For anyone interested, the CoT data improved again, although silver is not yet near the level that put in the June bottom. This could best be termed a sentiment indicator I guess. Other sentiment indicators are contrarian bullish. Yet certain macro fundamentals are not. I would welcome a final event to clear the contradictions, croak the bottom callers and finally set things up for a rally or bull market.
Everybody’s afraid of the dreaded ‘taper’ and that may be just what is needed to get the inflationists out of the gold market (come on FOMC, don’t roll over on us again). They are absolutely obsessed with the money printing aspect of QE and yet not looking at yield relationships and ZIRP.
Guest post by Tom McClellan
December 06, 2013
Since this is among many others, an indicator to the macro funda climate for gold, it is notable that the 30-5 spread is dropping below the 50 day moving averages, putting a would-be bottoming pattern in question for the ratio. Gold tends to be correlated to Treasury yield spreads, rising and falling with them generally.
NFTRH has had to remain bearish (aware of a possible final waterfall that swamps the bottom callers and potentially ends the bear) on the near term price of gold and gold stocks at the risk of being mocked as a contrary indicator. That is not because I am afraid of buying a potential bottom. Long time readers know that I have routinely stepped up to the plate on bottom feeder buying op’s.
But this time, unlike Q4 2008 for example, the funda’s are just not there, no matter how loudly people bullhorn China buying, COMEX shenanigans or Fed/Goldman conspiracies. The yield spread above had been constructive, but now it is joining a chorus of other indicators saying to use caution in the near term and tune out the bottom callers.
The idea remains to be intact first and ready to speculate second.
NFTRH has had several themes in play on the gold stocks. One was the potential for a ‘W’ bottom, which has been obviously negated. The other is a bottoming pattern with a target off an Inverted Head & Shoulders, which could serve to flush the remaining holdouts as it makes a ‘Head’ at a target significantly lower. These were in consideration of weekly MACD and TRIX up triggers. The two bottoming patterns would be ultimately bullish after differing degrees of pain, but other prospects are really disgusting and are also in play.
One theme has been for a break of the long term trend line that every chart geek and his brother is watching, and there it goes. This would inspire a panic, a final flush that would be needed to end or suspend the bear.
Gold and silver CoT data improved for the second week in a row.
It has been 2 years of chop, grind and drop in the gold sector. 2 years since my lousy projection on HUI’s monthly chart failed to do what the Russell 2000 still has a chance to do; measure the ‘Cup’ to an upside target.
The weekly chart of the HUI Gold Bugs index asks a question we have been reviewing in NFTRH for some time now; is the bottoming situation implied by the up-triggered weekly MACD (and confirming TRIX) a ‘W’ bottom in the making that saw its low at 206? Or is it an Inverted Head & Shoulders (IHS), that would theoretically make a final washout below 170 as a ‘Head’ is formed?