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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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  • Sunshine Profits: Stock Market Appears Ready For New High - What Impact Could It Have On Gold?

    Stock Market Appears Ready for New High - What Impact Could It Have on Gold?

    On Monday, after weekend talks failed to reach a solution that would reopen the federal government and raise the federal borrowing limit by October 17, the S&P 500 Index dropped to its intraday low below 1,700. However, the index reversed course early in the afternoon on a report that President Barack Obama planned to meet with Congressional leaders from both parties at the White House later in the afternoon.

    According to Reuters, yesterday Senate leaders made progress on a U.S. debt deal. Additionally, today they may reach an agreement to bring a halt to the fiscal standoff. The emerging deal would avoid a potential default, end the 15-day-old government shutdown and change the immediate deadlines in favor of three new ones over the next four months.

    Although it's far from complete as the Senate may delay passing the plan and House Republicans may seek to block or change it, investors still believe that an extension to the debt ceiling, or at least a resolution that buys more time, is highly likely. So do we - no matter how the authorities decide to call it, we think that more money will be available. Printing it is just too easy politically.

    Yesterday, the S&P 500 rose for a fourth day and closed at the highest level since September 19. It's worth noting that the index is within 16 points of its September 18 record of 1,725.52. The S&P 500 has advanced 3.3% in the last four trading sessions and this is its biggest four-day rally since January.

    The rally in stocks seems to have triggered a decline in the precious metals sector and the following stocks' moves could further contribute to metals' performance.

    Will the stock indices keep rallying? Let's take a closer look at the charts to find out what the current situation in the general stock market is (charts courtesy of stockcharts.com).

    (click to enlarge)

    Looking at the above chart, we see that the move below the rising medium-term support line was quickly invalidated and the outlook improved dramatically based on Thursday's session.

    The official reason was "signs of progress in negotiations to raise the U.S. debt limit, at least temporarily."

    In our view, it's almost certain that the debt ceiling will be raised, and the only unknown is the justification that politicians will use to do it this time. Therefore, we can expect stocks to rally further as the market becomes more optimistic about it. As mentioned earlier, yesterday the S&P 500 rose for a fourth day and closed at the highest level since September 19, which confirms the above assumption.

    In the previous week, gold's reaction was quite interesting - it didn't rally even though the additional perceived probability of the increase in the debt limit should trigger such a move. This time, markets seem to have focused on this piece of information as a relief, and people sold gold, which is no longer needed as a hedge - at least a lot of investors seem to have thoughts like that.

    The implications for gold are bearish, and this makes them bearish also for the rest of the precious metals sector, although to a smaller extent.

    Let's take a look at the short-term outlook.

    (click to enlarge)

    The invalidation of the breakdown is quite clear on the above chart, but since we already covered it above, we will now focus on something else.

    Another important thing to be noticed here is that declining stock prices didn't trigger a rally in the precious metal market. The only way in which the declining stocks managed to impact the precious metal market was to decrease the pace of the metals' and miners' decline. On a side note, our Stock Trading Alert subscribers remained updated throughout Thursday's volatile session (4 alerts were published on Thursday; the first one is available publicly and its description in the list of alerts is accompanied by an arrow summarizing the outlook - it was green and pointing upward before Thursday's session - for the first time in a week and a half).

    Let's turn now to the financial sector, which in the past used to lead the rest of the general stock market.

    (click to enlarge)

    On the above chart we clearly see that, in spite of the recent downward move, the financial stocks didn't invalidate the breakout above the level of 130. This was a subtle indication that a bigger decline would not be seen on the stock market.

    Consequently, the medium-term outlook remains bullish. Please note that since the support created by the 2011 high is relatively close, we will likely not see another major decline.

    With a bullish outlook for the stock market, it seems that the decline in the precious metals stock market can continue in the medium term.

    But how are stocks performing relative to gold - particularly: gold stocks? Let's move on to the gold stocks:gold ratio. We think that this is another interesting chart that may provide important clues about further movements in the precious metals.

    (click to enlarge)

    At the beginning of the previous week the HUI:gold ratio declined sharply and moved visibly below its 2013 lows. In other words, we saw a major breakdown in this important ratio and it seems that the ratio is on its way to the 2000 low at 0.133.

    Please note that the significant underperformance of the ratio was the thing that preceded the April plunge earlier this year. Of course, it doesn't mean that metals or miners have to move lower immediately, but in our view, it's just a matter of time.

