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Przemyslaw Radomski, CFA
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Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same. His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the... More
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  • Does Any Clear Picture Emerge From Gold And Crude Oil Charts?

    Does Any Clear Picture Emerge From Gold And Crude Oil Charts?

    Based on the June 7th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

    We have all seen the newspapers headlines about the troubles in Greece, Spain, Portugal, Ireland and the entire eurozone. The situation in the U.S. is not much better, even if the press is ignoring it for the moment. In both blocks there is high debt and large, long-term entitlement programs for citizens without any clear notion of where the money to fund these programs will come from. (Hint-the printing press.)

    The global economic situation is unstable and untenable. How long can citizens in the West continue to buy more and more imported manufactured goods from the East? When the West's appetite for unessential consumer goods will lessen as people learn to do with less because they have no choice, the economic situation in China and South East Asia will be even worse than it is in the west. The West can always go back to manufacturing, but it's unlikely that Asia can go back to agriculture.

    The month of May was possibly the worst month for gold prices in three decades, but it was unexpectedly followed on Friday, June 1, by the best daily climb--$66 -- since last August. The principal catalyst was the dismal US job report by the US Labor Department. Economists had hoped to hear about the creation of 150,000 positions, but the actual number was half that, 69,000, which brought on expectations of another round of QE, (that is, Quantitative Easing, not Queen Elizabeth who celebrated her 60 years Jubilee this week). It was interesting to note how the same financial media outlets that had eulogized the bull market just a week ago were now celebrating its return as a safe haven.

    With that in mind, let's take a look at the technical picture. Let's begin with the analysis of the crude oil market (charts courtesy by stockcharts.com.)

    In this long-term chart we see that oil prices continue their breakdown. This chart suggests that oil is likely to decline much more (to 74 or likely to 65 or even lower) and that gold prices have merely seen a small pause in their downtrend, much as was the case in 2008. The implications here are bearish for gold and the entire precious metals sector.

    Now, let's move on to the yellow metal.

    In the very long-term gold chart (if you are reading this essay on sunshineprofits.com, you may click the above chart to enlarge), we have three very interesting topics to comment upon this week. First is the interaction between the 300-day moving average (blue line) and gold prices. We see that prices moved to this level and then immediately declined. This moving average has been an important support many times in the past, which makes it important also this time. In 2008, in fact, it provided resistance when gold prices retraced after significant declines. This serves as a confirmation of what the crude oil price suggests.

    Secondly, the RSI levels here appear quite bullish as they bounced after reaching the 40 level in a manner similar to 2003 and 2004. This in itself is a bullish signal. Finally, the breakdown below the black declining support line has been invalidated as gold prices have recently rallied. Although this line could be broken once again, the situation is simply not as bearish as when gold prices were below this line.

    Turning to the Dow:gold ratio chart, we saw an invalidation of a breakout last Friday as stocks declined and gold prices rallied. The long-term picture for gold no longer is necessarily bearish based on this chart alone.

    In this week's chart of gold from a non-USD perspective, we see that prices rallied strongly last week, but overall there has not been much change here. The previously broken support line has not been breached, and the technical picture remains mixed.

    Summing up, the situation for gold is very difficult at this time. We have seen an invalidation of a breakdown below the declining support line. This is visible on the very long-term gold chart. We have also seen an invalidation of a breakout in the Dow:gold ratio chart, which is bullish for gold. At the same time however, crude oil is declining, gold prices are still below the 300-day moving average. From a non-USD perspective, the situation in gold remains overall mixed.

    In our view the chance for a continuation of the significant decline in the following weeks/months is a bit over 50%. Details regarding implications thereof and details of the current speculative trade are available to our subscribers.

    To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

    Thank you for reading. Have a great and profitable week!

    P. Radomski

    Editor

    www.SunshineProfits.com

    * * * * *

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for

    Gold & Silver Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Gold Charts, Gold Investment Tools and Analysis of Gold & Silver Prices Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    Jun 08 5:30 AM | Link | Comment!
  • The USD Index Above 82.5 Is Deadly For Gold

    The USD Index above 82.5 Is Deadly for Gold

    Based on the May 25th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

    The reasons for the gold's decline given in the press were a case of "round up the usual suspects."

