GOLD MINERS BULLISH PERCENT INDEX TURNS UP -- SILVER LEADS GOLD HIGHER -- GLD EXCEEDS 50-DAY LINE -- SILVER WHEATON AND MOST SILVER STOCKS SHOW RELATIVE STRENGTH -- GOLDCORP AND YAMANA GOLD EXCEED 50-DAY LINES
GOLD MINERS BULLISH PERCENT INDEX TURNS UP ... I've devoted the last two Tuesday messages to signs of an upturn in precious metal assets which have been largely ignored in the recent commodity rally. Although stocks tied to coal, copper, oil, and steel have been soaring, precious metal stocks have lagged way behind. That's one of the reasons I believe precious metals may now offer the best value in the commodity area. There are technical reasons as well. Chart 1 is a point & figure version of the Gold Miners Bullish Percent Index (BPGDM). That index measures the percent of stocks in the GDX that are in p&f uptrends. The index peaked last November from overbought territory above 90 and has been in a downtrend since then. After falling below 40%, however, it has scored an upside reversal to the up column ( the last X column). In the past, an upside p&f reversal has been enough to signal a new upturn in stocks tied to gold and silver.
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Chart 1
GLD EXCEEDS 50-DAY LINE... I pointed out previously that silver has been the stronger of the two precious metals (primarily owing to its industrial use), but that an upturn in silver was a positive sign for gold. Chart 3 shows Silver iShares (SLV) already challenging its recent high after rising above its 50-day average (blue line) a couple of weeks ago. Chart 4 shows Gold Trust Shares (GLD) trading above its 50-day line for the first time in a month. A decisive close above that line is normally a sign that a market correction has ended.
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Chart 2
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Chart 3
JUNIOR GOLD MINERS INDEX LEADS SENIOR GDX HIGHER... Last week's message also showed that the Market Vectors Junior Gold Miners Index (GDXJ) was leading the senior index higher which was another sign of growing optimism in the group. Chart 4 shows the GDXJ trading back above its 50-day line today. Chart 5 shows the Market Vectors Gold Miners Index (which includes larger mining stocks) nearing a test of its 50-day line. I mentioned last week that silver stocks were stronger than most gold stocks (owing to the stronger commodity). That explains why a larger number of silver stocks have already cleared their 50-day lines. The biggest of the silver leaders is Silver Wheaton which is shown in Chart 6. Other silver stocks exceeding their 50-day lines include Coeur d Alene Mines (CDE), Hecla Mining (HL), and Silvercorp Metals (SVM).
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Chart 4
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Chart 5
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Chart 6
GOLDCORP AND YAMANA GOLD CLEAR 50-DAY LINES ... The largest stock in the GDX is Barrick Gold. Chart 7 shows the stock climbing to a new five-week high today after bouncing off its 200-day line. However, it has yet to clear its 50-day line. Two of the larger GDX holdings, however, have already done that. They are Goldcorp (Chart 8) and Yamana Gold (Chart 9). I suspect there will be more added to the list by next week. As I wrote at the outset, money has been pouring into commodity-related stocks tied to coal, copper, energy, and steel. Precious metals have been largely ignored. They may now represent the cheapest choice for getting aboard the global inflationary train. The strongest gold stock by far is IAMGOLD which I showed a couple of weeks back. Its p&f boxes in Chart 10 show IAG having recently achieved a bullish breakout to a new record. That may also be telling us something about the direction of the entire gold group.
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Chart 7
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Chart 8
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Chart 9
