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Gold Stock Trades Editor Jeb Handwerger is a highly sought-after stock analyst syndicated internationally and known throughout the financial industry for his accurate and timely analysis of the equities markets, particularly the metals and mining sector. Subscribe to his FREE Newsletter right... More
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  • New Video Interview With Alix Steel From Thestreet.com
     Check out my recent interview with Alix Steel from thestreet.com.

    Please click here...


    Disclosure: No position in stocks mentioned.
    Tags: GLD, UUP, UDN, UGL, AGQ, SIL, GDX, GDXJ
    Nov 18 1:15 AM | Link | Comment!
  • U.S. Dollar Showing Incredible Strength On Emerging Fears

    The dollar has bounced higher as risk aversion has returned with Ireland on the verge of needing a bailout and China raising interest rates to combat rising inflation. There are growing concerns of the Fed needing to raise interest rates ahead of schedule as Treasury prices have had a bearish reaction. The previous euphoria in commodities appears to be waning and the technicals are demonstrating the fundamental challenges facing commodities as momentum deteriorates.

    Gold at the time of the QE2 decision was perceived as indestructible as investors worried about a currency devaluation war. As targets were being reached I issued a sell signal and cautioned about getting caught up in the euphoria. I had the four-word famous response, “This Time Is Different.” It was at this point in the precious metals rally where the rain clouds began getting dark beginning in late July.

    As bottoms and tops take time to form, patience is required when issuing a sell or buy signal. A top is now being confirmed as trendlines are being broken.

    Last week I warned that the US dollar was reaching three-year lows and to expect a dollar bounce. The dollar has bounced higher as risk aversion has returned with Ireland on the verge of needing a bailout and China raising interest rates to combat rising inflation. There are growing concerns of the Fed needing to raise interest rates ahead of schedule. The previous euphoria in commodities appears to be waning and the technicals are demonstrating the fundamental challenges facing commodities.

    There are negative divergences of momentum and price on both the dollar and gold to indicate counter trend reversals may be developing. I have alerted to be 100% defensive since the November 9 high volume reversal. (See Fed Creates Parabolic Move in Gold, Silver)

    Understanding momentum gives a trader clues that the trend may be changing ahead of the actual trend breakdown. Divergences in momentum signals the enthusiasm may be receding and the attitude of the crowd is changing.  At the beginning of a new trend there is a lot of excitement, but as the price continues higher demand weakens to the point where a major reversal occurs. Just like when you throw a ball into the air, the initial force wears off until it reverses direction and falls back. This loss of upward or downward momentum is being signaled in both the dollar and gold. Momentum changes trend often ahead of price.

    A new low was made in the US dollar after the election and the Federal Reserve’s QE2 announcement. However, the momentum didn’t confirm the new low made as it made a higher low on the RSI and MACD. This signals that the downtrend may be ending and that may have been an intermediate low.

    Negative divergence between momentum and price forecast further weakness for gold. Unexpected by many, the dollar is appearing to be the winner of the QE2 trade. Jesse Livermore said, “The smarter they are the easier the market fools them.” At the top in gold and the bottom in the dollar, the smart and easy trade was the wrong trade. Being long the dollar at a time when $900 billion is poured into the market is highly counterintuitive.

    The dollar broke through its five-month downtrend as investors are concerned of an Ireland bailout and emerging markets raising rates to combat imported inflation. Now we’re seeing political opposition to the Fed’s last move to pump $900 billion into the economy.

     



    Disclosure: No position in stocks mentioned.

    Disclosure: No position in stocks mentioned.
    Nov 18 1:13 AM | Link | Comment!
  • Trending or Trading: When To Use Momentum Indicators To Trade Markets
     Price volume action is showing weakness on this rally and there is a good chance we could see a third failure at the 200 day.  Many times, before bear markets ensue you can encounter three or four failed rallies above the 200 day before the primary bullish trend is reversed.Markets take time to transition from a bull to a bear market. Bullish mania wears down as repetitive failures shows a market that is losing confidence.  On each subsequent rally the amount of bargain hunters dwindle.  Price volume action is poor on this rally attempt.  If we see another failure- which I believe may occur- we could see a major trend change.

    Stochastics have been really accurate in this rangebound market.  Oscillators are most valuable in trading markets, not trending.  The S&P currently is a trading rangebound market while precious metals are in a steady upward moving trending market.  Since May the SPY has been in a trading range that only would have been profitable if one used oscillators.  On the other hand, in trending markets like gold which is in a steady uptrend the use of oscillators or stochastics should be secondary as those conditions shift as new high territory is reached.  In trending markets it is more important to rely on moving averages and trend support to make buy or sell calls.

    Be careful of selling gold or silver solely on overbought conditions. Gold (NYSEARCA:GLD) and Silver(NYSEARCA:SLV) are in very bullish patterns breaking out into new highs in an upward trending market.  Whenever you see a breakout into new price territory on strong volume, momentum indicators need to be relied upon less.  Gold and silver have both shown tremendous relative strength and I believe will provide continued safety during a market downturn.

    I believe gold and silver will continue to perform strong compared to other assets.  This summer has been hard on the equity markets and quantitative easing has been necessary for the Federal Reserve to maintaing momentum in this market.  New job growth has been weak and we are not out of the woods with the European Sovereign Debt issue.  Junior mining stocks who are translating cash into resources is where I want to be at the moment as they have held up well during this summer correction.

    Gold is finding support at the 4 week moving average and is forming the handle on the cup.  I believe gold and silver could have a very strong fall as the general public becomes aware of the junior mining sector and the value of gold and silver as an asset 

     


    Disclosure: Long Gold And Silver Mining Stocks
    Sep 13 2:03 PM | Link | Comment!
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