Sunday, December 7, 2014

Precious Metals Market - If History Repeats We Are Again At The Same Point

Firstly, the chart:

The chart shows the relative strength of Precious Metals miners' shares against the broad market (S&P 500). Today, the ongoing bear market in the PM sector is at the same point as in 2000, when the first stage of the bull market in the PM sector started.
If the history repeats we could expect the second stage of the bull in the PM sector.

Is it the chart of the decade?

Monday, November 24, 2014

U.S. Equities Go Up But The Overall Picture Deteriorates Again

Most recently U.S. equities have printed new highs. But it does not look as the classic and healthy bull market. Let us look at the table below:

As the table shows, though the market goes up, its technical picture deteriorates. New records are printed with less high and high-low issues. It means that less and less companies are driving the market higher.

Sunday, November 9, 2014

Gold Mining Shares Record The Highest Weekly Volume In History

When there is something unusual in stocks it is very often marked by high trading volumes. In most cases such situations occure during market reversals. For example, in a bear market, high volumes happen at dips when most of the participants panick and a few big investors do the opposite.
Let us look at the charts below:

The first chart shows the price action of precious metals producers (GDX) and the second one relates to juniors (small PM producers, developers and explorers - GDXJ). Both charts have the same element - the last week was a period of the highest volume in history of GDX and GDXJ.
I do not claim this a bottom in these shares but definitely something important is happening in the whole PM shares sector.

Tuesday, November 4, 2014

Big Precious Metals Miners At Their Multiyear Supports

It is a very interesting situation in the gold sector. The biggest miners are at their multiyear supports - technically speaking they do not have too much room to go down further. Of course, in theory their shares can go to zero but this is just a theory applicable to all stocks.
Well, look at the charts below:

The best examples of these multiyear supports are evidenced in the charts of  Kinross, Anglogold and Barrick. Their shares have been trading at the levels not seen since the beginning of the last decade gold bull run. It is really impressive. The three PM behemoths  have done nothing while gold prices are much higher these days than 12 years ago.

Sunday, November 2, 2014

Gold Sector Decimated But Juniors Are Being Accumulated

Last week the entire gold sector was decimated. Speculators were throwing gold stocks in the towel.
Many very good companies (low cost producers with decent reserves / resources) went down 10 - 20%. Simply, the sector crashed.

Now it is impossible to find a single positive opinion on gold, silver and related companies. Even PM perma bulls expect gold to fall to $1000 or around that number.

In my opinion, these days we observe a typical picture of the bottom in the gold sector forming. What is more, it should be a very hard bottom, which means that the prices would not go below this bottom for many years to come.

One of the best signs of that process is the strengthening of  juniors shares. Look at the chart below:

The chart shows a few juniors (exploration and development companies) - in most cases their shares have been going up since the end of 2013. The strength in that sector is better visible in the charts below - they show the relative strength of the sector against the whole PM sector:

It seems that juniors are being accumulated and the main reasons for that are:

- big producers extract gold and silver all the time, no matter the prices of gold and silver (it is quite different behaviour than, for example, this seen in the uranium sector - the uranium miners in most cases are not extracting uranium due to very low uranium prices - this is very logical and economically right decision)

- therefore they are depleting their resources

- in the last years there are practically no big discoveries of gold / silver deposits

- so the only way to replenish the resource base is to acquire juniors' shares

- during the last leg down in PM sector (which started in 2011) the juniors shares were decimated

- presently their shares are very cheap

 - therefore it is time to acquire juniors shares by big PM producers

- the recent strength in their shares supports that thesis.

Saturday, November 1, 2014

U.S. Equities - Short Term Selling Signals and Long Term Negative Divergency

So we had a correction to the upside in the U.S. Of course some would say (sorry, not "some" but nearly "everybody")  we had a correction to the downside and now we are again in the uptrend.
Maybe... as the legendary trader Jesse Livermore once said that the stock market is constructed in such a way to fool most people (me as well) so everything could happen.

