Special Update: Sell Signals Triggered in Gold/Silver Mining Shares Today!

Just a quick update this evening relating to the Gold/Silver Mining Shares.

I turned aggressively bullish on Gold/Silver mining shares in May, and by early June I had accumulated substantial positions in several of my favorite names (EXK, AG, GG, and GDXJ).

In this column on June 3rd I wrote the the following Special Update:

"Daily Chart computer-generated buy signals were triggered in the following Gold/Silver mining stocks:

Agnico Eagle Mines (AEM)              $30.48

Gold/Silver Mining Index (XAU)        $84.98

Barrick Gold (ABX)                          $15.97

Endeavour Silver (EXK)                  $  3.90

First Majestic Silver (AG)                 $  8.44

Fortuna Silver Mines (FSM)             $  3.93

Gold Mining Share ETF (GDX)        $22.37

Newmont Mining (NEM)                   $22.82

The sheer number of buy signals here is incredible! Of course, most of these stocks have been annihilated since their early February 2014 highs, but today's buy signals bode well for the group as a whole over the next several months (at least)! In the interest of full disclosure, I have significant long positions in Endeavour Silver (EXK), First Majestic Silver (AG), Goldcorp (GG), and the Junior Gold Mining Shares ETF (GDXJ)."  (Exact copy of paragraph from my June 3rd Column.)

However, ....

Daily chart Sell Signals were triggered by my computer trading system today, July 10th!

While I remain confident that the long term bull market in Gold and Silver has now resumed after several years of retracement and base-building, the rally (and first leg up) in Gold/Silver Mining Shares that began on June 3rd looks like it may have ended today. Recent gains in this sector have been nothing short of spectacular. From its closing price on June 3rd, Endeavour Silver (EXK) surged 61% to today's intra-day high. Fortuna Silver (FSM) jumped a similar amount, and all of the stocks listed above posted exceptional gains over the last five weeks.

However, it's time to take profits and exit all positions in this exciting group. Daily chart sell signals were triggered by my computer system in the following Gold/Silver Mining shares at today's close: ABX, AEM, AU, AG, FXM GDXJ, GDX, GG, HL, NEM, PAAS, PPP, RGLD, SILJ, SIL, SSRI, SLW, and XAU.

Here is a representative stock from the Gold/Silver Mining Sector with all computer-generated buy and sell signals reflected:

First Majestic Silver (AG) Daily Chart with Computer-generated Buy & Sell Signals

U.S. Stock Market - A Bridge Too Far

Any discussion of the greatest stock market analysts of all time must include the name Laszlo Birinyi. Very few can claim to match his incredible track record of prescient forecasts, and fewer still have his extraordinary ability to view the "forest through the trees" to capitalize on exceptional long term trends. Last week, Mr. Birinyi raised his upside target for the S&P 500 (yet again) from 1,970 to 2,100. This new target is expected to be reached within the next six months and corresponds to the largest spread between the S&P 500 and its 200-day moving average since 2010.  

While every great analyst has his or her own "secret" indicators, and Mr. Birinyi may very well have found the "keys to the kingdom", it looks to me like the primary reason for raising his target is the fact that we're in a bull market and the bullish case must be given the benefit of the doubt. According to Mr. Birinyi in a note to his clients, investors should acknowledge that this is not an ordinary, average, typical or normal bull market and thus many approaches and metrics are not useful or applicable. And most interesting to me is the fact that Mr. Birinyi acknowledges that according to some tried and true valuation measures, like the Shiller CAPE ratio, the current U.S. stock market may very well be as overvalued now as it was at the major tops in 1929, 2000, and 2007.

The fact that Mr. Birinyi has a hot hand right now can't be disputed. He's nailed this 5-year bull market like almost no one on the Street. But I think this latest upside revision to his forecast is a "bridge too far". I have attached two charts for your review:

1. The New York Composite Index Daily Chart against the spread between its daily closing price minus its 200-Day Moving Average. It may be noteworthy that when this spread gets to 800, the rally is stock prices stalls or even corrects. While all the corrections have been relatively shallow so far, they have been significant and worthy of attention.

2. The Dow Jones Utility Average Weekly Chart - A weekly chart sell signal was triggered last week by my computer trading system in this key market barometer. Despite the well publicized $200 million personal bet by PIMCO's Bill Gross that U.S. interest rates will stay low or move lower, my research suggests otherwise. Longer-term T-Bond prices look heavy to me, and with the Fed clearly in "tapering" mode, my view is that a meaningful intermediate term top in long term bond prices is now in place in this market.

The title of this column refers to the disastrous Operation Market Garden in World War II where the Allies attempted to break through German lines at Arnhem across the river Rhine in the occupied Netherlands in September 1944. A Bridge Too Far is the title of the non-fiction book by Cornelius Ryan published in 1974 which tells the story of Operation Market Garden. The title of this book comes from a comment made by British Lt. Gen. Frederick Browning, deputy commander of the First Allied Airborne Army, who told Field Marshal Bernard Montgomery before the operation, "I think we may be going a bridge too far."

NY Composite Index Weekly Chart with Spread Between 200-day MA & Actual Closing Price

Dow Jones Utility Average Weekly Chart with Computer-generated Buy & Sell Signals