    Summing up, the long-term, medium-term and short-term outlooks for the stock market are bullish, and the implications for the precious metals sector are bearish.

    To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

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

    Przemyslaw Radomski, CFA

    Founder, Editor-in-chief

    Gold Price Prediction Website - SunshineProfits.com

    * * * * *

    About Sunshine Profits

    Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

    Disclaimer

    All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA 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, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, 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.

    Oct 19 7:52 AM | Link | Comment!
  • Sunshine Profits: Did Gold Stopped Responding To The U.S. Dollar Price Moves?

    Did Gold Stopped Responding to the U.S. Dollar Price Moves?

    The recent week was tough for the U.S. currency. Investors avoided the dollar as uncertainty over the U.S. government shutdown and the upcoming debate on the debt ceiling weighed on sentiment. The shutdown, with its suspension of funding for government workers and some programs, could hamper U.S. growth and delay tapering. Therefore, some investors buy gold as a safe haven or alternative to the U.S. dollar on the view that it will outperform other assets during political or economic turmoil. However, looking at chart of gold, it seems that these circumstances have had a limited effect on the gold market.

    "(...) Sentiment remains hesitant towards gold, which has been reflected in the market positioning. While the temporary U.S. government shutdown has not proved to be a positive driver for prices, the risk of a debt ceiling breach holds scope to spark interest, in our view, given gold's response in 2011," Barclays noted.

    In our previous essay on gold price in October 2013 we wrote that the debt ceiling issue came up in 2011. Back then, an agreement was reached only in the last minute and gold hit an all-time high of $1,920 an ounce, in part because of the uncertainties surrounding the deal.

    Taking the above into account, investors are focusing now on the U.S. government shutdown and its impact on the dollar, and probably wondering where will the final bottom of the current corrective move will form. When we take a look at the chart, we see that the dollar dropped to its new eight-month low in the previous week. What's interesting, at the same time we didn't notice a sharp increase in gold. This relationship between the U.S. dollar and gold has encouraged us to examine the US Dollar Index once again (from many perspectives) and the medium-term gold chart to see if there's anything on the horizon that could drive gold prices higher or lower shortly. We'll start with the USD Index very long-term chart (charts courtesy by stockcharts.com).

    (click to enlarge)

    The situation in the long-term chart hasn't changed much recently and all of what we wrote in our essay on the dollar and gold is still up-to-date today.

    The long-term breakout above the declining long-term support line was not invalidated. (…) However, since the medium-term breakdown (below the support line marked with red) is visible also from this perspective, we could see some short-term weakness anyway. It seems that the long-term support line will stop the decline - that is, if the USD Index gets that low. Therefore, from the long-term perspective, it seems that the downside is still quite limited.

    Now, let's examine the weekly chart.

    (click to enlarge)

    On the above chart, we see that the USD Index reached the upper edge of the target area (marked with a black ellipse), so the bottom might be in. However, the situation is unclear, because even if the dollar moves three index points lower, it still will be in the target area.

    The breakdown below the rising, medium-term support line is confirmed, which makes the picture more bearish. However, as you can see on the short-term chart, it's not that important from the precious metals investors' point of view.

    Let's check the short-term outlook.

    (click to enlarge)

    Before moving to the main point, let's focus on a different interesting situation. At the same time, the USD Index has broken above the short-term declining resistance line and below the June low. In our opinion, the breakdown below the June low is more important, because it is of a more long-term nature. When two technical factors are in conflict, the stronger - more long-term / more significant one - usually prevails.

    As mentioned earlier, it is not the most important thing that we can see on the daily chart. The most important thing is gold's clear underperformance compared to the USD Index, something that used to herald declines ion the precious metal market in the past months.

    If we compare the dollar's performance and gold's performance in the last few weeks, we will see that gold has been underperforming the USD Index more and more significantly. In the final part of September, gold didn't move visibly higher even though the USD Index started to decline, and this was proved last week on Tuesday when gold plunged without any signal from the dollar.

    Again, this underperformance is the key thing to keep in mind at this time because it means the lack of clarity of for the USD Index is not so important. Gold can decline even without a signal (namely: without a rally) from the US Dollar Index.

    Having discussed the current situation in the U.S currency, let's now move on to the chart that shows us the yellow metal's performance in the medium term.

    (click to enlarge)

    On the above chart, we see that two important things happened last week.

