Monday, October 22, 2012

The Dow-to-Gold Ratio Since 1968

I usually caution investors from looking at these types of charts, so you’ll have to excuse me, but here’s a look at how the Dow has performed in terms of gold since 1968.

The difference is that I think this chart is interesting for its own sake. I don’t think there’s any useful analysis here. For one, it leaves out dividends which add up over the decades.
The trend of gold’s out-performance over the past several years is remarkable. If the Dow had kept pace with gold since August 25, 1999, it would be at 77,800 today instead of 13,500.
On January 21, 1980, the ratio got down to 1, but by August 1999, it had risen to 44. Since then, it’s been down, down, down. In August of last year, the ratio fell below 5.8. By this past August, the ratio got back over 8.2, and today we’re right around 7.75.

Precious Metals Miner Releases Estimate of 6.6 Million Ounces for New Deposit: PLG

Published on Friday, October 19th, 2012
By for Penny Stock Detectives
In anticipation of September’s Federal Reserve monetary policy announcements, many precious metals skyrocketed. This substantial increase in the price of precious metals across the board has certainly benefited many firms, including junior mining stocks. The main advantage for investing in junior mining stocks is that they have a higher level of sensitivity to increases in the price of precious metals. Of course, this also works in reverse, as well as potential risks associated with operational difficulties.

Junior mining stocks have to deal with many issues, including the price of the precious metals, as well as labor difficulties and new regulations. Also, junior mining stocks that are in the exploratory phase can be quite volatile due to the lack of production stabilizing earnings. Because of the lack of steady earnings, the capital appreciation possible is primarily based on what their exploratory work results in. If a large amount of precious metals is found, it’s extremely bullish for junior mining stocks. If, on the other hand, the drill results end up showing a lack of precious metals, the stock will plummet. These are risks one must be aware when investing in junior mining stocks.

While many investors look to gold when thinking about precious metals, I suggest considering platinum. Of course, this is not an easy task. Platinum isn’t easy to find or to extract, so one must be careful when investing in junior mining stocks in the precious metals sector.

One of the interesting junior mining stocks in the precious metals space is Platinum Group Metals Ltd. (NYSE/PLG; TSX/PTM). This is one of the penny stocks involved in exploring for platinum and precious metals, and it has recently issued some progress reports.

Because this is an early-stage exploration firm looking for precious metals, caution is urged. You certainly don’t want to rush into any junior mining stocks too fast. I would suggest patience, as it takes many years of work to fully understand the full extent of precious metals contained within a property. Following the drill results, it then takes more time to start extracting the precious metals.
Platinum Group is exploring its Waterberg property. The firm has discovered a new deposit within the property, announcing an estimate of inferred mineral resources of approximately 6.6 million ounces of gold, platinum, and palladium. The company breaks down its estimate as 3.73 million ounces of palladium, 2.05 million ounces of platinum and 0.81 million ounces of gold. (Source:, September 5, 2012.)
 plg stock market chart
Chart courtesy of
 I first brought this precious metals miner to the attention of my readers back in early August, when it was trading at $0.82. Following the good news, the stock surged to over $1.30 the following month, a move of over 60%. Obviously, that kind of move is not sustainable, as evident by the overbought condition the Relative Strength Index. Unfortunately, the stock was unable to hold above its 200-day moving average, and has since fallen back, although it’s still substantially higher than the price in early August.

Junior mining stocks involved in precious metals can offer a large potential reward, but also possess serious risks. I like watching the charts, and seeing what other investors are doing with their money when considering investing in junior mining stocks. The precious metals sector does have potential pitfalls, so I tend to be very careful about what junior mining companies I invest in. At this stage, one needs to understand that there are still substantial hurdles for this stock to overcome and far more due diligence is required by an investor considering this stock for their portfolio.

Top 10 Dow Dividend Stocks for October

Earnings season is upon us and the stock market continues to hang tough despite the slowdown in top-line revenue finally weighing on profits. If forecasts hold true, this will be the first decline in S&P 500 earnings on the whole since 2009.

And looking forward, the next round of earnings could be even worse.

However, while growth investors might be a bit out of luck, there is a lot to be said for a strategy that relies on stable names with big dividends. These companies haven’t just seen nice share appreciation during the market rally, but also have the ability to hang tough when things go south thanks to bulletproof operations and the safety of dividends to keep stockholders from running to the exits.

Whether you’re looking for a low-risk way to muddle through earnings season or whether you’re looking for a safe place to park your cash because you fear a looming crash due to Europe or the fiscal cliff, high-yield dividend stocks are one of your best bets right now.

