SILVER STOCK BREAKOUTS -- PLATINUM BREAKS OUT AND IS BENEFITING FROM STRONGER ECONOMY -- 13 AND 34 EMA LINES ARE STILL POSITIVE FOR THE S&P 500 -- BREAKDOWN IN DOLLAR GIVES BOOST TO GLOBAL STOCKS

SILVER STOCKS... Last Friday I showed several gold stocks that had achieved bullish breakouts. One of our readers asked me to show some silver stockss that had achieved bullish breakouts as well. Shown below are the top three in terms of relative strength and strong chart action. Chart 1 shows Coeur D Alene Mines soaring to new high for the year on very heavy volume. Its relative strength line (below chart) hit a new 52-week high as well. Chart 2 shows Silver Wheaton also reaching a 52-week high on rising volume. Its RS line is close to doing the same. Chart 3 shows Hecla Mining breaking out to an eleven month high. Although gold is closer to a record high, silver has actually been rising faster during 2009. Part of the reason for silver's stronger performance is that it's partially a precious metal and partially industrial. Its industrial quality makes silver more sensitive to economic trends. It fell much harder than gold during the 2007-2008 bear market and is now rallying faster. The same is true of platinum which is the last of the three to achieve a bullish breakout.

Chart 1

Chart 2

Chart 3

PLATINUM BREAKOUT... Another reader asked for a chart of platinum which is provided in Chart 4. It shows platinum breaking through the upper line of an "ascending triangle" near $1300 in today's trading. [Platinum is rising $30 to 1320 which is the highest level in a year]. That puts all three precious metals in uptrends. The rising platinum/gold ratio below Chart 4, however, shows platinum rising faster than gold this year (as is the case in silver).

Chart 4

PLATINUM IS ALSO AN INDUSTRIAL METAL ... Chart 5 shows the three precious metals over the last six years (gold, silver, and platinum). There are several conclusions that can be drawn from the chart. The first is that the uptrend in precious metals is strongest when all three are rising together (as they are now). That was also the case from 2002 to 2008. Although all three peaked in March 2008, notice that platinum (black line) and silver (gray line) fell much further than gold until the end of 2008. In my view, that's because platinum and silver are also industrial commodities which are influenced by economic trends. Platinum, which is tied to the auto industry, was the weakest of the three throughout 2008 when the economy and stock market were weakening. All three metals have been rising throughout 2009 which is a positive sign for the group as a whole. The fact that platinum and silver are rising faster than gold is also a sign that the economy is getting better. The fact that gold stocks are rising faster than bullion is another positive sign for both.

Chart 5

13- AND 34- EMA LINES ARE STILL POSTIVE ... A third reader asked for an update on the 13-34 exponential moving average (EMA) lines. Let's start with the dailies. Chart 6 shows the 13-day EMA (blue line) still trading above the 34-day EMA. That's been the case since the end of March with the exception of a short-lived whipsaw in early July (see circle). The lines turned positive again in mid-July and remain so. Traders using that system would hold long positions until the blue line crosses below the red. The persistence of the continuing uptrend may be due to the fact that weekly EMA lines are also positive as shown in Chart 7. On August 6, Arthur Hill showed the 13-week EMA crossing over the 34-week EMA (blue arrow) for the first time since the end of 2008 (red arrow). He pointed out that the positive August crossing ended a string of 18 down months for the S&P 500. Sometimes it pays to put things on automatic and let the EMA lines make decisions for you.

Chart 6

Chart 7

DOLLAR DROP HELPS BOOST STOCKS ... One of the factors that kept the September stock rally going was this week's breakdown in the U.S. Dollar and upside breakout in the Euro. Arthur Hill pointed out during the week that stocks and the U.S. Dollar have been trending in opposite directions all year. That also means that foreign currencies have been rising with stocks. Chart 8 shows the Euro breaking through chart resistance just below 145 that was formed last December. I had been expecting a pullback in the Euro from that resistance barrier (along with a pullback in stocks). This week's upside breakout in the Euro prevented either one from happening and gave a boost to global stocks (as well as commodities). Another positive factor was this week's strong rebound in Chinese shares. Chart 9 shows China iShares jumping to a five-week high. That combination was enough to help push the S&P 500 to a new high for the year as shown in Chart 10. That puts initial chart support at the September low of 992. The 50-day moving average currently sits at 980.

Chart 8

Chart 9

Chart 10