Week Ending 4/03/09
The following is an excerpt from the full market wrap report (34 pgs.) available at the Honest Money Gold & Silver Report website. Stop by and check it out - all 28 charts and graphs.
In last week's report I stated:
The next chart focuses in a bit closer to the recent price action. RSI is showing a negative divergence, which suggests a pullback. There is an open gap at 35 that may need to be filled: more evidence of a likely correction. The CCI indicator was deep into overbought territory and is now moving lower.
The chart below is the same chart used last week, but it has been updated for this week. The RSI negative divergence played out to the downside filling the open gap. The CCI indicator was spot on flashing an early warning.
For the week, the GDX lost almost 7%, while gold was down a bit over 3%, however, gold stocks usually move 3X to physical, so if we take it on the upside, we must accept it to the downside as well.
It is only balanced action so to say. We may not like it, but it is what it is. We can always choose not to play if we do not like the rules of the game.
The chart shows mixed signals, although most of the indicators point to the downside (short term at least). There are two significant positives, however.
The 50 ma put in a golden cross over the 200 ma. This is a long term positive and very constructive development. This does not mean it will take "effect" immediately, but unless it is violated by a negative cross to the downside, it means good price action lies ahead.
The CMF indicator shows positive money flows even while the index has been taking a hit to the downside. If this lasts, this too is a very positive development going forward. It means that investors are accumulating the index, even on weakness. If such continues, rising prices will follow in due course.
The charts of most precious metal indices are leaning to the downside, as are most of the precious metal stocks themselves. Most are overbought and need to consolidate. There are negative divergences.
A lot depends on what the dollar does, what the stock market does, and what the price of gold does; all of which depend on how risk is perceived and priced accordingly.
As of now I'm looking for more downside action to consolidate the recent strong advances and resulting overbought conditions. This is normal and healthy market action.
Even markets must digest their intake. If you notice on the charts above - GDX has more than doubled off its low.
The dollar lost 1.29% for the week. In last week's report I thought the dollar might have a short term rally. I was wrong. It lost ground instead. The chart below shows the gap down. Actually there are a couple of open gaps.
Notice that MACD is ever so slightly in negative territory. It would not take much to move it back into positive territory (and fill the gap).
The dollar's fall gave a boost to the commodity markets as the second chart indicates. With the dollar falling market players are willing to take on more risk. Hence safe plays like the dollar and gold are being shunned; at least they were last week. We'll see what this week brings.
Commodities have been building a nice base since Dec. of 2008. A series of higher lows has been put in place. Overhead resistance is clearly evident on the chart below (upper horizontal black line).
The falling dollar has given a boost to commodities. Price is back above its 50 ma and RSI is headed up, as are the histograms, along with a positive MACD cross.
Commodities got hit bad and have much room left to the upside from which they have fallen. They are a far distance below their old highs. There is a lot of tough sledding ahead.
The above is a brief excerpt from the full market wrap report available at the Honest Money Gold & Silver Report website. This week's 34 page report contains 28 charts & graphs, including positions held in the model portfolio and on our stock watch list. All major markets are covered.
When gold was recently closing over $1000 an ounce we were selling into the strength and looking for a correction that came within days of our call. A few weeks ago we bought GG on a Friday for $29 per share and sold it the following Friday for $34 a share, as posted on our bulletin board. Since then we have looked for more weakness, which has occurred.
When others were touting the beginning of a new bull market in the overall stock market, we were calling for a resumption of the secular bear market, which is here in spades. Come see why we believe the present rally is a suckers rally and why the bear is about to unleash its full force and fury.
There is also a lot of information on site about gold and silver, not only from an investment point of view, but also from its position as being the mandated monetary system of our Constitution - Silver and Gold Coin as in Honest Weights and Measures. In today's turbulent times of financial crisis gold and silver are more important than ever. Stop by for a free trial offer. Send your request via the email listed on site.
Good luck. Good trading. Good health. And that's a wrap.
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