These top 10 Dow dividend stocks are some of the best picks out there, with all 10 stocks boasting a dividend yield of 3% or better. Take a look: (more)

Chart of the Day - Federal Realty Investment Trust (FRT)

The "Chart of the Day" is Federal Realty Investment Trust (FRT), which showed up on Thursday's Barchart "All Time High" list. Federal Realty on Thursday rallied to a new all-time high of $110.20 and closed +1.11%. TrendSpotter just turned long on Tuesday at $108.99. In recent news on the stock, Federal Realty on Aug 1 reported Q2 funds from operation at $1.04, right on the consensus, and raised its quarterly dividend for the 45th consecutive year by 5.8% to 73 cents. Federal Realty Investment Trust, with a market cap of $7 billion, is a real estate investment trust (REIT) that focuses on community and neighborhood shopping centers that are anchored by supermarkets, drug stores or high volume, value oriented retailers that provide consumer necessities.


Newmont Mining Corp. (NYSE: NEM)

Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company's assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, New Zealand, and Mexico. As of December 31, 2011, it had proven and probable gold reserves of approximately 98.8 million ounces and an aggregate land position of approximately 31,500 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.

Please take a look at the 1-year chart of NEM (Newmont Mining Corporation) below with my added notations:

1-year chart of NEM (Newmont Mining Corporation)

NEM sold off from November of last year until May of this year. After hitting that low, the stock formed what a double bottom (blue) price pattern. The pattern is as simple as it sounds: Bottoming, rallying up to a point, selling back off to a similar bottom, and then rallying back up again.

As with any price pattern, a confirmation of the pattern is needed. NEM confirmed the pattern by breaking up through the $52.50 resistance (red), which had also been a brief support in March. The expectation would be for the previous $52.50 resistance to now act as support on any pullbacks before the stock moves higher.

Correction in Gold & Silver Stocks Nearing End

We expected a correction after the gold and silver shares ran into predictable resistance that coincided with October seasonal resistance. That was predictable. Now we are 19 days into the correction and we see some stealth signs of strength and signs of the correction nearing its end.
Let’s take a quick look at GDX before we get to the analysis.

There are numerous positive elements to the current technical makeup of GDX. First, is the price action. The market has very strong support at $48 to $49. It first bottomed at $50.90 and then at $50.81 on Monday. Since then, GDX pushed higher to $53. Secondly, note that the RSI bottomed at 50. In a bull trend the RSI will bottom at 40 and not the typical 30. However, in a very strong bull trend the RSI can bottom at 50. Third, the GDX vs. GLD ratio has shown strength in the past few days and has shown little to no weakness during this correction. Finally, note the accumulation line at the bottom of the chart. It barely dipped after surging for several months.
Next, let’s take a look at GDXJ. Do you notice the similarities to GDX?

GDXJ has strong support at $23 but managed to bottom twice at $23. Meanwhile, the RSI indicator has remained above 50 and the GDXJ vs. GLD ratio has remained steady during the correction. Once we have confirmation that the correction is complete, we’d target $30 in the near term. A close below $23 would indicate that the correction has further to go.
Moving to the silver shares, we see the same things we see in the previous charts. The market has maintained support at $23, RSI is holding above 50, there has been little distribution during the consolidation, and the silver stocks are trending higher against SLV.

Precious metals shares enjoyed a strong summer rebound after forming a double bottom. Their overbought condition has been worked off in a consolidation more so than a correction. As we noted, the shares are quietly showing signs of strength that hint at another leg higher in the not too distant future. The shares could remain in consolidation for a few more weeks but it would not impact the bullish prognosis for the medium term. As long as recent lows hold, this bullish analysis applies going forward.

US Weekly Economic Calendar

time (et) report period Actual forecast previous
MONDAY, Oct. 22
  None scheduled        
TUESDAY, Oct. 23
  None scheduled        
10 am New home sales Sept.   386,000 373,000
9 am Markit flash PMI Oct.   -- 51.1
2:15  pm FOMC statement        
8:30 am Weekly jobless claims 10-20   372,000 388,000
8:30 am Durable goods orders Sept.   8.0% -13.2%
8:30 am Chicago Fed national activity index Sept.   -- -0.87
10 am Pending home sales Sept.   -- -2.6%
10 am FHFA home prices Aug.     0.2%
FRIDAY, Oct. 26
8:30 am GDP 3Q
1.7% 1.3%
9:55 am UMich consumer sentiment index Oct.   82.0 83.1