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June 25, 2010 / Jeb

Banking Reform Pushing Financials Lower and Silver Higher

Major mining indexes appear to be approaching a major breakout point fueled 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.

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 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.

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9 Comments

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  1. Ron / Jun 25 2010 5:01 pm

    If and when silver breaks above $19 will it quickly run to $30 or will it be a slow and steady increase, and will silver mining stocks outpace the actual bullion during this increase as they have been lagging in relation to silver over the past year or so?

    • Mining For Winners In Any Market / Jun 25 2010 6:34 pm

      stay tuned. I find the miners that will outperform.

  2. katherine / Jun 25 2010 10:17 pm

    So, if sliver up 60%, how about uxg would be 8.75? is that correct?

    • Jeb / Sep 3 2010 3:19 pm

      Probably higher.

  3. Emery Homonnay / Jun 26 2010 12:35 am

    What is your opinion on rubicon gold RMX onTSX (toronto) exchange?

  4. doctor ED / Jun 27 2010 2:38 am

    At last–a straight talk letter that does not fear to pick winners.

    • Jeb / Sep 3 2010 3:19 pm

      Thank you Ed

  5. María Sarubbi / Jun 30 2010 1:31 pm

    Hi, I´m from Argentina and I help my father trade. I would like to know if you still recommend to short Nasdaq and S&P500 with etfs REW y SH, as you mentioned a few days ago. Thank you very very much!!

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