JP Morgan vs. Silver: Go Gold
The year 2010 seems over already: Gold had a "remarkable" rise of some 30% since the beginning of this new decade. Silver even had a "sensational" year rising some 70%, which equals to silver outperforming gold 2.3-fold: so far, so good.
Accordingly, the gold/silver ratio experienced a "crash-like" performance in 2010 that can be explained with a thrust to the downside out of the (dark blue) triangle that formed between 2008-2010 – which is actually supposed to be a thrust to the upside out of the (light blue) triangle that was built between the beginning of this century & 2008. However, it will be considered as a thrust to the downside (out of the light blue) triangle, as soon as the thrust to the downside (out of the dark blue triangle) is trading beneath the triangle-apex of the (light blue) triangle at approximately 46. Hence, gold is expected to perform better than silver now until this potential event occurs – as the price-level of the apex represents strong hold.
On December 2, Max Keiser stated at the Guardian.co.uk in his readworthy article "Want JP Morgan to crash? Buy silver" that this investment bank currently (?) owns and holds silver short-positions equaling to some 3.3 billion ounces ore some $1.5 trillion in liability – if in need of cover.
The following longer-term perspective since 1980 shows that the gold/silver ratio predominately moves within the (green) upward-trend-channel and that since reaching the upper (green) trend-channel at approximately 90 in 2008, a correction has taken place. Currently having arrived at the lower (green-dashed) trend-channel at 47, suggests a rebound will start now. Only if this last support is being breached, another/confirming sell-signal for gold (against silver) is generated (i.e. silver is to be favored relative to gold). Hence, as the ratio has arrived at this (green-dashed) support, a buy-signal for gold (against silver) has just been issued (i.e. gold is expected to perform better than silver from now on).
Interestingly, the stock of J.P. Morgan is currently trading at the apex of the (red-green) triangle that has been forming since the mid 1990s. Despite two major breachings of the triangle`s lower (green) leg in 2001-2003 and 2008-2009, a breakout above the (red) leg occurred in 2009, whereafter various classical pullbacks to the triangle and its apex followed. Hence, the longer-term decision is soon to be made if a thrust to the up- or downside occurs: buy-signal (à la thrust to the upside) when rising above the (red-dashed) resistance currently at approximately 45 and sell-signal (à la thrust to the downside) when breaching the (green-dashed) support currently at approximately 34.
Indicators:
RSI: buy-signal since trading above the (red-green) triangle-apex. Sell-signal when breaching the apex at approximately 40 points, or when reaching the (grey) horizontal-resistance at 79 points (buy-signal when rising above it).
MACD: buy-signal when rising above the upper (red) resistance and sell-signal when breaching the lower (green) resistance.
PPO: buy-signal when rising above the upper (red) resistance amd sell-signal when breaching the lower (green) resistance.
The gold/silver ratio is analyzed constantly at the the Mackrocheck website. The analysis of stocks like JP Morgan can be observed at this section – however, as buy- and sell-signals are issued permanently, a "membership" is required (free of any costs and obligations):
Stephan Bogner is senior analyst with Makrocheck Investments & Research, a diversified investment & research group based in Zurich, Switzerland, specialized in the analysis of financial markets & equities for institutional & private investors.
Makrocheck (or any of its affiliates) is not liable or responsible for any loss (especially financially) that is made by readers using any of the information published by Makrocheck. Makrocheck does not guarantee the accuracy or thoroughness of the information reported.
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