Gold and Silver Mining Stocks Are Flashing GREEN !!

One of the highlights of my 10-year career as Director of Research at Sutton Financial Services, and Editor and Publisher of the Sutton Advisory Letter between 1988 and 1998, was winning Timer Digest's "Gold Timer of the Year" in 1994. It was my first of several "Timer of the Year" awards, and it was an important form of validation of my research for me. While ALL my clients at that time were focused on the U.S. stock and bond markets, I was convinced then, and am still convinced now, that quality stock and bond market research MUST include rigorous analysis of the precious metals markets and the U.S. Dollar in foreign exchange dealings.

I think it's safe to state now, with 100% certainty, that stock and bond markets (globally) are being manipulated by central banks in an attempt to promote economic growth (in part through the so-called wealth effect). And I am fine with that, although it makes my job as an investment adviser a little tougher. While the Federal Reserve has NOT yet admitted to buying stocks (even though I feel confident that the Fed's "helping" hand has been there to support stocks quite often since the Crash of 1987), the Bank of Japan is now an open book on this issue and is actively participating in several of the major global stock markets (exclusively on the buy side!). Comments from prominent ECB officials over the last six months strongly suggest that the ECB will "do whatever it takes" to support the economies of the EU and to fight the potentially devastating effects of deflationary forces that now seem widespread. "Doing whatever it takes" seems to include the buying of almost every asset imaginable (including stocks), although there has been rhetoric suggesting that Gold is not included here (LOL), and we already know about the much publicized 16-month $1.3 trillion QE program that just got underway.

Bottom line:

1. The Fed will eliminate the word "patient" from its next post-FOMC meeting statement, which will then open the door to its first interest rate hike since the Fed's zero percent policy target was implemented in 2008. Jon Hilsenrath, reporter for the Wall Street Journal, and well-known mouth piece for the Federal Reserve, has pretty much already confirmed this upcoming "tightening" action in terms of monetary policy.

2. However, while the Fed has clearly been attempting to begin the "normalizing" of interest rates away from ZIRP to a higher level (perhaps near 2%), I strongly disagree with the consensus view that the Fed will raise its Fed Funds target by 0.25% in June 2015. In fact, I don't think the Fed will raise interest rates at all in 2015, and I even see the possibility of a new QE program (#4?) in an attempt to fight recessionary forces that are already impacting the U.S. economy right now.

3. Gold and Silver prices have bottomed! The November 2014 lows in both of these precious metals will not be broken. And the testing of these lows that we have witnessed over the last 6 trading days since the stronger than expected employment report on March 6th is done!

4. A major new advance in Gold and Silver prices is now underway, and the upside price action will surprise even the most ardent bulls!!

Daily and weekly chart buy signals were triggered last week in several of the Gold and Silver mining stocks that I follow. At Friday's close March 13th, daily chart buy signals were triggered in AG, AUY, GG, PAAS, PPP, SSRI, SLW, and XAU. Within this group, "daily double" chart buy signals were triggered in AG, AUY, GG, PAAS, PPP, and XAU. These "double" buy signals are relatively rare and offer added reliability to the accuracy of the signal. Weekly chart buy signals were triggered last week in AUY and PPP. Please see the charts below, which are representative of the entire precious metals sector.

In the interest of full disclosure, my current allocation to gold and silver mining shares is 38% of assets under management. My precious metals positions include AG, CDE, EXK, PPP, GDX, and GDXJ.

Philadelphia Gold/Silver Mining Index (XAU) Daily Chart with Computer-generated Buy & Sell Signals

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

Yamaha Gold (AUY) Daily Chart with Computer-generated Buy & Sell Signals

Pan American Silver (PAAS) Daily Chart with Computer-generated Buy & Sell Signals

The U.S. Dollar (DXY): Ripe For A Downside Reversal?

Why would anyone step in front of the Northbound train that is the U.S. Dollar in foreign exchange dealings right now? Here are just a few bullish arguments from Wall Street analysts claiming that continued strength in the Dollar is a sure bet:

1. The U.S. Dollar Index (symbol DXY) is up 26% since May 2014, with almost no meaningful corrections along the way! Is the "trend" still your friend?

2. The Federal Reserve is hinting strongly that an interest rate hike is now on the not-too-distant horizon (June 2015 seems to be the consensus view for this action).

3. John Hilsenrath of the Wall Street Journal, who appears well connected to Fed officials (or is just the mouthpiece for the Fed when a policy change may be imminent), wrote an article earlier this week that the key word "patience" will be dropped from the Fed's official statement that will follow the upcoming March FOMC meeting. With this key word gone from the next Fed statement, Wall Street pundits are now proclaiming that a rate hike would then be imminent (within two or three months).

4. The European Central Bank has just started its 16-month $1.1 trillion QE program.

5. U.S. Employment Reports have been surprisingly robust over the last several months (at least on the headline numbers).

The Greenback is King right now! And maybe deservedly so!!

Today, the U.S. Dollar Index (symbol DXY) traded as high as 100.06 intra-day, before relatively minor profit-taking took hold. DXY ended at 99.44. Today's advance above 100.00 was the first above this key level since April 2003.

After 35+ years experience observing and participating in the financial markets, I feel confident in saying that almost any market opinion can be justified with a well constructed suite of carefully selected charts. However, with full knowledge that charts can sometimes be dangerous to your pocketbook, I still spend most of my research time reviewing my favorite charts and applying all my favorite indicators. 

Bottom Line: The U.S. Dollar now looks vulnerable to a meaningful correction! Here are a few charts that lend support to this minority view: Of course, if the Dollar does break now, then my current favorite investment of choice, Gold/Silver mining shares, will soar !!

U.S. Dollar Index (DXY) Monthly Chart with 3-Std. Dev. Bollinger Bands, Gann Lines, & Fibonacci Retracement

U.S. Dollar Index (DXY) Weekly Chart with 3-Std. Dev. Bollinger Bands and Computer-generated Buy & Sell Signals