first majestic silver

Gold Tries For A Breakout

Precious Metals Analyst
July 12, 2013

The US economy is doing well, compared to Europe’s worst performing countries. The most recent jobs numbers growth shows lots of part-time workers.  That’s not going to create a thriving economy.

 

TLT (T-Bond Proxy) Rally Time Chart

 

 

·        There is an ominous head & shoulders top pattern on this T-bond proxy chart.  Higher interest rates put an enormous strain on the government treasury, and on many over-extended Americans.

·        The greatest risk to the bond market is that the investment community could leave all at once, creating a panic.  We may be approaching a time where QE might have to be increased, rather than tapered. 

·        The Fed is committed to keep rates low for an extended period of time.  If $40 billion a month is being spent to buy T-bonds now, and that isn’t enough to stop rates from rising, the Fed must print more dollars and buy more bonds.

·        Yesterday’s rally came on questionable volume. I’m projecting for a small move back to the neckline area, followed by new lows. 

·        At that point, an increase in QE would be very likely!

 

FXI (China Stock Market Proxy) Power Volume Chart

 

 

·        Ben Bernanke “juiced” the market with his dovish statements on Wednesday. China is the largest manufacturing economy in the world, and the door is open for a substantial rally.

·        There is a big h&s top pattern on this chart, but yesterday’s gigantic volume is encouraging.  It opens the door to a rally to the right shoulder highs, in the $38 area.

·        Unless those highs are taken out, global stock markets remain in the danger zone.

 

Gold Breakout Chart

 

 

·        Both gold and silver have experienced parabolic price declines. The good news for embattled bulls is that this type of chart action usually happens at the end of a decline

·        Even if there is a big rally now, it will take many months for sold-out bulls to regain their confidence, and most of them could end up missing the price rise. 

·        Note the blue box that I put on the chart. An upside breakout from the inverse parabola may have already occurred.

 

GDX Arc Of Profits Chart

 

 

·        If an investor believes the price is ready to rally, the arc tool should be brought into play.  Fibonacci arcs can help investors place profit booking orders. In this report, I’m including 4 examples of the arc, using GDX charts.

·        This chart shows a decline in 2012, from about $57 to the $38 area.  A rally to about $48 took GDX to the 2nd arc.

 

GDX Arc Of Profits

 

 

·        The chart shows the 2011 - 2012 decline, and the ensuing rally. As a rule of thumb, investors should start booking profits when the price touches the 2nd arc of the pattern. In this case, that worked out quite nicely.

 

GDX Arc Of Profits

 

 

·        This arc chart highlights the decline from last summer to the current lows in the $22 area.

·        There is also a possible fuel cell volume (FCV) signal in play.  The target of FCV signals is the first ring of a Fibonacci arc drawn from the potential low point of the decline.  In this case, that’s about $32.

·        GDX should be able to rally to $35 - $38, which is the area between the 2nd and 3rd arcs on this chart.   

 

GDX Arc Of Profits

 

 

·        The fourth arc chart shows the entire gold stocks decline, from the 2011 highs, to the current lows in the $22 area.

·        The long term profit booking area suggested by the arc is $52 - $66.

·        The Fibonacci arc does not predict that a low has been made.  Oscillators, price patterns, and “lady luck” are needed for that. The arc tool is used to suggest good profit booking areas, once a rally begins!

 

Silver Rally Chart

 

 

·        Silver has come down to key support and is massively oversold. Fundamentally, it’s an outstanding value and a key asset. 

·        While RSI has yet to move above 30, MACD is turning higher.

·        Like gold, silver shows an upside breakout from a parabolic decline.

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Morris Hubbartt is the creator of proprietary timing models in the Superforce Signals, Superforce 60 Trading Service. He is senior vice president, General Manager and as Co-Owner of a concrete manufacturing company since 1985. He is also sole proprietor of SFS Newsletter Services that specializes in volume analysis of the gold & silver markets. His website is at www.superforcesignals.com.


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