• 97 days Could Crypto Overtake Traditional Investment?
  • 102 days Americans Still Quitting Jobs At Record Pace
  • 104 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 107 days Is The Dollar Too Strong?
  • 107 days Big Tech Disappoints Investors on Earnings Calls
  • 108 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 110 days China Is Quietly Trying To Distance Itself From Russia
  • 110 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 114 days Crypto Investors Won Big In 2021
  • 114 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 115 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 117 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 118 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 121 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 122 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 122 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 124 days Are NFTs About To Take Over Gaming?
  • 125 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 128 days What’s Causing Inflation In The United States?
  • 129 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Markets
  3. Other

Gold and Silver Stocks Maintain Long-Term Support

Now that we are past the Fed circus we can get back to reality. But what is reality? Is it inflation? Deflation? A repeat of 2008? What matters is the message of the markets and the correct interpretation of the message. With regards to the mining stocks we are seeing a stark contrast relative to the rest of the stock market. This positive divergence has been strengthening and remains well intact despite Thursday's sudden Fed-induced selloff.

In the chart below we graph GDX (gold stocks) and SIL (silver stocks) at the top followed by the S&P 500, EEM (emerging markets), CRX (commodity stocks) and XLE (energy stocks). In each graph (but SIL) we show the 400-day moving average. The 50 and 200 day moving averages are important but in my opinion the 400-day moving average is the most important when dealing with the primary trend.

GDX

The 400-day moving average has been significant for each market as it easily distinguishes between bull and bear markets. Each market, with the exception of the precious metals stocks has broken its 400-day moving average. Equities, emerging market equities and commodity stocks are now in a cyclical bear market. This doesn't mean these markets will fall another 20%. I think they've seen most of their downside. The key point is that these markets won't make a new high anytime soon and will likely remain in a trading range over the next 12 months.

Meanwhile, despite Thursday's drubbing, the gold and silver equities remain healthy from a long-term technical perspective. GDX would have to fall another 10% to test its 400-day moving average. SIL doesn't have 400 days of history but its holding 6% above its 350-day moving average. Back in the summer of 2008, the mining stocks plunged through support alongside commodity stocks and emerging market stocks. Today we continue to see an entirely different picture.

The gold and silver stocks are right where they need to be, holding up well amid a summer swoon that likely ends next month. There may be some more downside for these shares but don't expect a penetration of long-term support. These stocks have held up well for fundamental reasons. Metals prices are up significantly on all time frames while cost pressures are abating. That is a recipe for higher profits and higher share prices. As we near 2012, a peak in bonds and bottom in equities will send money flowing into the gold and silver stocks.

Good Luck!

 

Go here to learn more about how you can take advantage of our professional service.

 

Back to homepage

Leave a comment

Leave a comment