But let me introduce two charts, which seem to confirm my stance. The first  one is a short term look at the U.S. stock market:

The lower chart shows a 10 day simple moving average of the NYSE advance - decline issues indicator. This is one of the best short term indicators of selling and buying pressures at the U.S. stock market. Presently the indicator says that we are in the short term selling zone.

Now, let us look at the long term indicator:

This chart shows the behaviour of VIX (VIX measures the stock market volatility). Looking at this indicator in the long term we can spot that at inflection points it shows divergencies with the stock market. For example in 2009 this indicator was rising while the stock market was falling - shortly after that the stock market started its long bull run.
Presently, similarly to 2007, it is showing the negative divergency with the stock market which points to the incoming problems for the bulls......

Wednesday, October 22, 2014

Gold Denominated In Other Currencies

Sometimes it is good to look at things from a different perspective. Let us look at gold denominated in U.S. dollars and other currencies:

As you can easily spot, when related to other currencies, gold looks not so badly as in the case of U.S. dollars.
For example, gold denominated in euros is approaching the resistance level (and not support as gold denominated in U.S. dollars).

Sunday, October 19, 2014

A Quick Look At U.S. Economy

Banks are vital entities for every economy. If banks do not lend there can be no real growth. When we look at the balance sheeet of the American commercial banks we can spot that since the last financial crisis banks have been behaving very prudently.

source: FRED, Simple Digressions

As you can see, between October 2007 (just before the last financial crisis began) and October 2014, loans granted by the American banks were growing 2.4% per year; in the previous cycle, beteween Oct, 2000 and Oct, 2007 the c.a.g.r. was much higher: 9.5%. So in the current business cycle the banks are very reluctant to grant loans (or, it is better to say, the businesses are reluctant to raise loans). And remember that interest rates are standing at  nearly zero!

But look at the cash assets. In this business cycle the cash assets were going up 38.4% per year. These cash assets of the American banks ($2.9 trillion) are nothing more than deposits held at the FED. Simply, banks have sold U.S. treasuries, which they held before, to the FED and the cash obtained from those sales was deposited at...the FED.

For many years the talking heads were telling the public that the American economy is healthy. No, it is not. Businesses do not want to borrow money, which has a negative effect on investments.
What is more, the money artificially created by the FED through many stages of quantitative easing just went back to the FED, not to the economy.
On the other hand, it is a very positive phenomenon. The businesses, seeing artificially low interest rates, did not subscribed to it. They are just standing aside.

By the way, I recommend the economic insight offered by two American economists: Van R. Hoisington and Lacy H. Hunt. Each quarter, these guys publish excellent analysis on American economy. Here is a link to the last piece.

Wednesday, October 15, 2014

U.S. Stocks Are Going Lower

There are two strong signals indicating that the U.S. stocks bull run is finished at the moment.
Here is the first one - the old good Dow Theory:

As you see, both indices have broken their supports which were the secondary lows. This is a confirmation the stocks are going lower.

Another chart:

Value Line Geometric Index has also broken its suport - we have a similar technical situation as in 2007 (see my previous post here).
Well, now I am waiting for a major correction to the upside.

Sunday, October 12, 2014

The Tocqueville Gold Fund - This Is a Chart for Gold Bulls

The Tocqueville Gold Fund invests in precious metals assets. The main holdings, as of 31 August are:

 source: Tocqueville Gold Fund

As the table shows, the Fund, apart from gold bullion (8.12% of the assets), invests mainly in precious metals miners and streaming companies. For those unfamiliar with gold stocks:
  • Royal Gold and Franco - Nevada are streaming and royalties companies
  • Goldcorp is one of the biggest and lowest costs PM producers
  • Agnico Eagle, Eldorado Gold, Yamana Gold are big PM producers
  • Tahoe Resources and Detour Gold have just started PM production
  • Primero Mining is a medium PM producer
The Fund portfolio is quite an interesting offer for gold investors. What is more, the Fund is overseen by John Hathaway - the highly respected gold veteran.

