Stocks & Equities

Stocks Swing To Best Gain In 6 Months…..

shutterstock 112959457…..Volume & Credit Slumping. In 3 days the Fed has talked the S&P 500 up 4% (amid collapsing volumes)….

…..read more HERE

 

Some Hard Numbers on the Western Banking System
 

by Simon Black

‘If one of you stands up right now and heads for the exit, the rest of the audience probably won’t pay much attention. If ten of you do it, one or two people may notice and follow. But if 400 of you suddenly head for the exit, the rest of the audience would probably follow quickly.’

It’s a great metaphor for how our financial system works. The entire system is based on confidence. And as long as most people maintain this confidence, everything is fine.

…..read more HERE

 

Will Gold Mining Stocks Drop Any Further?

Last week was very disappointing for those who had previously been long precious metals and very profitable for precious metals bears. A lot happened after the FOMC meeting and the Federal Reserve Chairman’s statement on June 19, 2013.

As expected, the confirmation of the Fed’s intention to withdraw from QE3 clearly helped the American dollar. After about three weeks of the currency declines, last week brought the breakout and a start of a rally.

The strengthening of the U.S. dollar was a strong blow not only to the currencies, but also to commodity markets. 

After Bernanke’s comments, pessimism transpired to the precious metals markets and we saw some of the biggest swings in this sector.

The sell-off in precious metals pushed gold and silver to lower levels and last week they hit new 2013 lows but haven’t found the bottom quite yet, as it seems. On Friday gold fell below its technical support around $1,285-1,308 per ounce. The decrease in the yellow metal triggered a plunge in silver. The white metal has been beaten in the recent months even worse than gold, and on Friday morning its price accordingly went down to the lowest level since September 2010. 

Could these events trigger a more profound correction in mining stocks? 

It’s said a picture is worth a thousand words. So let’s take a look at some charts below and try to come up with a thousand words to describe what we see (charts courtesy by http://stockcharts.com ).

(click HERE or on Chart for Larger View)

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When you take a look at this chart you can ask a simple question: is the bottom already in? Several weeks ago we mentioned the silver-gold ratio as one of the key things to look at when making the call.

We have previously discussed how the final bottom for the white metal is often preceded by a big underperformance of silver to gold. This is yet to be seen, so lower prices are likely still in the cards for the white metal, and the rest of the sector as well.

There’s been no sharp drop so far, so the bottom is likely still ahead of us. If that’s the case and the entire precious metals sector is about to move lower, how low can mining stocks go?

Let’s take a look at two of the most followed commodity stock indices – the Philadelphia Gold/Silver XAU Index and the AMEX Gold Bugs HUI Index.

radomski june262013 2

The XAU Index is above our initial target (84) for this decline (or at least it was at the moment of creating the above chart). As you know this target level was created from the rising support line based on the late 2000 and 2008 lows.

However, it seems that we could see a move even below that level and a local bottom will probably form slightly above 80. This is the range that likely needs to be reached before the declines in the mining stocks and the precious metals sector come to a close.

This might be a great buying opportunity or – more likely – there beginning thereof.

Now, let’s have a look at the HUI Index. The chart below expresses a simplicity that betrays potential information on where this market may ultimately be heading. 

(Click HERE or on Chart for Larger View)

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Last week gold mining stocks have continued their decline. Although investors have been selling their shares fear remains in control. However, this may not last much longer. As we mentioned above it seems that miners might move even below the initial target of 84 for the XAU Index.

In this case, it is the HUI Index that enables us to create a better price target.

There is a major support zone drawn on the chart which is a worst case scenario. The red ellipse on the above chart includes both important support levels – the 61.8% Fibonacci retracement level and the 2008 low. There’s one more thing that we didn’t mark on the chart and that is the price gap close to the 300 level (the gap was formed in April). Such a price gap sometimes indicates that at the time when its formed, the market is halfway done rallying or (in this case) declining. Taking this analogy provides us with a target in the marked area as well.

Our final chart today is the gold-stocks-to-gold ratio which is one of the more interesting ratios there are on the precious market.

radomski june262013 4

The above chart provides a very bearish picture. We see that the decline continues and that the ratio is quite far from its target – the 2000 low.

Please note that the trading channel and the next horizontal support intersect at a point much lower than where this ratio is today. 

As we wrote over a month ago in our Premium Update on May 17, 2013:

The ratio has already broken below the previous late 2008 major low (…). This is a major breakdown and it was confirmed. The implication is that the trend is still down.

With the trend being down and accelerating and the recent breakdown being confirmed, there is a good possibility that the miners will decline significantly once again.

The ratio might move to its target level – the 2000 low – close to the 0.135 level, which is a quite clear forecast as far as direction of the next move is concerned.

Summing up, the outlook for mining stocks remains bearish and the correction is likely still not over.  There may be many obvious, and not so obvious reasons for this recent underperformance of the precious metals sector, but the charts are quite clear. In our view it does not seem that the final bottom for mining stocks is already in at least not based on last week’s closing prices.

Thank you for reading. Have a great and profitable week!

Przemyslaw Radomski, CFA

Founder, Editor-in-chief

Gold Investment & Silver Investment Website – SunshineProfits.com

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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.

