Rok-n-Dan's Market and Sector Analysis with Fidelity Select Sector Funds

Dan Caldwell

4/30/16: Have been getting a lot of emails re: gold/silver mining. The sector is overbought and has made significant gains, and a ST correction would be healthy, but the sector is coming off of a 3 yr. very oversold market condition, and is now experiencing a strong snap-back rally. Can it go higher? My technical analysis suggests 10-15% more before a correction, but markets can remain overbought and oversold for extended periods, so buying PUT insurance may be prudent. On the plus side the US Dollar rally is correcting, with an 88 target on the index, and my FED INFLATION/DEFLATION chart indicates we are moving from deflation towards inflation, i.e. accommodative policies. Also, it took longer than expected, but 35% of mining expense is the cost of fuel, that's been dropping, and those costs saving move straight to the miner's bottom line. Third, as the USD falls, gold rises in terms of foreign currencies, and gold is experiencing a bullish breakout in Chinese, Indian, Russian, British, Euro currencies, etc. 4th, multiple bullish golden crosses are popping up all across the materials sectors, so the rally could definitely extend further.

00000 Shanghai Stock Exchange Composite Index (EOD) ($SSEC)

0000a1 XAU Index to Price of Gold Ratio ($XAU:$SILVER)

0000a1a Gold & Silver Index - Philadelphia/Gold - Continuous Contract (EOD) ($XAU:$GOLD)

a01 NYSE Summation Index (Ratio Adjusted) ($nysi)

a01a NASDAQ Summation Index (Ratio Adjusted) ($nasi)

a02 S&P 500 to Volatility Index ($spx:$vix)

a03 Russell 2000 Small Cap Index ($RUT)

a03 Russell 2000 Small Cap Index/Russell 1000 Index ($rut:$rui)

Added 2/10/06. When small caps start to lag larger cap stocks it usually signals a market correction. When the small caps start to lead large caps then buy with gusto!

a06 Copper Futures - COMEX ($copper)

3/20/08 It's interesting to note that LME copper inventories are falling to record lows as we enter the strongest demand period leading up to the summer months, even as copper prices retreat (source Kitco Base Metals. com) and copper prices remain in backwardization (source Metalprices. com), typically a bullish indicator. Could it be that we're seeing a 'takedown' in commodity prices to allow big money, like Calpers, to buy in at lower prices?

AAb Gold - Continuous Contract (EOD) ($gold)

This information is presented for education purposes only. StockCharts.com is not responsible for any comments, advice, or annotations presented on this page. Please review our Terms of Use for more details.