Let us look at the long term chart of the fund:

As you see, the price of the Fund is in a long term upward trend and the last sell out in the sector looks like a good entry point for gold bulls.

Friday, October 10, 2014

U.S. indices approaching some support

The U.S. stock market does not look good for bulls. But, apart from crashes, prices do not go down in just one move. It is rather quite a complicated structure.
Presently, after the initial fall, the market may find some suport. Let us look at the chart below:

VIX, which measures the stock market volatility, indicates the possible support. Since 2013, when VIX had been trading around 20 -22, the corrections were over. It is interesting whether this story will repeat these days. Well, looking at the charts of the main U.S. indices, with some of them breaking down their trend lines, I would expect only a minor correction up.

Saturday, October 4, 2014

Precious Metals Market - Situation Is Very Interesting

First of all - I cannot find any optimism on precious metals market. Everybody is busy with guessing to what levels gold or silver are destined to fall. But I know one thing - when everybody is pessimistic about any asset class  the bottom is near or we are just at it.  The same is with gold and silver.
Anyway, this time the situation in PM market is a little bit different. But before more details are provided, please, look at the current situation at this market:

It looks as the whole sector is standing on the edge of a major disaster with silver breaking down below its strong suport.
Maybe, but not so fast. Previously, in 2011 - 2013, when a bear leg in PM market started, the first assets to breake down were stocks of Juniors and Producers. Gold and silver followed them one year later.
Today, the leading factor is silver - it broke down in September. Gold and Producers are at their supports while Juniors are behaving pretty well (see the chart at the bottom of this post).
I do not have the slightest idea where all that mess will end but definitely Juniors are being strongly accumulated. And due to the fact that the only players buying Juniors are proffesionals (with very deep pockets), this occurence confirms my belief that we are near the bottom in the PM sector.

Sunday, September 21, 2014

Value Line Makes Me Very Cautious

Value Line Index is not confirming the top printed by S&P 500 and a few other indices. To find parallels, please, look at the charts below:



This is another example of a deterioration in a technical picture of equity markets in the U.S.

Saturday, September 20, 2014

U.S. Stock Market Is Seriously Degenerated

U.S. equities are marching up but there are many signs this market looks not so good. It does not mean this is a good opportunity to short it but it means it is a good opportunity to sell equities. Simply put, the risk is, in my  opinion, too high. A way too high. Just two charts:

I have explained the meaning of SKEW Index in this article. Looking at the chart above we can spot there is a very high risk of a rapid correction.

Well, another thing. Look at the chart below:

Despite Nasdaq100 and S&P500 marching up, we see that less stocks record new highs
But we have seen it before. The most surprising thing is that we see that more and more stocks record new lows while indices are standing at their long-term highs.
The market is driven by less new high issues and more new low issues. It does not look good.

Thursday, September 18, 2014

Navios Maritime Acquisition Behaves Better Than Its Peers

Most recently I have written an article on Navios Maritime Acquisition. This is a shipping company having a quite big fleet of product tankers. These vessels are being used in the transportation of such oil related products as diesel oil, gasoline, jet fuel etc. In my opinion, the operators specializing in this segment of transportation business should benefit from growing U.S. exports of petroleum products.
Below you will find the charts showing the current technical situation of NNA's shares:

Wednesday, September 17, 2014

Gold And Silver Near Their Supports But PM Stocks Look Good

Well, it looks quite strange. Both silver and gold are approaching their supports (silver actually standing at its suport) but the behaviour of Juniors (PM explorers) indicates that the PM market does not look as bad as it appears. Look at the charts:

The blue area indicates that PM miners and explorers are not in a bear market anymore. Either they are not in a bull market. They are just in a consolidation phase with Juniors better than Miners (a yellow area indicates a bear market with Miners better than Juniors).

Wednesday, September 10, 2014

Nasdaq 100 Topping But We See More 52-week Lows Than 52-week Highs

Such a situation had happened only once: in March 2000 when we a historical top at Nasdaq100 was printed. Look at the chart:

What happened then?

