It's been a minute, here's a fresh technical chart festival including ratios and one price comparison. The most appealing ETFs on the long side, strictly on price action, are the gold and silver ETFs (GLD, SLV) and gold stock indexes (GDX, GDXJ). I forgot to check out the silver stock ETF. If precious metals want to move in tandem, I say play the potential silver breakout. GLD broke through its all time high in October, 2009 while SLV lagged. Two months ago famed commodity investor, Jim Rogers, said silver looked cheap being "70% below its all time high" (see post with Jim Rogers on CNN Money).
All of these plays look good with put protection and a stop under support (imo). I think put options (depending on implied volatility, consult with an options pricer) would work well as a hedge if gold and silver failed at resistance. They'd probably blast through their 50 week, 50 day and 200 day moving averages and ascending channel support from 2008, which would bring massive downside volatility and make the puts profitable. The same thing happened in June but it was a correction. So in the near term, precious metals ETFs either break free from here or violate the lows from July (imo). If you're on the index page, 12 charts are after the jump link.
GDX (Market Vectors Gold Miners ETF) - Courtesy of FreeStockCharts.com
GDXJ (Market Vectors Junior Gold Miners ETF)
I continued the trend line on GLD and if it breaks out here I see a target of $147-150. If it fails AGAIN, I think it will fall all the way down to $100 support, puts will make $$ on your stopped out long.
If SLV violates $19.30 it will be free to hit $25 or $26. Put protection will be the failure hedge.
Now to equities. The S&P 500 Index is either forming a head and shoulders breakdown pattern or is set to ride through all symmetrical triangles and moving averages to Tom Lee's 1,300 target (JP Morgan). He said P/E multiples correctly reflect his $90 2011 EPS target with the 10-Year Note Yield where it is today (most recent appearance).
To negate all of these negative technical indicators, Im thinking either bond yields move significantly lower, the Fed unleashes massive liquidity, lowers the Fed Funds rate to 0% (not 0-0.25%), there's a massive turnaround in housing or bonds get killed on some positive reflation/inflation news and people rush to equities. Do you see this happening? Nouriel Roubini, Professor at NYU/Roubini Global Economics, just said he sees less than 1% growth in Q3 with the potential for a sharp stock market correction and/or credit spreads and interbank spreads widen (system tightens). See blog post for links.
TLT (the iShares Barclays 20+ Year Treasury Bond Fund ETF) is hitting ascending channel resistance and could retrace to floor support or the 50 day moving average. As you can see in the next chart below, Treasuries have been moving inversely with the stock market. So there could be a rally here for stocks. Not sure how long it would last due to overhead resistance on the S&P.
TLT:UUP is an interesting chart (Treasuries to the US Dollar ETF) and it looks similar to November 2008, when yields hit 30 year lows during the financial crisis. The ratio broke the 2009 high, we'll see if Treasuries retest the 2008 high going forward.
SLV/GLD is interesting. Silver/Gold got clobbered during the 2008 financial crisis but rallied strongly during the 2009 reflation bid. SLV/GLD peaked in September of 2009 and has been trending lower ever since. It's at another inflection point in a symmetrical triangle vertex point. Strength is slightly above the midline at 56.23 and the MACD (momentum indicator) is barely under the zero level. A double dip in the economy could bring on a double dip in SLV/GLD. We'll see.
Look at the Russell 2000 to the S&P going back to 2008. Small caps usually underperform large caps during market corrections. What's interesting is the higher highs and I think if I threw up a trend line it would be testing it, so the ratio's in a symmetrical triangle as well.
GLD/SPY is testing a symmetrical triangle and if it takes out 1.2, it could could retest 1.4 again. It is strong with an RSI at 69.44 with the MACD in a symmetrical triangle, just above water (0.017). For a 1.4 ratio retest, GLD either has to spike relative to SPY or SPY crashes with GLD constant.
Last but not least, UUP (PowerShares DB US Dollar Index Bullish Fund ETF). It is testing a near term downtrend line but its ultimate forming an inflection point in a multi-year symmetrical triangle. UUP is above the 50-week moving average but is testing 50-day moving average resistance. We'll see if the US Dollar can break above its 50DMA. If there are concerns in Europe and banks tighten up again on recession fears, it could happen (see this post: John Taylor (FX Concepts) Eyeing EUR/USD Trend Reversal, Greece, Spain Will Default, COT Chart (EUR/USD, USDX, DXY, UUP, FXE). Or, investors could flee from Treasuries and the US Dollar on US Growth fears, Fed rate fears to 0% or inflation expectations! It's a complex system out there.
I found articles on gold and silver tonight on Bloomberg.com:
Gold May Climb to $1,252, Commerzbank's Rudolph Says: Technical Analysis
Silver `Looking Cheap' Lures Investors, Prompting Decline in Ratio to Gold