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.

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.

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.

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.

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......