We had experienced a very severe bear market in tech stocks.

Now, the history repeats:

Today, Nasdaq 100 is topping and....there are more 52-week lows than 52-week highs. It resembles March 2000, doesn't it?

Saturday, September 6, 2014

European Central Bank Cuts Interest Rates But Gold Does Not Fall

The general rule is that gold is negatively correlated with the U.S. dollar. If dollar goes up, gold goes down. And vice versa.
On September 4, the European Central Bank cut interest rates very aggresively. After that the U.S. dollar strengthened by nearly 1% - quite a nice and quick jump. After one day it stays at these high levels.
Shortly after the rates were cut gold dipped around 1%. Till that moment it was as the general rule said. But then...well, it regained nearly everything it lost and at the end of September 5, gold is standing more or less at the level it was standing before the rates were cut. Quite embarrassing, eh? Look at the charts below:

I do not know what will happen next. Gold is not in its upward trend. But it looks like the players want to tell: "Hey, we do not trust currencies, we trust gold".

Saturday, August 30, 2014

This Time Gold Miners Are Going Differently

Generally, when U.S. dollar is rising the shares of gold miners are going down (as gold and silver). But most recently, gold miners has been doing quite well despite U.S. dollar rising (gold has been repeating the old pattern, i.e. going down or stalling with $ going up). Please, look at the chart below:.

The orange areas indicate the rising U.S. dolar environment - at these times PM miners are going down.
But look at the last orange area (starting in March 2014) - PM miners have been going up quite steeply. It looks very bullish for PM miners' stocks..

Thursday, August 21, 2014

Silver and Gold - At Inflection Point Again (How Many Times Yet?)

Gold is hated in the West. No matter what happens it stays unchanged or goes down.
The game is simple: BUY U.S. stocks SELL gold.
But sometimes the game is at interesting points. Presently we have such a point. Please, look at the chart below:

Most recently silver has started to weaken against gold. This is good for gold bears and bad for gold bulls. When we have a bull market in precious metals sector then silver is better investment than gold. Since August 2013 silver has stopped to go down against gold which has been a rather good sign for gold bulls.
 But today we have a test period again - if silver goes down below the green line on the centred chart the bear market in PM sector could start again.

And just one look at the dominating pattern in gold (it repeats nearly every day):

Monday, August 18, 2014

Gold Miners Are Trying To Go Their Own Way

Firstly I would like to remind you one of the charts illustrating the gold miners' relative strength against gold:

Despite a long term up trend in gold, recently the precious metals miners have been dramatically undervalued against gold. But presently the situation is very interesting. Let us look at the chart below:

As in August 2013 and in February 2014, PM miners are trying to set free from gold. Despite gold going nowhere, the prices of PM miners are going higher. Please, study these markets carefully. If we can see the breakdown in the relative strength of PM miners against gold, the big bull run in PM miners stocks could start.
In the end, just a look at things from a different perspective....

Saturday, August 9, 2014

Gold Inflows Into GLD Replicate The Gold Prices

Nothing special in gold. When we have the gold bull run the we should see gold inflows into GLD (sort of a fund acccumulating the physical gold). And the opposite. Let us look at the chart below:

Since March 2014 we observe the similar action concerning the gold price and gold inflows into GLD. Well, the consolidation phase in gold is still intact.

Thursday, August 7, 2014

Lake Shore Gold - In My Opinion This Is One Of The Best Gold Miners

Lake Shore Gold is a Canadian gold miner operating three gold complexes in the Timmins Gold Camp (Canada).
The company (ticker NYSEMKT:LSG) has made a huge progress most recently. The stock price action mirrors the company management's work. Let us look at the chart below:

To illustrate what happened in the company's fundamentals, please, look at these charts and numbers below.

Some of the numbers were adjusted to make them comparable - the quaterly ebitda, cash flow from operations and gold ounces produced were multiplied by a factor of 4 to compare them to the yearly numbers.

