GOLD STOCKS RALLY ON PRECIOUS METAL BUYING -- IAMGOLD REACHES NEW RECORD -- KELLOGG AND HERSHEYS SURGE ON STRONG VOLUME -- CANADIAN MARKETS BENEFIT FROM RISING COMMODITIES
GOLD STOCKS BOUNCE OFF 200-DAY LINE -- IAMGOLD HITS NEW RECORD... My Tuesday message showed the Market Vectors Gold Miners ETF (GDX) testing long-term support at its 200-day moving average, and suggested watching it closely for signs of an upturn. Today's strong rally in precious metals assets may be the start of that upturn. Chart 1 shows the GDX surging more than 2% today and clearing its 20-day moving average (green line) for the first time this year. In addition, its 14-day RSI line (top of chart) has turned back up. The daily MACD histogram (below chart) has also turned positive (see circle) for the first time in two months. In my view, those signs of improvement increase the odds that the pullback in precious metal stocks is over. The Tuesday message identified IAMGOLD as the strongest gold stock and showed it having broken through the upper line in a bullish "symmetrical triangle". Chart 2 shows IAG exceeding its spring 2010 high to reach a new record. Its relative strength ratio (bottom of Chart 2) has turned up as well. Gold and silver stocks are rallying on the backs of their respective commodities.
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Chart 1
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Chart 2
PRECIOUS METALS SURGE ... Just when other commodities appear to be taking a breather, precious metals caught a strong bid today. Chart 3 shows Gold Trust Shares (GLD) surging more than 1% and testing its (dashed) 20-day average. Its RSI (above chart) is about to cross over the 50-level which would be a positive sign. The MACD histogram (below chart) shows improvement but has yet to turn postive. That's not the case with silver. Chart 4 shows the daily MACD histogram turning positive for the first time this year for the Silver Trust iShares (SLV). The SLV has already crossed its 20-day average and is testing its 50-day line. That makes silver a slightly stronger bet than gold at this point. Even stronger is the price action in platinum. Chart 5 shows the Platinum ETF (PGM) nearing a new 52-week high. I point that out because platinum usually trends in the same direction as the two other precious metals. A new high by platinum would increase the odds for higher prices in gold and silver (along with their respective stocks).
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Chart 3
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Chart 4
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Chart 5
KELLOGG AND HERSHEY SURGE ON STRONG VOLUME ... Two food related stocks in the consumer staples space are having very good chart days after some positive reports. Chart 6 shows Kellogg surging to a seven-month on on very strong volume. Notice that it's relative strength line has been dropping since last summer. That makes this a relatively cheap stock. The same is true for Hershey Foods. Its RS line (below Chart 7) has been falling since midyear as well. But not today. The stock has risen to a four-month high on strong volume and is nearing a test of its 2010 high around 51. A decisive close through that chart barrier would put HSY at the highest level in six years.
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Chart 6
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Chart 7
HERE'S THE REAL CANADIAN DOLLAR... I described the Canadian Dollar on Tuesday as one of the world's strongest currencies, but showed a chart of Canadian iShares (EWC) instead. Chart 8 shows both charts. The red line on top shows Canadian iShares hitting a new two-year high. The daily bars show the Canadian Dollar close to doing the same. The point I was making is that Canadian markets are among the strongest in the world at the moment owing to that country's production of natural resources and its distance from oil concerns in the Mideast.