 

TSX Composite Index Trouble

Anybody notice the massive head-and-shoulders topping pattern on the TSX Composite?   It has been obvious that the Canadian benchmark charted a triple top at 12,900, a peak reached in January, March, and May.   It could also be argued that a head-and-shoulders pattern is potentially in play as well, a bearish setup that would push the benchmark further into negative territory on the year.   A break of the neckline, presently around 12,000, could target 10,900, or over 9% lower than present levels.   Until the technicals improve, equity markets are within a negative trend, defined by a series of lower-lows and lower-highs.   Beware of the seasonal volatility ahead as we progress later into the summer.

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The equity market selloff continued on Monday as investors remained concerned by the looming Fed tapering of present monetary stimulus.   The S&P 500 declined by around 2% at the session low, but trimmed the losses into the close as investors sought to buy the dip.   The trend for the market remains negative and the technical sell signals are accumulating.

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…….read more HERE

Initial “Sell” Signal Is In

Screen shot 2013-06-24 at 8.04.51 AM

After eight straight months of advance in the markets what the media absolutely believed could not happen finally has – the market quit going up. However, you can’t really blame the media for believing in an “unstoppable” rally, after all, like a “Bigfoot” sighting, they clearly saw evidence of an urban legend.

However, as we have been discussing for many weeks, such market advances that push prices to extreme divergences from their historic norms are ultimately due for a correction. Without such corrections the markets become distorted, unhealthy and subject to severe crashes.

This week we will review our analysis from last week, set targets for the current correction and discuss recommended actions for portfolios currently.

However, before we jump into the analysis I want to give you a few updates to the coming changes to the newsletter and website.

“Streettalklive.com” is merging into “STAWealth.com.” Only the look is changing – all the great features will remain the same.

This weekly newsletter will actually become three different HTML documents that you will be able to print, read on your tablet and phone, share with friends post to your social network. The three pieces will be:

            – Portfolio Management: Market analysis & Investing Strategy

            – Market/Sector Analysis: Analysis of 15 major sectors /markets

            – 401k Plan Manager: Expanded and improved model/analysis

Also, more frequent postings to the daily blog that are short reads, quick analysis or video/audio analysis of investing ideas, economics, strategies or tips.

As we get closer to the rollout of the new site I will keep you informed of all of the changes. I hope you will find the new website to be more useful and informative in the management of your financial future.

……read the 17 page report HERE

These are Not Normal Times

Millions of investors are soon going to learn about the financial markets the hard way — through giant losses.

Why? Because they’re confusing normal times with abnormal times.

Let me explain. In normal times, rapidly rising interest rates and Fed credit tightening would typically be bearish for commodities and stocks.

But these aren’t normal times. We’re coming out of a period with the lowest interest rates in the history of the country. A period that was fraught with financial failures, even the near-total collapse of the monetary system. And a period when the Fed deliberately kept interest rates at record lows.

Thing is, most investors aren’t making the appropriate distinction. They’re reacting in a knee-jerk fashion to the recent rise in interest rates. So they’re dumping gold and other commodities, and unloading stocks as if a giant bear is back on the scene.

But based on all of my research and long-term indicators, I’ve concluded that those same investors are going to be very sorry.

Why? Because this rise in interest rates, occurring during abnormal times, is going to have precisely the opposite effect. Instead of being bearish, it’s going to be resoundingly bullish for a lot of markets.

Simple logic explains why.

Screen shot 2013-06-24 at 7.00.53 AMFirst, rates were at record lows because almost nobody wanted to borrow. The demand for credit simply wasn’t there.

So as rates and the cost of money and credit rises, guess what happens? Demand goes up too. Potential homeowners and businesses will want to suddenly borrow again before interest rates go any higher. And that, in turn, will stoke all sorts of demand, from housing, to commodities, juicing corporate earnings and the stock market.

Second, interest rates are way below the true rate of inflation, which is running north of about 8%. In other words, we would need rates to move higher than the true rate of inflation ? higher than 8% ? to negatively impact any markets. Until that point comes, if at all, rising interest rates will actually become fuel for higher prices, once the knee-jerk selling has passed.

Third, there will come a time in the not-too-distant future when our foreign creditors start to sell U.S. sovereign debt as they lose confidence in our government’s ability to manage its affairs.

The resulting rise in interest rates will be very bullish for most markets, as money leaves the bond market in droves and seeks out alternative investments for appreciation and safety.

So you see, right now millions of investors are selling everything from gold to stocks because they think we’re in normal times, or approaching normal times.

But these are abnormal times. So you simply can’t apply the old rules.

You have to think out of the box, or you’re going to get buried in the box with a whole lot of losses and missed opportunities. And that’s not what I want for you.

Instead, I believe what’s going on now in the markets is a huge gift for savvy investors. For the following reasons:

  1. It’s helping gold slide into what should prove to be a major low. Ditto for silver. .
  2. It’s helping the dollar rally. A rally that will, in turn, be aided by Europe’s coming demise. That, in turn, will eventually lead to a huge opportunity to short the dollar, because, ultimately, its long-term bear market will resume, offering you enormous profit opportunities.
  3. It will eventually drive huge amounts of money into gold. Other commodities as well.

Right now, though, the selling can continue. So don’t be afraid to make hay with it in the short-term.

For instance, if you’ve followed my suggestions in this column, then you’re short stocks via the ProShares UltraPro Short S&P 500 (SPXU) and you’re long the dollar via the PowerShares DB US Dollar Bull (UUP). Hold those positions.

As to gold and silver, I’m loving that they are falling now. Why? Because the declines are setting up one of the greatest buying opportunities of all time.

Best wishes,

Larry