SILVER ASSETS ARE DOING EVEN BETTER THAN GOLD -- SEMICONDUCTOR SURGE HELPS KEEP THE NASDAQ IN THE BLACK
SILVER EXCEEDED SPRING PEAK MONTHS AGO ... Precious metals surged to new nine-month highs on Wednesday on heavy volume. Although a lot has been made about the fact that gold was testing its spring high (which it broke yesterday), the fact is that silver exceeded that chart barrier in late November. Chart 1 shows that, although both precious metals are rising, silver has been rising faster than gold all year. We see the same thing when we look at precious metal shares. Silver-related shares are doing much better than gold stocks.
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SILVER STOCKS DO MUCH BETTER THAN XAU... Gold shares continue to lag behind the commodity. Chart 2 shows that the PHLX Gold & Silver (XAU) Index has yet to clear its December peak at 149.95. A close above that level by the XAU would give added confirmation to the strong commodity action. Silver shares, however, have done better than either commodity. In fact, the only two stocks in the XAU that have reached new record highs are silver-related. Chart 3 shows Pan American Silver (PAAS) trading at a new record high. Chart 4 shows Silver Standard Resources (SSRI) doing the same.
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HECLA MINING IS CLIMBING AS WELL ... Another silver-related stock to hit a new 52-week high this week is Hecla Mining (HL). And it did so yesterday on massive volume. [HL is included in the AMEX Gold Bugs Index (HUI)]. The weekly bars in Chart 6 show the stock trading over 8 for the first time in nearly three years. In reality, HL had been a precious metal laggard until a year ago. The silver line in Chart 6 is a ratio of HL to the XAU Index. The RS ratio only started to rise at the start of 2006. That's when silver started playing catch-up to gold. [Most gold stocks have already exceeded their 2004 high]. That makes Hecla one of the cheapest stocks in the precious metal universe. But that may change if silver keeps doing better than gold.
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MARKET VECTORS GOLD MINERS ETF TESTS RESISTANCE ... If you're interested in an Exchange Traded Fund that deals with precious metal stocks instead of the commodities (or if you're not interested in picking individual stocks), there's the AMEX Market Vectors Gold Miners (GDX) to consider. Chart 7 shows the GDX testing chart resistance along its August/December highs just above 42. Chart 8 shows a p&f version of the same chart. Chart 8 requires a close at 43 or higher to register a bullish breakout in the GDX.
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SEMI SURGE ... Semiconductor stocks caught fire today. The Semiconductor (SOX) Index jumped 2.76% to close at a new six-week high. Chart 9 shows the SOX moving up to challenge its recent highs ranging from 488 to 492. Semiconductor Holders (SMH) surged 2.6% on huge volume (Chart 10). The SMH is also nearing a test of its late 2006 highs. The relative strength ratio (blue line) for the SMH is rising for the first time since last August. This group has been one of the market's weakest over the last year. Someone's suddenly getting very interested in it.
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SOX LEADERS ... Four out the five top percentage gainers in the S&P 500 (and two Nasdaq leaders) today came from the SOX. All four chip stocks surged on huge volume. In order of relative strength, Analog Devices gained 10% (Chart 11), Linear Technology rose 9.5% (Chart 12), Maxim Integrated Products gained 7.8% (Chart 13), and National Semiconductor made 7.3% (Chart 14). The big jump in the SOX kept the Nasdaq in the black. The rest of the market lost ground on rising Iranian tensions and crude oil closing over $60 for the second day in a row. Those two factors may also explain this week's heavy buying of precious metals.
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