Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Gold and Silver Stocks Sentiment Analysis

Commodities / Gold & Silver Stocks Oct 06, 2009 - 08:51 AM GMT

By: Jordan_Roy_Byrne

Commodities

Best Financial Markets Analysis ArticleIn analyzing the sentiment towards gold stocks, I am going to start with a tactic from Bernie Schaeffer of Schaeffer’s Research. I believe he espouses the idea of looking at the consensus view of analysts. If most analysts are bullish on a stock or sector, then where is the money going to come from to push shares higher? Conversely, if a sector is rising but the analysts are not bullish, they can change their mind and that provides further buying power.


As far as the gold and silver shares, I was curious as to the consensus analyst rating, 2010 earnings growth forecast and price target. In the graph below, I show the current analyst rating on the stock, the consensus forecast for 2010 earnings growth and how far above the current price, the mean price target is. Remember that analysts rate stocks 1.0 (strong buy) to 5.0 (strong sell). A 3.0 means hold, while a 2.0 means buy or accumulate. Since Wall Street is naturally optimistic, a 3.0 basically means “sell” and a 2.0 means “hold”. 

Only Silver Wheaton has a rating below a 2.0. Most gold and silver shares are rate from a 2.3 to 2.8. The next two columns are very interesting. The second column is the consensus 2010 earnings growth forecast and the third column is how far above the price target, the stock currently is. Analysts are expecting very good earnings growth in 2010, yet they don’t expect the stocks to move very much? In recent days, the stocks have gained a lot. It seems that the rating and price targets don’t fit with the earnings growth.

This is a good sign if you are a bull on gold and silver shares. Analysts have yet to jump on board and that means that clients at those firms are not invested or at least underinvested in gold and silver shares. Moving along lets take a look at some options data. 

Options Data

The first chart shows the ISE Put/Call ratio for SLV and the cumulative Put/Call ratio (ISE) for all the Silver stocks we track. The bottom graph shows the price of SLV and price of GDX. We can see that GDX and SLV are basically flat throughout the period, yet the Put/Call ratios in both SLV and the silver shares are rising steadily. Often times, a spike in the put/call is a strong signal of a potential bottom. 

In this chart we show the ISE Put/Call for GDX and a cumulative ISE Put/Call ratio for all of the gold stocks we track. The blue is the CBOE Open Interest Put/Call ratio. The signals are not quite as strong as for Silver but the ISE figures were steadily rising from September 11 to September 25.

Short Interest Data

In our Gold & Silver stock newsletter, we collect short interest data and use it to build these simple charts. The first chart is the cumulative short interest for all the silver stocks we track. We graph the changes in short interest with a silver index we made. It is considered bullish when short interest rises along with the particular market. Since the end of April, short interest in silver stocks has risen steadily.

Here we show the short interest for all of the gold stocks we track. Our price index is XGD, the Canadian Gold Stock ETF. The short interest surged 44% in the period of September 1 to September 15. New short interest figures are available Friday on NASDAQ’s website. 

Conclusion

Some sentiment data can give strong signals while some sentiment data has to be interpreted in a different way. I actually think that some analysts place too high of importance on sentiment data. Remember that the crowd is actually right most of the time. It is best to use sentiment data to predict turning points and for market timing purposes. I prefer to use sentiment data in conjunction with technical analysis. 

In looking at the various data provided here, one has to feel pretty good if you are a bull on gold and silver stocks. First, the analysts on the street don’t have high expectations for the shares, despite the positive outlook for metals prices and profit margins. Secondly, we see constructive put-call data following the mid September peak. In other words, options data gives no sign of excessive bullish sentiment or even bullish sentiment. Finally, the surge in short interest shows strong skepticism about the ability of the shares to sustain these prices.

A daily close above 445 on the HUI should induce quite a bit of short covering.

For more info on our gold/silver newsletter, visit: http://trendsman.com/Newsletter/GSletter.htm

By Jordan Roy-Byrne
trendsman@trendsman.com
Editor of Trendsman Newsletter
http://trendsman.com

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.

Jordan Roy-Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules