Category Archives: Precious Metals

NFTRH 299 on the Precious Metals

aliceI had family commitments over the weekend but an abbreviated NFTRH 299 (which I might add, still packed more useful analysis than much of what is out there puts out on a good day) closed its Precious Metals segment with this, written after Friday’s big head fake to the upside…

“The bottom line on the precious metals segment (which went on longer than intended) is that the elements are in place for near-term corrective activity but on an intermediate view, considering the breakout in silver, the picture is bullish.

We should not fall into the ‘bullish, no bearish, no bullish…’ trap of chasing daily activity around. We have been raising the prospect of coming corrective activity and Friday’s recovery does not change that.

If the sector rises and starts [to] break important resistance levels in a ‘CoT be damned’, upside extravaganza we will note it and watch for those resistance levels to be turned to support. Since that would likely be a bull market signal, there would be plenty of time to position like ‘Old Turkey’ (the ‘be right and sit tight’ buy and holder from Reminiscences of a Stock Operator) for big gains over the ensuing months. For now however, caution remains advised on the near-term.”

I feel that NFTRH has done right by its subscribers; not in being right all the time* but in saying what I feel has to be said all the time. At $10 a month less than other TA services I have observed – offering little or no macro fundamental or broad market research – I am secure in the idea that slow, steady and b/s-free is going to win this race. Lotta clowns out there.

* Though the rally started at our ‘HUI 205′ parameter, which we had been watching for weeks leading to the late May low.  You know, markets go both ways after all.  So both ways need to be managed in order to be properly positioned for bull or bear.

A Look at Gold Stocks

NFTRH update yesterday before the downside reversal:

“Gold stocks are in the resistance target zone, so understand that negative reactions are becoming more likely.”

Okay, a reaction and downside reversal it was.  But now we are left with the dilemma of GDX above its neckline, on a relief recovery day, but still below the resistance point that limited it yesterday.  The reversal candle painted a big engulfing hunk of red on the chart, which today’s relatively low volume rise is attempting to repair.

gdx

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Silver vs Gold

Silver vs Gold became very over bought by daily charts.  Silver also got more suddenly bearish by its CoT configuration.  Okay, now let’s juxtapose that against silver’s weekly situation and what do we have?

sgr

What we have is a still-intact down trend from the 2011 blow off in silver vs gold and in nominal silver.  Further, the ratio is at the top of its long-term down trend channel.  Conclusion?  Why, gold is better than silver.

A problem for the precious metals sector however, is that silver usually leads the rallies that most gold bugs tend to get excited about.

A problem for most global markets is that silver usually* out performs gold during phases of liquidity and risk ‘OFF’.

So is the silver-gold ratio going to break out of the down trend?  Personally, I wouldn’t bet on it.

* In normal markets anyway, which admittedly the last year has not been with regard to some of its traditional functioning vs. the indicators.

Whiplash

[edit]  From an NFTRH subscriber:  “I sense people possibly annoyed with you this morning and now a mere few hours later like oh that guy is level headed.”  FWIW, I too wondered how many might be getting annoyed this morning.  But I have got to say what I think.  Sometimes it’ll prove wrong and other times, not.

I am going to wait until tomorrow and then check a certain website to see what the latest is in the JNUG vs. JDST, NUGT vs. DUST, USLV vs. DSLV precious metals sweepstakes.  No, I’ll not name the site because it is no longer my place to police the entire internet (MSM excepted of course :-) ).  There are others doing just fine in that capacity.

But speaking in general terms, I find the smart guys with the ‘bullish-no-bear-no-bullish… dohhhh, blame it on the charts!’ routine to be really tiresome.  It’s all part of the grand pronouncement neurosis that too many websites and services have in seeking would-be guruhood.  Climbing all over each other to make THE call.

Well here’s a call… the gold sector was going to go up until it stopped going up.  Here is another call… it stopped going up right in a resistance zone that was readily identifiable since HUI made a bottom at the readily identifiable (and highly strategic) level of 205.  Why make things more complicated than that?  Why get involved in crack use?  Why not just have balance and enjoy your summer?

Who Are Those Guys?

As the silver CoT report data systematically, almost robotically degraded into the September 2012 top (despite the seemingly bullish coming of QE3) NFTRH used to ask week after week “Who are those guys?” doing its best Butch Cassidy while evaluating the gathering short interest.

Below is the CoT graph from NFTRH 203 dated September 9, 2012.  Week after week ‘those guys’ were ganging up on silver and we all know what soon happened; a harsh bear market down leg for the precious metals.

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Gold-Silver Ratio

I had just done an NFTRH update using GDXJ’s 30 min. chart and the darned chart changed right in the middle of the post (funny thing, those short term views) and I decided that it would just put too much noise on anyone not already off on what looks to be a great weekend, weather wise here in the North East at least.  So that is scrapped.

But part of the post also included the Gold-Silver ratio, which is at an extreme over sold condition.  The chart indicates that gold stocks often decline after sharp declines in the GSR.  All within the normal and bullish context of an extended bottoming pattern?  There’s a very good chance that’s the case.  But silver is over baked vs. gold, at least in my opinion.

gsr