Market Trend Health Check

The stock markets have been surging, but how healthy are the markets? Is the current trend sustainable? Let's use the S&P 500 as the proxy for the US Stock market. Take a look at these interesting charts, and let me know what you think. I'll share my thoughts on these charts with you soon.

ECU Technical Analysis

In a previous post, I listed ECU as one my recommended Junior precious metal miners. Let's perform a technical analysis review for ECU.

Now let's take a look at a daily chart:

The daily chart is at a decision point. ECU is trying to gold the breakout with the gap up from a week ago. ECU needs to follow through. We'll know shortly ... now let's take a look at a weekly chart:

Look at how nice the Fibonacci fan lines worked. I'll dedicate a post to Fibonacci fan lines and arcs in the near future. The weekly chart is at a decision point, and here too ECU looks good here too. Finally, let's take a look at the big picture:

ECU found support at .50, and it held. Looks good.

Recommendation: BUY BUY BUY 

Relative Strength Analysis - Gold vs Silver

PerfChart: GLD,DGL,SLV,DBP,DBS,CEF,DGP,AGQ,GDX,$SPX

ProShares 2x leveraged Silver ETF AGQ has been the best performer since Dec 2008. Silver has benefited from both an overall rising stock market and falling USD because of its industrial and precious metal aspects.

However, since Gold's high and USD low in DEC, Silver has been the worst performer:

However, note how the precious metals are starting to curl up while the USD is starting to curl down since Feb. In fact it looks like the S&P 500 is leading and precious metals are following ... for the time being

Visual Relative Strength Anaysis

StockCharts.com has a nice tool called Performance Charts that enables you to quickly perform a visual relative strength analysis. Let's see how the various other asset classes are doing relative to GOLD.

As you can see, over the past year, GOLD has underperformed stocks, commodities, silver, and the precious metal miners. It has performed better than the USD and bonds. The strongest asset class over this period has been stocks. Why did I pick GOLD as the baseline? Because GOLD has been the best performing asset class over the past 10 years:

Here's another example of stepping back and looking at the bigger picture, i.e., the dominant long term trend of a secular bull market. You definitely want to be on the right side of the trend. In other words, go with the dominant trend until the trend is broken. Let the river carry you - don't try to resist. It still looks like to me that the dominant trend is still accelerating. GOLD is currently taking a little rest, but is still way in the lead. If you watched the speed skaters or cross country skiers during the Olympics, then you know that GOLD is just cruising right now - getting ready to explode when the time is right to finish the race.

News says GOLD will go up, down, or sideways

BULLISH

• McEwen Speaks to Kitco News: Gold offers shelter over devalued currencies
• Gold, silver prices set to soar 
• Nepal hikes duty to stop gold rush to India

NEUTRAL - BEARISH

• Gold prices to hold steady at $1 006/oz ? Westpac
• Base metals prices to surpass gold

INTERESTING

• PRECIOUS-Gold rises above $1,100/oz on sovereign risk fears
• Bundesbank would oppose backing European Monetary Fund with gold 

In other words, the "News" is forecasting GOLD will go either up, down, or sideways ... this is why you should never listen to the news. It's almost impossible to get the real truth by listening to the news. The time to listen is when they all agree - then do the opposite.

McEwen Predicts $2000 GOLD in 2010

I have showed you McEwen's favorite DOW:GOLD ratio charts. In fact, McEwen's DOW:GOLD ratio target is 0.5. In his recent interview with Kitco, he is predicting $2000 GOLD in 2010 and $5000 GOLD when the dust clears. Let's see how McEwen's $2000 target for 2010 lines up with a Fibonacci extrapolation:

Notice how the TRIX(8,5) oscillator is flattening and looks like it want to curl up. I like to use Fibonacci numbers for TRIX periods to look at trends in different time frames. Let me show you:

Weekly chart:

Note how the long term TRIX (55,34) and (89,55) are looking like they are forecasting higher GOLD prices.

Daily Chart:

Short term TRIX (21,13) and (34,21) are forecasting higher GOLD prices as well ... In the medium term, it looks like GOLD is still consolidating - like a hurricane gathering energy ...

$XAU Mayan Time Cycles - Galactic

According to the Mayan Calendar, we are currently in the Galactic Underworld, which is the 8th Underworld. An Underworld is a major period in the Mayan Calendar with it's own purpose. I know there is a lot of talk about Dec 21 2012 - that is not the Mayan  Calendar. The Mayan calendar actually ends on Oct 28, 2011. The Mayan Calendar is not about the end of the world. It is about the "birth" of humanity. There are 9 Underworlds - think 9 months to give birth  ... I digress ...

Now let's see how the 13 Heavens of the Galactic Underworld overlay over $XAU. Each Heaven maps to a 1/2 "day" -  there are 7 days and 6 nights in each Underworld.

If you are curious, Night 6 ends on Nov 2, 2010. Day 7 (fruition) begins on Nov 3, 2010. Using the human birthing process as an anaology, time is accelerating. The contractions get closer together (time cycle period shortens) and the contractions intensify. But don't be scared. Don't let the media scare you. The only thing to fear is fear itself. The final outcome is the birth and a new life. It is darkest before dawn, and just like the birthing process we need to support each other to use all our energy for that final thrust.