    There were concerns that China's economy is slowing and that European leaders may fail to stem the debt crisis. As expected, the new French President Francois Hollande challenged Germany's deficit-cutting stance. The euro hit a near two-year low against the dollar on Thursday after dismal German economic data suggested that no country in Europe is immune from crisis. The German data for May suggested the growth in Europe's economic engine that has so far helped the currency bloc dodge recession, may be starting to slow. Last week euro dropped sharply to $1.2515, its lowest level almost two years. All that boosted the dollar driving the greenback to the highest since Sept. 13, 2010, against a six-currency basket.

    It is likely that the confidence in the U.S. dollar will turn out to be medium-term-lived. It won't be too long before the people will turn to the tried and true source of true wealth preservation-gold. Global economic turmoil is likely to continue over the next few years as we lurch from one economic crisis to the next and gold will be the beneficiary of this. We have no doubt for the long term. Those who invest in gold for long-term wealth preservation don't feel the bumps as much along the way.

    However, things may turn out differently in the medium term (several weeks to several months). Let's begin today's technical part with the analysis of the US Dollar Index's very long-term chart (charts courtesy by stockcharts.com.)

    The index has rallied in spectacular fashion for the past few weeks and the move is clearly visible even from the very long-term perspective. Three resistance lines have been surpassed and the index is currently at its last one based on intra-day highs. Once broken, if the breakout above the 82.5 level is confirmed, much higher values will likely be in the cards. A move to 87-90 would not be surprising in this case.

    Now, let's see how Euro did last week.

    The euro decline is quite likely responsible for most of the positive upswing seen in the USD Index. If the breakdown is seen here - below the black neck line of the head-and-shoulders formation - if we see the index close below this line for three consecutive days, the Euro Index will likely move much lower and the dollar much higher.

    In fact, we have already seen a breakdown in the euro based on weekly closing prices (red line) and this is being verified right now. Whether or not the breakdown is in is a bit unclear, but the situation in the Euro Index has surely deteriorated last week.

    To finish off today's essay let's have a glance at our in-house developed tool that traces the intermarket dependencies.

    The Correlation Matrix is a tool which we have developed to analyze the impact of the currency markets and the general stock market upon the precious metals sector. Last week, the coefficients were classic as gold and stocks were positively correlated and gold was negatively correlated with the dollar.

    A key factor this last week was how moves in the USD Index were immediately reflected in gold's price. It appears to be very important at this time to watch any move in the dollar and act accordingly. Based on the short-term trend, the USD Index seems likely to be headed above 82.5 even if it has to temporarily correct first (please note that there can be no such correction before the breakout). Lower precious metal prices will probably be seen following such a move.

    Summing up, all-in-all, the medium-term picture appears quite bullish for the dollar and bearish for the euro. If the breakout above 82.5 in USD Index is confirmed, a more powerful rally in it and a decline in gold will likely follow.

    To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

    Thank you for reading. Have a great and profitable week!

    P. Radomski

    Editor

    www.SunshineProfits.com

    * * * * *

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for

    Gold & Silver Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Gold Charts, Gold Investment Tools and Analysis of Gold & Silver Prices Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    May 30 2:19 AM | Link | Comment!
  • What Can We Infer From The Gold:Dow Ratio?

    What Can We Infer From the Gold:Dow Ratio?

    Based on the May 25th, 2012 Premium Update. Visit our archives for more gold & silver analysis.

    There is all the talk of Greece leaving the eurozone and we are already seeing a slow-motion runs on Greek banks. The Financial Times reports that €5 billion has left Greek banks in just the last two weeks and the more that Greek citizens feel it is possible that their country will leave the euro, the more incentive they have for pulling their money out and sending it abroad.

    There are no rules in place for a country to leave the eurozone and it is anybody's guess as to how severe the impact of such a move will be. These are uncharted waters and the sailing could get very rough. If Greece were to leave the eurozone, gold could initially fall on euro weakness and a flight to cash but the precious metal might then bounce due to a policy response of quantitative easing from central banks.

