Allow me to share a simple sketch I drew that was part of an NFTRH interim update for subscribers last night. The black line is where we have been. The blue line is a projection of what a typical correction (whether a healthy interim one or a bear market kick off) might look like.
We used real charts of the Dow, S&P 500 and Nasdaq 100 to gauge the entry into the current correction and now the resistance points to the expected bounce off of the US market’s first healthy sentiment reset in quite some time. But our cartoon above gives you the favored plan on how the correction could play out.
Well, the headlines are rightfully bearish for gold, silver and the major precious metals stock indexes, ETFs and senior gold miners. The technical damage is real. Today’s burst could be and probably is just short covering. [edit; post was mostly written before the end of day flop]
But improbably enough, there is a stealth uptrend going on in certain royalties, miners, developers and explorers. Believe me, if you could hear me talk instead of write you would not hear anything resembling desperation in my tone. That is because I have worked hard during this bear market to manage risk, stay strong and out of the bear’s way. So I am not talking any sort of a book here other than my biggest picture view (an economic contraction environment that ultimately benefits the counter cyclical gold sector), which could still be out on the horizon.
Don’t take my word for it, here’s Investopedia’s definition of an uptrend:
“Describes the price movement of a financial asset when the overall direction is upward. A formal uptrend is when each successive peak and trough is higher than the ones found earlier in the trend.”
Complicated it’s not.
The following charts are what they are (in up trends), and considering that legions of gold bugs have now sworn off the promoters and puked up gold for good, the time is nearing that this sector will again be investment worthy. At the very least, NFTRH for one is going to point out positives along with the ample negatives. Just so we keep a level playing field and an unbiased viewpoint.
Well, at least it looks like a reversal in the gold stocks. Right at the 220 measurement too. Now we enter the realm of ‘Real or Memorex?’, bounce or rally resumption? There is a very logical target lower if this proves to be just a bounce. But 220 is viable too. So it’s just going to take ongoing work… and gold fixing itself technically. That’s a biggie.
In the previous post about ‘Gold Miners & Inflation’ it was mentioned that the 2013-2014 would-be bottoming grind in HUI has been almost exactly the duration of the 2010-2011 topping grind. Here is a visual to put with that statement.
The current yellow box is an exact duplicate of the 2010/11 box, which came with an over bought MACD crossed down. The breakdown candle implies that September would be the month that a break UP candle comes into play if this relationship has any predictive power.
Taking it further, as also noted in the previous post, the Ukraine noise does not help the sector and indeed could hurt in the short-term, because it keeps the wrong gold bugs on the tout. So NFTRH keeps open some minor downside targets.
Taking it further still, those downside targets would end up being buying opportunities if gold’s macro fundamentals start to improve, which despite the emails I get to the contrary, really has not happened yet beyond a few ongoing positives. But it had not happened yet in 2000 either.
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.
The gold stock sector is pulling back today after HUI made a new recovery high of 242.53, just below our anticipated strong resistance zone of 245 to 250. Hopefully, traders have been taking some profit. What comes next for gold stock players is a game plan…
 This post was written while gold stocks were positive this morning. Now? Not so much.
After making fools of the gold stock bears the initial thrust off of the right side of the bottoming pattern is making heroes of the bulls, especially those who remained steadfast in their bullishness throughout the bear market. Indeed, there is now some chest thumping going on by Team PermaBull.
The first move has been impressive in bursting upward off of what NFTRH has called ‘the 205 parameter’ (a right side shoulder point of a large Inverted Head & Shoulders). The initial move is maturing amidst the bullish cheer.
 Well, the price to be paid for using a free alternate chart service is that the volume was severely delayed. GDX volume was actually right on its 50 day average.
NFTRH has been consistently noting support and resistance parameters in the gold stocks so that we do not get caught hoping ill-fated rallies are the real thing. The current bounce is one we have anticipated, but now it is rubber meets the road time. Here is chart of GDX from backup source Barchart.com because Stockcharts.com has been down all day (to the frustration of geeks everywhere).
I would like to think that is not a bear flag, but volume and resistance (red arrows) may argue otherwise. We’ll soon see.
The weekly chart may tell a whole different story, which NFTRH has been anticipating since last year. But the daily needs to play ball first.
This chart shows HUI dropping through the 205 parameter today. While it is technically at support (and getting sufficiently over sold) as you know, without fundamental incentive, I am not near the view I had in Q4 2008 (buy!). No way, no how. Not without a fundamental case that is engaged and measurable. This update then is simply a technical status check on HUI for those interested.