What are the chances that if the pig in the top panel corrects the POS in the bottom panel might rally? Now, will the pig correct?
Take it for what it is worth… a bullish divergence in the HUI Gold Ratio.
Although there is nothing like the ugly daily chart of HUI to illustrate the long and terrible southward journey gold stocks have been on.
At some point this crap will bottom. Is today’s attempted reversal that point? Bullish divergence has not stopped new bear market downside in the past. But rallies have to start somewhere. Bears watching… and no, no pun intended.
Here are some possible bear flags in the making, compliments of the precious metals sector. These are weekly charts and the flags may not yet be mature. Indeed, we have been managing a would-be rally by the miners off of the capitulation low of a couple weeks ago, and that is still in progress.
But the weekly view is not a good one technically for the precious metals complex. Maybe what we need is for the “community” leaders to get emboldened just a little more.
People who understand the value of their physical metal are sleeping soundly. Unfortunately, the majority of players are just casino patrons dressed up as value players and they are micromanaging every tick in gold. Do you think it is just going to breeze through 1524 with all that hope and angst built in?
The gold generals (with egos as big as their reputations) may be debunked by the time this is all over. All along they have used dogma to keep the troops in line and other smart guys have used charts to call bottoms that really weren’t… ‘see, I have a chart to back up my biased viewpoint!’; but the problem is real people with real lives, loves, problems and joys read this stuff and think ‘expert’.
Nobody knows what the fuck is happening out there for certain. If the bear flags above turn out to be wrong, I’ll admit as much. That is because a chart cannot predict. It can only hint and prompt risk management or speculation. It is all about hard work and discipline.
Sorry for the negative attitude, but this whole process has disgusted me more and more the longer it has gone on. I read things every day by dangerous people that make me want to puke. Gold is monetary value, not an idol of worship. Keep religion out of it. Keep fear out of it. Keep greed out of it, and you’ll be fine.
We have been anticipating a rally attempt of some kind. There are targets to the upside that can actually extend all the way to the broken neckline of the big fat Head & Shoulders at 375. There are several rally target points lower than that, plotted by daily charts. There are also parameters to the current rally’s viability, which were not eliminated by Friday’s down thrust.
But it is Mr. Fat Head (the monthly chart) who owns the big picture until such time as 375 is taken out. Mr. Fat Head’s target is an unthinkable 100. The problem is that 250 was unthinkable when we began putting it on radar months ago. Just a friendly reminder in the event things get bullish in the short-term as has seemed probable.
This is a battle between scenarios. Was it THE bottom at the washout low a couple weeks ago, as the index came to the 62% bull market Fib retrace? Is the trend line in the low 200′s going to contain it? Or is Mr. Fat Head’s 100 target going to one day prevail?
In my opinion, week to week management by charts on shorter timeframes will work best. They have worked so far. There is a scenario in play here where the precious metals are bouncing with the inflation trade and another bump in the maturing stock bull market. I would not read much more into it just yet.
Another non-technical sign would be the Chest Beating indicator. You know the one. It’s a week to week, take the pulse type of market until real technical damage is negated.
This week we pared it down to 17 pages because that is all I felt it needed to make its points, some of which were strong. That is in part owing to the more frequent ‘in-week’ updates that were posted here at the site of late. This will probably be the mode going forward; an easier flowing weekend letter and interim updates as frequently or infrequently as called for during the week. It’s sort of a more dynamic way of going about things.
That was the question I asked myself after being 100% cash into the last hour yesterday and seeing the bottom fall out on the gold stocks once again. Classic trading methodology teaches that you do not try to catch a falling knife. ‘Screw classic trading methodology’ thought I, ‘I’m taking some positions’, which ended up being in the gold and silver bullion fund CEF (now selling at a discount), a few individual items I consider to be of relative quality and the leveraged NUGT in a high risk trading account.
The above was noted in an update to NFTRH subscribers in the last hour and certainly was not a call to action. It was just a note from a market manager who had been updating subscribers all along this frustrating journey since the gold stocks lost critical support in November. With that final plunge yesterday afternoon, something bullish welled up inside me.
But as usual, the chart takes out the human element (e.g. “something bullish welled up inside me”), so let’s look at the one for GDX, as it shows an awe inspiring picture of volume.
I won’t recount the whole agonizing history of the breakdown from the September ‘QE’ euphoria. The busy chart does that for me. What is important now is the series of ‘rolling capitulations’ that manifested in Bear Flags, which in turn served to reset over sold status just enough to continue a series of plunges.
Yesterday’s impulsive mega volume drop blew the Bollinger Bands to their widest separation in maybe forever. RSI came to an opposite condition to its very over bought status from September. While on this subject, my stance in September/October was that gold stocks were over bought and in need of a ‘healthy’ correction. That is what TA said. I was wrong about the “healthy” part and was proven so when the red dotted neckline broke down. We are going to be wrong, but it is what we do with that knowledge (deny it or face it?) that is important. When that critical support failed, we labeled the correction “abnormal” and in need of constant risk management.
Which brings us to today. I may be right or I may be wrong in having bought the puke-fest close yesterday. I have plenty of dry powder (too much, if a real rally is forthcoming), but these are the times we wait for people. That chart above has finally woken up with capitulation after a 6 month grind.
A long standing target of HUI 250-260 was hammered yesterday into the close. There are targets lower in the low 200′s (secular trend line by linear chart) and 100 (measurement off a huge topping pattern). So this is all just a trade until it proves otherwise. But look at that chart again. People are being driven out with extreme cruelty and force. This is a picture of massive pain and tumult. Sometimes you just gotta buy that. As noted to subscribers, this will be undone quickly if proven wrong.
How on earth long did I have that target on there? Did I predict it? I don’t do predictions, but I sure did respect it. This thing is hideously over sold but ‘over sold’ itself is not a buy signal. It’s at a target with support a little lower, but a target itself is not a buy signal.
I am going to focus more on the big market bearishness and when I see what I want to see here (other than an over sold index hitting a target) then I’ll plan to manage this sector for a potentially furious rally at least.
It’s incredible how markets work. How DIA-Gold did what it said it was going to do. How HUI did what it said it very well may do. I swear the markets are like some sort of loud, cacophonous orchestra keeping some kind of strange time and making some really grating music.