    No one can predict how big the systemic contagion will be for Spain, Italy and their banks. In Spain, 16 banks and four regions have just been downgraded by Moody's Investor Service. The point of no return may be approaching faster than anyone anticipated. Spain and Italy are too big to bail out if panic ensues after a "Greexit," which is why European leaders would prefer that Greece, with all its problems, remain. A Greek departure is likely to be seen as the beginning of the end for the whole euro zone project. Greek voters still need to produce a functioning government in new elections on June 17.

    New York Times columnist Paul Krugman compared the choice of Greece staying in Eurozone to the situation of Italy, where the north has had to subsidize the poorer south for many decades. He writes:

    Italy's currency union held together because the north made, and continues to make, large fiscal transfers to the south. Economists reckon these transfers to be around 4-5 per cent of Italian GDP. A flow of subsidies towards the south has had evil consequences: incomes have been maintained at uneconomically high levels, fostering unemployment. Large infrastructure and development projects have fuelled corruption, sustaining southern Italy's criminal societies. Fiscal transfers helped Italy maintain its political unity but the cost has been enormous. From an economic perspective, the Mezzogiorno (Italy's south) would probably have done better if it had stayed out of Italy's monetary union.

    Today, Greece stands on the brink of an exit from the euro. To avoid further sovereign contagion, the remaining eurozone members may find themselves pushed rapidly into a more complete fiscal and political union. The markets would doubtless applaud such an outcome. But if Italy's example is relevant, the northern eurozone members could find themselves paying indefinitely a large tribute to the south. Economic divergences within the single currency area could become entrenched. Viewed from this perspective, a clean-break divorce might bring more immediate pain but in the end prove less costly than an unhappy marriage Italian style.

    Meanwhile, central banks continued to buy bullion in April as Turkey raised its reserves by 29.7 metric tons and Ukraine, Mexico and Kazakhstan also increased their holdings, according to International Monetary Fund data.

    Before addressing the title question, let's begin this week's technical part with the analysis of the S&P 500's long-term chart (charts courtesy by stockcharts.com.)

    In the long-term S&P 500 Index chart (if you are reading this essay on sunshineprofits.com, you may click the above chart to enlarge), stocks are at some important support levels now. Last week, stocks moved below the long-term support line and today are trying to move back above it. We have seen some sideways trading around it and stocks are slightly above the support line based on intra-day highs. It's important to see where they close this week, as this chart alone does not give decisive information.

    Let us now move on to Dow Jones Transportation Average chart.

    In the chart, we see a significant breakdown last week, which was is currently being verified by a move back to the resistance line. If the index closes the week below this level, the breakdown will be verified.

    Now, let's see how the financials did this week.

    In the Broker Dealer Index chart (a proxy for the financial sector), we saw a move below the final Fibonacci retracement level last week. Attempts to move back above this line have been unsuccessful and the index is still visibly below this resistance line. This can be viewed as a verification of the breakdown, which is bearish not only for financials, but also for other stocks (more on this subject can be found in last week s essay).

    Finally, let's take a look at the Dow:Gold ratio.

    In the chart, we see that the ratio moved lower for a ten year period as gold prices rose. The ratio tried to move below the lows of 2009 in 2011 but the breakdown has been invalidated and a rally followed. In fact, this rally took the ratio above the medium-term declining resistance line (the declining red line on the above chart) and this breakout is now being verified.

    There are some bearish implications for gold here but these are limited since the breakout in the ratio has not yet been verified.

    Summing up, the situation in stocks is a bit indecisive for the S&P 500 but other indices show signs that lower stock prices are to come. In addition to these charts, a note about fundamentals seems valid here. Companies which are strong generally act weak before periods of market decline, whereas those which are weak fundamentally can be seen to thrive during the final part of a rally. Apple, seen as a strong company moved lower on Thursday, whereas Facebook (seen as weak from the valuation approach) has moved higher in each of the past two days. If the "strong-weak" theory holds, lower stock prices would be in the cards. As has already been mentioned, there are some bearish implications for gold in the dow:gold ratio chart, but we need to wait until the breakout in the ratio is verified to consider them reliable.

    To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

    Thank you for reading. Have a great and profitable week!

    P. Radomski

    Editor

    www.SunshineProfits.com

    * * * * *

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for

    Gold & Silver Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Gold Charts, Gold Investment Tools and Analysis of Gold & Silver Prices Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

    May 27 2:45 AM | Link | Comment!
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