Banking Reform Pushing Financials Lower and Silver Higher

By: Jeb Handwerger | Fri, Jun 25, 2010
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by the sweeping overhaul and takeover of banks. Banks have been under pressure from a continuing recession, high unemployment, a weak housing market and now more government oversight and audits. This does not help a recovery process for housing or financials. These are two industries where I need to see strength to believe in a real economic recovery.

XLF Weekly Chart

Financial are under a lot of pressure. In the past 6 months, the financials have had 7 major weekly distributions verse 1 major accumulation which leads me to believe that this bearish crossover could lead to a major financial decline. Notice how the financials when it broke into new 52 week highs it was on low volume which means it didn't have the momentum to really hold those highs. This is also evidenced by the declining momentum indicators. The financials had 5 major weekly sell off in the 8 weeks of April and May. The bearish crossover pattern plus the failure of the financials to hold the 200 day leads me to be long term bearish.

On the other hand Silver, Gold and Miners all appear to be reaching new breakout points.

Silver Weekly Chart

Silver is very close to a 3 year breakout and I would not be surprised if over the next couple of weeks silver makes a move into new 36 month highs. If this move breaks $19 on silver, which is a major resistance level my target would move to $30 an ounce. Silver has shown increasing demand as it has found support at the rising trendline support and is at the verge of a major breakout.

The connection between the financials and silver is showing that more investors are moving away from investment vehicles which are exposed to debt, government regulation and weak economic growth. Investors want their assets in real money which is silver and gold. Keep an eye on $19 silver and a breakdown of XLF past $14.

Disclosure: Own shares in silver mining stocks.

 


 

Jeb Handwerger

Author: Jeb Handwerger

Jeb Handwerger
http://goldstocktrades.com

Jeb Handwerger

I started reading charts at eleven years old. One day my father, a market trader and technician found his library of books on technical analysis mysteriously disappearing. He later found the textbooks under my bed. For many years day and night I studied technical analysis and charting, working and learning from my father who has over 50 years of trading experience. Technical analysis is my passion and love.

In 2001, I started noticing the junior mining stocks and gold as having a tremendous upside. For the past 9 years I have researched many juniors and have identified the major winners using technical analysis and finding top management.

I earned a Bachelors Degree in Mathematics and a Masters Degree. I learned most of my technical analysis from the school of hard knocks, managing real money for myself and for my family.

Constantly perfecting my craft, I have traded for two decades of success in many different markets. I have been asked to post ideas to some of my students who have taken my course in charting and technical analysis. I have made an excellent living trading stocks for myself.

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