Great Trades

Great stock trades based on fundamentals and technical analysis.

Monday, June 21, 2010

Gold, Silver Breakout, Retest Success

Just a quick note to point out that gold and silver continue to break out, with gold at a new all-time closing high both on the daily and weekly charts. This is what a strong bull market looks like:

Silver has even been outperforming gold recently. Since our last update, silver is up over 3 times as much as gold, and still has quite a ways to go to get to even a new high on the year.

The Silver/Gold ratio had a bullish MACD crossover earlier this month, and has now broken above its 20-day EMA. Watch for silver to continue to outperform as long as this ratio remains above the 20-day EMA. Investors are beginning to realize that silver is money, too, and is a far cheaper alternative to gold.

For the stock market, since our last update on the SPX testing the 1105 area, it sold off to retest the February low at the 1040 area. After a successful retest of that support, for a nice double bottom, the SPX again tested its 20-day EMA and 200-day moving average this week after the VIX broke down badly from its uptrend. Unlike last time, this time the SPX broke above those moving averages, passing the test with resounding success.

With these successful tests, we now have the summer rally we were looking for earlier. As long as the SPX remains above its 20-day EMA and 200-day moving average, odds favor the long side in the stock market. For month end, the 12-month EMA remains in the 1090 area, and remains critical support for next week. With some more strength likely early this week after the news of the lifting of the China Yuan peg to the US dollar, the market would be short-term overbought and due for a pullback, but as long as any pullback is shallow, the summer rally should resume.

Watch the VIX downtrend in addition to these moving averages. When the VIX next has a strong break upward, it will likely mark the beginning of the next stock market selloff, which would be confirmed with breakdowns of the aforementioned SPX moving averages. There's a good possibility of such a selloff beginning by fall, after this summer rally ends.

posted by GreatTrades # 12:22 AM

Comments:

very good graphics!

# posted by

quick house sale : 12:25 PM

Fantastic work.This graph shows the market value of gold and silver.I think this weekly chart shows ratio of silver and gold.

# posted by

Mens Health : 2:08 AM

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Jay Jay : 11:44 AM

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# posted by

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I enjoy reading you posts in the past and most of the times you are right on target with your analysis. Are you a hedge fund manager?

Please write something when you have the time.

Thanks.

# posted by

Jason Lim : 10:02 AM

Silver and gold are trading at record high and all the nasayers that hated gold over the years have been stuped.

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I think natural gas is a better deal than gold here. Theirs and exchange traded note that tracts the price of gold using futures contracts it trades under the symbol {GAZ}

# posted by

King Kong : 4:38 PM

I believe that silver is a great buy right here.

# posted by

King Kong : 5:12 PM

I believe that the upward move in gold has lots more to go.

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Paras Tierea The Rize : 3:12 AM

Great Trades

Monday, June 21, 2010

Gold, Silver Breakout, Retest Success

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