Significant price damage was done as stocks dropped away from what looks to be a potential triple-top pattern on the Nasdaq 100 or a head-and-shoulders reversal pattern on the S&P 500 and NYSE Composite indices. No matter what index you prefer, or which technical pattern you’re looking at, the message was clear: The bears were dug in at a key level, and the bulls failed to break through.
Now, the counterattack is on. The average investor, which watched stocks get whacked over the last few months and Treasury bonds get whacked over the last few weeks, are stampeding into the last safe haven: Gold and silver.
You can see how the Gold Trust (GLD) has breached its multi-month consolidation range to the upside today — a powerful sign that a new uptrend is being getting underway. Many indicators, including the percentage price oscillator, are perking up in a way that hasn’t been seen since February — ahead of a nice three-month rally in the yellow metal.
What are the catalysts? Fear is a big factor, and we’ve seen plenty of that over the last few days. The ARMs Index, which measures how much investors are focused on declining issues vs. advancing issues, jumped to levels not seen since last August yesterday and posted one of its highest readings of the last 60 years. Inflation expectations have also perked up since the end of June, a positive for gold and silver since they are seen as inflation hedges.
And there are long-term supply-demand issues for precious metals — issues I discussed in a recent column (Apr. 21, “Why gold could hit $5,000″).
For investors looking for exposure, the commodity ETFs mentioned above are the default options. For a bit more leverage, consider the ProShares Ultra Gold (UGL), which returns twice the daily return of gold futures.
As for individual stock picks, I’ve recommended silver miner Silver Wheaton (SLW) to my newsletter subscribersand it still looks good to go. Shares are up more than 6.1% today as it attacks its old May highs. I found Silver Wheaton with the help of technical screens developed with Fidelity’s Wealth Lab Pro back-testing tools, which you can find here. (Editor’s note: Fidelity sponsors the Investor Pro section on MSN Money.)