Honest Money Gold and Silver Report: Market Wrap
Week Ending 5/16/07
I'd like to mention something that comes up on my website fairly often, and was discussed prior to this week's rise in gold and the gold stock indices.
The various indices (Hui, Xau, and GDX) are merely tools that one can look at to get an overall and general read on the precious metal stocks. Only the GDX trades. It is possible to own all of the stocks comprising the other two indices, but it would take a bit of money to do so.
Also, the indices are weighted; they are not representative of the actual performance of each stock on an equal footing one to the other. Some have more "weight" than others in the computing of the index; in other words they comprise a larger percent of the index and hence skew the readings.
More importantly, however, is whether it matters what an index is doing in regards to any given individual investor; other than giving a very broad and biased picture of a group of stocks?
If you don't own the stocks what difference does it make to your portfolio how they are performing? What matters is how the stocks that you own are performing.
For each individual investor that is the key to focus on - not some mythological index of stocks one does not even own. At least that is my opinion. If I own FCX and it is down in price, what good does it do me if any of the indices are up?
With that in mind there will be some interesting charts that show this, you don't have to take my word on it. The charts tell the story quite clearly.
Gold had a pretty good week, up just below 2%. During the beginning of the week gold was down pretty hard, so it was a good come back as the week closed.
Up first is the daily chart, which shows the upper falling trend line being broken above. This is very constructive if it holds. Will it hold - I have no idea.
Then there is the question - for how long does it hold, even if it advances further? Perhaps it will never be breached again; perhaps it will.
RSI has turned up strongly through the 50 zone and that is a good sign. A positive MACD crossover is in effect, and the histograms are expanding upwards - all positive indicators.
The stochastic indicator has also made a positive cross and ROC is headed up strongly as well. All the indicators point upward and suggest higher prices.
Notice the 50 day moving average that is falling and the level it comes in at, as this is the first important test that gold must overcome for a sustainable rally to occur.
After that the horizontal trend line represents significant overhead resistance, as it is broken support turned resistance, and must be overcome once again. So far, this is a short term rally - so far.
The weekly GLD chart tells a bit of a different story and can be viewed in the full market wrap on my website.
Silver underperformed gold for the week as the chart shows. The daily chart looks better than the weekly, however. This is a short term move until proven otherwise, which it well could be.
The GDX was up 2.40% for the week. Not a bad showing, however, it did not out perform physical gold, which is a bit of a negative divergence. Price did break above its falling trend line, very similar to the GLD chart. All the indicators are headed up and look good, suggesting more is to come.
Once again, the weekly chart looks much different and can be viewed in the full market wrap.
Next up is a chart that shows what I was talking about at the beginning of the report regarding gold and silver stock indices versus individual stocks.
All that should matter to you is how the stocks in your portfolio are doing. The indices and the charts of them above, are simply a general over-view of the sector; and ultimately one that is skewed. They are meant only for very general information.
The charts of the stocks that you own are what are important, not ones that are not in your portfolio. It took me a long time to realize this, and I still sometimes forget and screw things up anyways. Everybody does. If they say they don't - turn and walk the other way - quickly.
Based on the chart above, which would you rather own - the stocks in the indices as weighted by the indices; or the individual stocks that are up as indicated?
I have been fortunate to buy and sell all these stocks recently. There are many similar charts like this in the full market wrap report onsite that compares other commodities and individual stocks, etc. All buys and sells done in the portfolio are listed daily and weekly. These are not recommendations to buy or sell anything; it is what I have bought and sold - nothing less nor more.
The latest full-length version of this week's market wrap is available on my web site linked below; including all positions bought or sold this week and the entire stock portfolio holdings.
Stop by and check it out. Most major markets are included with the emphasis on the precious metals market.
There is a lot of information on gold and silver, not only from an investment point of view, but also from its position as being the mandated monetary system of our Constitution - Silver and Gold Coin as in Honest Weights and Measures.
On the main homepage are papers and articles by some of the best out there to be had. There are audio and videos on banking, the Constitution, and cutting edge news. Many articles are archived and others are linked.
Live time quotes on gold and silver and precious metal stocks are available, including charts for most world currencies and futures.
Links to the World Bank, Central Banks, the International Monetary Fund, the United Nations, the Bank for International Settlements, and many other similar and different sources are available.
There is also a live bulletin board where you can discuss the markets with people from around the world and many other resources.
Good luck. Good trading. Good health, and that's a wrap.
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