September 11, 2013 at 12:15 PM EDT
Mining Stocks Versus The General Stock Market
NYSEARCA:NUGT, NYSEARCA:GGGG, NYSEARCA:GDX, NYSEARCA:GDXJ Related posts: Mining Stocks Appear Cheap Versus Gold Bullion What Do (Mining) Stocks Tell Us About Gold’s Future Moves? Dollar’s and Mining Stocks’ Implications For Gold Is It Right Time To Buy Mining Stocks? Recently this has been more of a “market of stocks” rather than a “stock market.”

minersPrzemyslaw Radomski, CFA: Yesterday, the S&P 500 Index closed higher for a fifth straight session, posting its best daily performance since the beginning of August, while all 10 S&P sectors ended higher. What factors had such a positive impact on the S&P 500 Index?

Without a doubt, upbeat industrial and retail figures from China boosted optimism about the health of the global economy. Chinese government data showed that exports from the world’s second-largest economy rose more than expected in August.

Sentiment among investors was also lifted by merger activity and easing concerns about a potential Western-led strike on Syria. U.S. President Barack Obama said he saw a possible breakthrough in the crisis with Syria after Russia’s proposal. Russia proposed to work with Damascus to put its chemical weapons under international control raised the chance that a U.S. military strike would be delayed or averted. However, U.S. President Barack Obama said that he will still continue efforts to convince politicians to back military action.

Syria welcomed a Russian proposal and Syrian Foreign Minister Walid al-Moualem, after talks in Moscow, praised the Kremlin for seeking to “prevent American aggression.”

And what has happened with gold and the HUI index in the recent days?

On Friday, gold gained almost 2% after data showed slower-than-expected U.S. job growth in August, even as the jobless rate hit a 4 and a half year low. What’s interesting, at the same time the HUI Index almost didn’t move.

Yesterday, the yellow metal gave up some gains made in the previous session on market expectations that the Federal Reserve may taper its monetary stimulus.

The previously-mentioned Chinese government data and possible breakthrough in the crisis with Syria after Russia’s proposal were further bearish factors for gold.

It’s worth noting that the shiny metal is also under pressure from expectations the U.S. Federal Reserve will taper its monetary stimulus program after the Fed’s Open Market Committee (FOMC) meeting next week.

In our previous essays we looked at the situation in gold from different perspectives (see the previous essay entitled Gold Price in September 2013). We examined the US Dollar Index, the Euro Index and the gold stocks:gold ratio. We also examined the S&P 500 Index and the HUI Index to check for implications for gold.

Today, we will compare their performance and explain what each of them currently tells us. Let’s take a look at the S&P 500 Index chart to find out what the current situation in the general stock market is (charts courtesy of http://stockcharts.com).

Long-term S&P 500 Index chart - General Stock Market - SPX

On the above long-term chart, we see that the S&P 500 Index reached the rising support line based on the November 2012 -January 2013 lows (on an intraday basis) at the end of August. This strong support line stopped the recent correction and stocks bounced off it in the following days. As we previously wrote, the S&P 500 Index closed higher for a fifth straight session yesterday. Additionally, stocks broke above the resistance level at around 1,670, marked by the August 26 local top, which is a positive sign.

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Related posts:

  1. Mining Stocks Appear Cheap Versus Gold Bullion
  2. What Do (Mining) Stocks Tell Us About Gold’s Future Moves?
  3. Dollar’s and Mining Stocks’ Implications For Gold
  4. Is It Right Time To Buy Mining Stocks?
  5. Recently this has been more of a “market of stocks” rather than a “stock market.”

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