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Bearish Technical Clue in U.S. Stock Market Could be Boon to Gold, Silver Bulls

Friday October 18, 2013 2:44 PM

(Kitco News) - The weekly continuation chart for nearby S&P 500 stock index futures shows prices are in a solid uptrend. Prices this week just hit a new record high.

However, this major bull market move in U.S. equities is "long-in-the tooth." The very mature bull market in stocks strongly suggests most of the upside price action has already occurred in this present price uptrend.
Another way to put it: The easy money in the bull market in U.S. equities has already been made.

See at the bottom of the S&P 500 weekly chart that the Relative Strength Index (RSI) has shown declining values (and is trending lower) even though the actual S&P stock index prices have continued to trend higher. This is called "bearish divergence" and it's an early warning signal that the stock index bulls are losing steam, even though prices are still in an uptrend.

A drop below the technical support line seen on the weekly S&P chart would be another signal the major bull market move has run its course.

Importantly, when the U.S. stock market does run out of gas, money will then begin to flow out of stocks and into other asset classes, very likely including the raw commodity sector--and gold and silver. Raw commodity market bulls are eyeing this weekly S&P chart and licking their chops.

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By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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