LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
Broad Market Nearing Resistance while Gold Stocks Basing After Bottom



-- Posted Thursday, 16 February 2012 | | Disqus

By Jordan Roy-Byrne, CMT

 

While the gold stocks have enjoyed a decent recovery, they have certainly lagged the broad market which has almost broken out to new highs. Should you be worried that a major shift is in place? Hardly. The fact is the broad market is in the latter stages of its a cyclical bull while gold stocks just completed a major bottom. Don’t call us doom and gloomers because we do not foresee a real bear market. The last phase of a secular bear market tends to be mild in nature but coincides with a strong move in resources, higher inflation and higher interest rates. In looking at the charts, we expect 2012 to be a transition year in which precious metals reemerge while the broad market peters out at resistance.

 

Here we show the S&P 500 with its bullish percent index, a breadth indicator. The S&P 500 is nearing resistance at 1350 and has strong long-term resistance at 1400-1500. Currently, the bullish percent index is at 83% which suggests a top is near.

 

 

 

This chart, from the Short Side of Long, shows the S&P 500 and various sentiment indicators. Two of the three indicators are very close to bullish extremes.

 

 

 

Moving along, in the next chart we find that the gold stocks are retreating and could retest the December lows. From top to bottom we show GDX (large caps), ZJG (Canadian Junior ETF) and GDXJ (US Junior ETF). Note the positive divergence in the juniors which are no threat to break to new lows. We believe the same can be said of the large caps.

 

 

 

Relatively speaking, the gold stocks have reached an extreme in terms of their ownership versus the broad market. The chart below (source: sentimentrader.com) shows the assets in Rydex’ Precious Metals Fund. Relative to other sectors, assets are only 13% which compares with past bearish extremes.

 

 

 

The gold stocks will likely spend the next few months forming a base which follows the long-term bottom in December. Meanwhile, the broad equity market is unlikely to move much higher. The S&P is nearing short-term resistance at 1350 and would face significant long-term resistance if it reached 1400. Moreover, sentiment indicators show increasing risk in the equity market. At the same time, the gold stocks are on the other end of a spectrum. They are coming out of a bottom, are underowned and unloved after a disappointing 2011.

 

The impact of the overall market on gold equities can be tricky. If the broad market is in a bear market then gold equities will find it difficult to rise. If the broad market is surging, then investors will invest in conventional stocks and ignore precious metals. The biggest moves in mining stocks began prior to an equity market bottom (1931, 2001, 2008) or occurred with the market moving sideways (2005-2006, 1978-1980). Over the next year, the equity market is likely to move sideways from 1200-1450 while the gold stocks have a chance to rally back to resistance and launch a major breakout move. It isn’t obvious yet but markets are definitely and gradually nearing a turning point. If youd be interested in professional guidance in uncovering the best mining stocks for 2012, then we invite you to learn more about our service.   

 

Good Luck!

 

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com


-- Posted Thursday, 16 February 2012 | Digg This Article | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.