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Weekly Market Update Excerpt
posted Jul 12, 2013
TLT (T-Bond Proxy) Rally Time Chart
- 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.
- 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 Tabanids 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 #1
- 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 Chart #2
- 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 Chart #3
- 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 Chart #4
- 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 Time 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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Jul 12, 2013