Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks Bear Market Rally Inflection Point and Dollar Rally Impact on Gold

Stock-Markets / Financial Markets 2009 Dec 21, 2009 - 02:25 AM GMT

By: Douglas_V._Gnazzo

Stock-Markets

Best Financial Markets Analysis ArticleThe action this week was in the currency markets. Moody’s downgrade of Greece’s sovereign debt put pressure on the euro, while supporting the dollar’s rally.

Hot money flows can sustain or reverse a trend in motion. Currency flows have weighed heavily on the gold market, which moves in line with the euro, and inversely to the dollar, as the chart below shows.


Next up is the weekly dollar chart. Price is bumping up into overhead resistance at 78, as the yellow horizontal trend line indicates. During November the dollar made a higher low, as support from the 2008 low held. This was the first hint a rally was likely.

MACD has made a positive crossover. Both the histograms and RSI have turned up. The weight of the evidence suggests that further upside potential exists – if the dollar can close above the 78 resistance level. The 38% Fibonacci retracement level at 80 is the next target, if resistance is broken through and confirmed. 

The daily chart of the euro shows serious technical damage, which will take time to repair. The euro has been in a rising channel for months. However, price reversed and sliced through lower trend line support at 148 without hesitation.

Overlaid on the chart are the Fibonacci retracement levels coming out of the April low. Since the beginning of Dec. the euro has fallen to its first Fib retracement level near 143.

If support doesn’t hold here, the next target is the 50% level near 140. Both RSI and CCI are oversold, but they can remain oversold for a lot longer than one would think reasonable. An oversold bounce would be of no surprise.

Gold Stocks

Precious metal stocks continued down, losing -3.20% for the week, as measured by the GDX index, which closed at 46.29. Since making its early Dec. high, the GDX has fallen about 16%.

In Nov. there were some who said the risk to gold stocks was the risk of not being fully invested. I respectfully disagreed and the reasons are unfortunately evident.

The daily chart shows price falling in early Dec., followed by a sideways consolidation. GDX then sliced through its 38% Fib level, and is quickly approaching its 50% retracement zone (44).

Friday saw a nice bounce up, as support held, at least so far. All eyes remain on the dollar and the euro for signs of direction.

Next up is the weekly GDX chart with the Fibonacci retracement levels coming out of the 2008 lows. Measuring the entire rally since the 2008 lows gives the 38% Fib level at 40.40. Several factors enter the mix:

  • Strength/weakness in short term interest rates
  • Strength/weakness in the dollar
  • Strength/weakness in physical gold
  • Strength/weakness in the overall stock market

If all four factors line up on the wrong side, the pm stocks will have a difficult time. The operative words being: if and all. From last week’s commentary:

Since its closing high of 54.78 on Dec. 2, the GDX has lost about 12%. Price is presently testing support. If the gold stocks don’t hold here, the next target is the lower diagonal trend line at 46.

Support didn’t hold and the GDX dropped and is now testing lower diagonal support at 46, as evidenced by the following chart. 

Summary

Although the trend is up for the overall stock market, there is substantial evidence that this is still a bear market rally and that an important inflection point may be close at hand.

The dollar rally we have been expecting is finally here, but it is short term overbought. Back in April we called for a $1300 upside target for gold if the inverse head & shoulder formation broke out, which it did.

Regular readers know that warnings of gold’s reaction to a dollar rally have been discussed in these pages for months. We have also been leery of pm stocks as they were approaching their recent highs.

To see what we think might be coming in the various markets stop by and check out our website; or request a free trial subscription at dvg6@comcast.net.

Free with every new subscription is a copy of the new book: Honest Money: a historical examination of the gold and silver coin monetary system mandated by the U.S. Constitution. A new audio-book is available, as well.

The above excerpt is from this week’s full market wrap report (34 pgs), available only at the Honest Money Gold & Silver Report website. All major markets are covered, including stocks, bonds, currencies, commodities, and the precious metals (36 charts). Stop by and request a free trial subscription or email dvg6@comcast.net.

Good luck. Good trading. Good health, and that’s a wrap.

Come visit our website: Honest Money Gold & Silver Report
New Audio-Book Now Available - Honest Money  

Douglas V. Gnazzo
Honest Money Gold & Silver Report

About the author: Douglas V. Gnazzo writes for numerous websites and his work appears both here and abroad. Mr. Gnazzo is a listed scholar for the Foundation for the Advancement of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

Douglas V. Gnazzo © 2009 All Rights Reserved


© 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