As you see, LSG extracts gold from higher grade deposits - for those not familiar with gold, grades etc. it means that LSG is digging in the rock with higher quantity of gold. Which is good.

LSG is ramping up its production- in the second quarter of 2014 it extracted 52,300 ounces of gold which, adjusting it to the whole year, makes around 200,000 ounces a year (actually, the company plans to extract around 160,000 ouces of gold, which is more than in 2013).

And the most important thing - cash flow from operations. LSG is not digging gold - it is digging cash. And it is a lot of cash. Taking into account that presntly the LSG enterprise value stands at $565 million it means that the investment in LSG shares should pay back in 3.6 years. Not bad.

Monday, August 4, 2014

U.S. equities - a Topping process

Bears had their time most recently. At last. But in my opinion this is not the beginning of the major decline or a bear market in stocks. Let us look at the charts below:

Only Russell 2000 is in its consolidation phase; the other indices are trending up and the last decline has been just a usual correction.
So the bull market is still intact; no matter how big the accompanying divergencies are. And there are many of them (just look at some of my previous posts).
But there is something which is really different this time...or it could be. The main divergency I will be closely watching from now on is NYSE Advnace-Decline Issues. Look at the chart below:

To spot what is going now I had to present the last chart in a much shorter time span:

As you can spot, the market's picture has just started to look very awful for the bulls.

Saturday, June 28, 2014

Bonds and Stocks - Interesting Relationships

Somebody once told that the truth is in the bond market. Well, let me look at some of these markets to find whether there is any relationship.

I will look at the corporate bonds and junk bonds. As everyone knows, junk bonds are associated with a high risk while corporate bonds vice versa. When investors feel that something wrong is in the making they escape into safe instruments. It means that if such is a case, they should prefer to own less risky corporate bonds to junk bonds.

Let us look at the chart below:


The charts show three markets: stocks (S&P 500), junk bonds and corporate bonds. Below the charts of these instruments you will find the chart showing the relative strength of junk bonds against corporate bonds. As you can easily spot, before any major correction in stocks the corporate bonds were stronger than their junk friends. The most interesting thing is the last junk bonds' relative weakness lasting from September 2013. It has been the longest weakness since 2007. Prudent investors are escaping into less risky instruments and they have been doing that for quite a long time .

Wednesday, June 11, 2014

The Trade In PM Exploration Companies

In my May 16 article I presented a simple strategy for playing gold miners stocks. Today a quick update of that trade plus one relevant modification:

As you see, the trade is still active and buying GDXJ on May 16 would have bring a profit of $2.5 per share till now (7.1%).
But, for those risk averse players, this deal could be a little bit different. Because this is a play between big PM miners (GDX) and junior PM exploration companies (GDXJ) it could be less risky to go LONG GDXJ and go SHORT GDX - smaller profit but smaller risk as well As you like.

But generally the trade is still on...

Monday, June 9, 2014

Positive Set-Up For Gold In The Making

Gold is a story about two markets:
  1. Far East (mainly China and India) - this is a physical market - people there do not care about the gold price - they just want to hold gold in coins, bars etc. Why? Because for them gold is money and everybody wants to have money...
  2. West - this is a paper market - nobody cares about holding physical gold; the price of futures contracts is the only thing which counts.

In other words: the Far East holds gold and the West speculates, trades etc. What is more - in a silent and slow process the Far East is taking gold from the West. In my opinion, the paper gold market is going to vanish. Simply, the Far East will take gold from the West so in some time the Western speculators in gold will have nothing to speculate on.

But for the time being the speculation is still on. Looking at one of the main flag ships of gold trading, SPDR Gold Shares (GLD), we can spot interesting thing these days. Generally, the price of gold mirrors the changes in the flows of gold in GLD. Let us look at the chart below:

When there are in-flows of gold into GLD, the price of gold (and GLD) is going up. And vice-versa.
Presently, we can notice that there are inflows of gold into GLD (the last red circle).