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Technical Divergences Are Growing

Morris Hubbartt
Weekly Market Update Excerpt
posted Nov 25, 2011

US Dollar Double Top Chart

How safe is the Dollar?

  • The fear trade has returned, and this has a short term positive impact on the dollar. This market has a long way to go, and unfortunately it’s to the downside. The focus has been on Europe now for months, with the financial press covering a time bomb that will not end well for its citizens. In the shorter term that media coverage benefits the US dollar.

  • The focus for months has been all about the next nation in Europe that will ruin investors, so they run from all assets, including gold and silver, to the “safety” of the dollar.

  • Unfortunately, the fundamentals couldn’t be any worse for the US Dollar. The national debt has topped $15 trillion, with the deficit over $1.4 trillion. The time is quickly approaching when interest payments could overwhelm the government’s ability to meet obligations.

  • Money printing has been the historical “solution” to this problem. Lighten up on the dollar while everybody is running to it. The economy is stagnant and the debt is beyond payment. Printing is their answer. Gold should be yours!

Gold Super Highway Chart

Analysis

  • Gold has taken a hit this week, due to news out of Europe and the US “super committee” failure. Use this technical weakness to transfer assets into gold.

  • Every time a scare hits the broad markets, gold goes down too, but the fundamentals of the ongoing gold bull market are stronger than ever. I prefer to hold about 30% of my assets in physical precious metals outside the banking system.

GDX Launchpad Chart

  • Volatility has returned to gold stocks this past week. When turbulence moves in, it pays to understand what you own and why you own it. Central bank buying in the 3rd quarter was an enormous 148 tonnes. This kind of demand requires aggressive mining and much higher prices. My targets for GDX are $75, $95 and $133, with the highest target projected within a timeframe 18 months.

GDX MACD & TRIX Chart

  • The above chart paints quite a bullish picture. It is a one year chart that displays the greatly oversold position of senior and intermediate gold stocks, basis the MACD & TRIX indicators.

  • The price has not come close to a new low during this pullback, and oversold indicators are in a powerful position here. This price area is a good place to buy for new participants, and the upside projections should give a lot of hope to those who are already fully invested.

GDXJ Technical Support Chart

  • The above weekly chart displays a very bullish picture for gold junior stocks. Note that MACD has been oscillating lower for 11 months. This type of action is like a weight on stocks, moving the price lower. On a weekly basis, this indicator is at the bottom and appears ready to turn up.  Volume is also declining with the price, and that is very bullish.  

GDXJ Divergence Chart

  • This 60 minute chart shows just how positive a position the gold stocks are in. There are positive divergences from top to bottom on this chart. Volume patterns are being dominated by up volume. All other indicators on this chart are foretelling higher prices. Look at the divergences on MACD, RSI, and CCI!

Silver Chart

  • I consider silver the best investment you can make right now. Note how the weekly MACD bottomed in October of 2008 when silver was trading in the $8-9 range, it topped with silver touching almost $50.

  • Now, consider the COT smart money traders who are in a very similar position they were in when silver was trading near $9. There are those that advocate shorting silver, but I don’t see that as a viable strategy at this stage of the crisis.

  • Buy physical silver. I am projecting $150 per ounce, within a timeframe of two years.

DBA (Agriculture ETF) Chart

  • A week ago, I put out a maximum sell signal on crude oil. Crude had moved 35% in a few short weeks. Where do you move that capital now?
  • I believe one of the greatest opportunities that now exists in the markets, both in the short and long term, is agricultural commodities. Agriculture appears very close to the start of a brand new phase of outperformance.
  • This weekly chart configuration looks very similar to the charts above of GDXJ and silver. MACD is very low, and looks set to turn up. This price area is a place to accumulate this quality asset, with an eye on much higher prices. Uptrends in agricultural commodities can last well over a year. I just issued a buy signal for DBA on Wednesday. Personally, my holdings in this sector haven’t been this large since the bottom of May 2010!

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Nov 25, 2011
Morris Hubbartt

321gold Ltd