    The first is the completion of the head and shoulders pattern and the breakdown below the neck level. The second thing is the invalidation of this breakdown. The invalidation by itself is a bullish signal, so further strength in the short term should not surprise us.

    Please note that there is a short-term declining resistance line based on the August and the September 19 highs, which intersects with the 38.2% Fibonacci retracement level based on the August-October decline and serves as resistance. If this resistance is broken and we see a breakout, we could also see another significant rally, perhaps above the $1,400 level. However, please remember that this is just a possibility, because this time, the medium- and short-term trends remain down.

    Summing up, although the situation ion the USD Index is unclear, it is not so important, because it seems that gold can decline even without the dollar'sa rally in the dollar. The medium-term outlook for gold remains bearish and the downward trend is not threatened at the moment, even though we could see some strength on a short-term basis.

    Oct 08 1:43 PM | Link | Comment!
  • Sunshine Profits: Volatile Times Ahead For Silver

    Volatile Times Ahead for Silver

    Based on the October 3rd, 2013 Premium Update. Visit our archives for more gold & silver articles.

    On Wednesday, silver gained almost 2.7% and reached $22 as a weak dollar boosted commodities priced in the greenback. The US currency was under selling pressure as a U.S. government shutdown entered a second day with no end in sight. The white metal was supported by weak U.S. economic data, which raised hopes the Federal Reserve would stick to its commodity-friendly stimulus for longer.

    Despite this temporary increase, silver has since given up the gains and is trading below $22 once again. We didn't expect silver to show significant strength - as we emphasized in our previous essay on the gold price on October 2013, the medium-term trend for the precious metals market remains down.

    Will silver decline further? Or maybe the white metal will rebound in the near future? Before we try to answer these questions, let's take a look at the charts and find out what the current outlook for silver is. Today, we will start with the analysis of silver from the long-term perspective, then move to a short-term chart, and then once again back to the big picture (charts courtesy by stockcharts.com).

    (click to enlarge)

    Although a lot happened this week, really not much changed, as silver remains above the 2008 high. It will be important to check where silver closes this week. At this time, it is unclear whether we saw a true move below this important support level (and Wednesday's rally was a correction) or it was just a temporary price slide. If so, we probably shouldn't view Tuesday's decline below this level as significant.

    Please note that the 2008 high corresponds to the 61.8% Fibonacci retracement level based on the entire bull market, which makes this level particularly important.

    Now, let's move to the short-term chart to see the recent price moves more clearly.

    (click to enlarge)

    On the above chart, we see that silver moved close to the short-term rising support line (based on the June and the August lows) and bounced after reaching it. However, it has now moved quite close to its 20-day moving average, which has been seen stopping rallies multiple times in previous months.

    Taking this fact into account, it seems that it will likely stop this short-term upward move once again. If not, we could see a more powerful upswing even to the August highs. Again, as is the case with the gold market, that's just a possibility, not something that is probable at this time since there has been no breakout just yet.

    Before we summarize, we would like to discuss an important long-term factor, which is likely to affect the precious metal market in the coming months.

    (click to enlarge)

    As you see on the above chart, there have been two major bottoms and two major tops in the current major long-term cycle. As you can see on the weekly chart, the next cyclical turning point will be seen in late November or early December this year. This may be where the next major bottom in silver materializes.

    Since the entire precious metal sector tends to move together during major price swings, the above has bearish implications for gold and mining stocks in the medium term.

    Please note that we saw extreme volatility right before the long-term cyclical turning point in all previous cases. Therefore, it's quite likely that silver will be volatile soon.

    Summing up, the outlook for the white metal remains bearish for the medium term, though the short term is rather unclear. Taking long-term cyclical turning points into account, we - the precious metals investors - should be particularly prepared to enter new trading positions and/or adjust the long-term investment ones in the next several weeks and months.

    To make sure that you are notified once the new features are implemented, and get immediate access to our free thoughts on the market, including information not available publicly, we urge you to sign up for our free gold newsletter. Sign up today and you'll also get free, 7-day access to the Premium Sections on our website, including valuable tools and charts dedicated to serious Precious Metals Investors and Traders along with our 14 best gold investment practices. It's free and you may unsubscribe at any time.

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

    Przemyslaw Radomski, CFA

    Founder, Editor-in-chief

    Gold Price Forecast Website - Sunshine Profits

    * * * * *

    About Sunshine Profits

    Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

    Disclaimer

    All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA 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, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, 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.

    Oct 08 1:40 PM | Link | Comment!
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