Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Stocks No Retest of June Lows

Commodities / Gold and Silver Stocks 2013 Sep 06, 2013 - 12:46 PM GMT

By: Jordan_Roy_Byrne

Commodities

Recently I’ve received some emails from those who are concerned about a retest of the June low in the precious metals complex. That prompted me to look at how rebounds develop from significant bottoms. In recent months we focused on historical bottoms in gold stocks and it helped us to pinpoint the best buying opportunities. In this editorial we broaden the scope and examine how certain bottoms play out and why they play out in a particular manner. The length and depth of the preceding bear market helps us to understand how the ensuing bull market evolves during its initial rebound.


Below is a chart that shows the S&P 500, CCI (commodities) and Gold from 2007 through 2009. The S&P 500 declined for nearly 18 months without any major rallies. It was extremely oversold and enjoyed a V bottom. The March bottom was actually somewhat a retest of the November low though it did form a new low. Meanwhile, commodities were very oversold but for only a short period of time. Therefore, after the market bottomed it “based” for about four months before accelerating. (This is somewhat similar to what occurred following the 1987 stock market crash). Gold was oversold but only for a short period of time. Its bottom took a few weeks to form and then within a month had a retest.

Next, look at the 1974 bottom in the S&P 500. The market was cut in half over more than an 18-month period. It was very oversold and oversold for a long period of time. The retest occurred within two months of the bottom and then the rebound accelerated.

The chart below (from nowandfutures.com) plots Gold from today with Gold from 1975-1976. Back then Gold declined by nearly 45% and over an 18-month period. Gold was extremely oversold and oversold for an extended period of time. That could be why Gold didn’t have a retest. This time around Gold was in a similar position. It declined over 35% over a 20-month period but has since rebounded over $200/oz. It’s not a coincidence that the two rebounds occurred without a retest.

These studies provide great examples and a great education with regards to post-bottom price action. Here is our interpretation. If a market is extremely oversold and has declined for a long period of time then it is more likely to have a V-type bottom. If a retest doesn’t occur (in this case) within two months then the bottom is most likely in. If a market is extremely oversold but has only declined for a short period of time (1987 crash, 2008 crash) then a base building process (or two steps forward, one step back) should be expected over the coming weeks.

If a market is extremely oversold for an extended period of time then the selling has been exhausted, therefore leaving little resistance to the rebound. This explains the V bottom. Conversely, if a market hasn’t been oversold for an extended period then there are still some sellers that come in after the bottom and slow down the rebound.

It’s been two months since the bottom in precious metals and the sector remains comfortably above its lows. Silver is still $5/oz above its lows while Gold is nearly $200/oz above its lows. It’s too late to expect a retest of the lows. In fact, the miners already tested their lows in early August which was five weeks after the bottom. Given what we’ve studied, the severity of the 2011-2013 cyclical bear market, and the recent strong rebound, there is no compelling reason to expect a retest or any major decline.

The chart below plots Gold as well as various miner ETFs with arrows emphasizing the 50-day moving averages.

Last week we wrote:

The bottom line is the current correction or consolidation is quite healthy for the sector. Many stocks have made huge runs in a very short period of time and are set to digest those gains and correct short-term overbought conditions. Be patient over the coming days and weeks and use the 50-dma as a guide for support and potential lows.

The above chart shows that gold and silver stocks of all stripes are quite close to testing the now upward sloping 50-day moving averages. We should see a test of that support over the next few days. Don’t fret over recent weakness as its an opportunity. If you are kicking yourself for not buying the June or August lows, then you may get another chance very soon.

If you'd be interested in professional guidance in this endeavor, then we invite you to learn more about our service.

Good Luck!

Email: Jordan@TheDailyGold.com
Service Link: http://thedailygold.com/premium

Bio: Jordan Roy-Byrne, CMT  is a Chartered Market Technician, a member of the Market Technicians Association and from 2010-2013 an official contributor to the CME Group, the largest futures exchange in the world. He is the publisher and editor of TheDailyGold Premium, a publication which emphaszies market timing and stock selection for the sophisticated investor.  Jordan's work has been featured in CNBC, Barrons, Financial Times Alphaville, and his editorials are regularly published in 321gold, Gold-Eagle, FinancialSense, GoldSeek, Kitco and Yahoo Finance. He is quoted regularly in Barrons. Jordan was a speaker at PDAC 2012, the largest mining conference in the world.

Jordan Roy-Byrne Archive

© 2005-2022 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