You will find details on our thoughts on gold portfolio structuring in the Key Insights section on our website.

Again, our latest report on mining stocks rebalancing is available free of charge and we encourage you to read it.

As always, we'll keep our subscribers updated should our views on the market change. We will continue to send them our Gold & Silver Trading Alerts on each trading day and we will send additional ones whenever appropriate. If you'd like to receive them, please subscribe today.

Thank you.

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Tools for Effective Gold & Silver Investments - SunshineProfits.com
Tools für Effektives Gold- und Silber-Investment - SunshineProfits.DE

* * * * *

About Sunshine Profits

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2022 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