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.
HUI is coming to 205, as anticipated. That is the key support zone to a big picture bottoming stance.
Well folks, there it is; the GDX is officially breaking down from support. People absolutely cannot be complaining that there was no warning or that this is some kind of short attack by the forces of evil. It has been in the charts for weeks now (despite the ridiculous ‘Golden Cross’ hype).
For about as long as the precious metals have been below both the 50 and 200 day moving averages I have been advocating patience and strength to NFTRH subscribers. That is because if this mess is going to resolve into a buying opportunity it will require strength to buy it while the ‘community’ pukes again.
In life you can have strength in many different ways. In the financial markets you can only have strength by not being caught on the wrong side of a market and by having lots of cash… and again, patience. The key now is to await targets and hopefully marry up some fundamental underpinnings into a would-be buying opportunity in the coming weeks.
Ukraine war hype, China demand drop, GOFO mysteries… these are the short term noise inputs on the gold sector.
US Treasury bond yield spreads, gold vs. commodities (i.e. the ‘real’ price of gold), gold vs. the stock market… these are some of the fundamental considerations that actually matter and they have taken a hit since January.
It is easy to say ‘I am bullish in the big picture’ (measured in years) but it is not so easy to actively manage in the smaller pictures (measured in days, weeks and months) with all of the above noise inputs and more bombarding the poor individual player.
We use shorter term charts to manage the shorter time frames. Daily charts have most recently indicated a bearish set up as bear flags formed across the precious metals complex (with the exception of silver, which never got going to begin with) last week. Weekly charts continue to indicate that an extended and oh so grinding bottom may be forming, but that includes the potential for ups and downs, also known as volatility.
There is also a lot of noise lately in the stock market. The US stock bull celebrated its 5th birthday last month. The last 2 cycles (the manic phase of the secular bull ended 2000 and the cyclical bull ended 2007) were each approximately 5 years long. Today let’s retreat to the calm of the long term monthly charts and get a snapshot of the big picture.
The S&P 500 has a measured target of around 2190 that we have had open as a possibility since the big breakout occurred in early 2013. A measured target is just that, a measurement; simple math. It is not a directive and therefore 2190 is not hype, it is just a possibility.
Big picture (2014) I remain bullish for a coming turn. But technicals and fundamentals must be aligned. All we can do is continue the journey without imposing our will on events. They’ll play out as they will and we need to adapt to that, not the other way around.
Gold Stocks Technical Bottom Line
- I am so bullish I can taste it, but the time may not yet be right. The big market pivot will take its time unfolding. This corrective leg, which had looked so normal as a post-Ukraine reaction, is taking on short-term technical problems.
- I am going to tell you what I see every step of the way and trust you not to over react and simply stay within your discipline.
- A bear flag breakdown on HUI, if it happens, would project to around 211 in my opinion.
- Unfortunately, it would also open the possibility of a bottom re-test below 200.
- We are not going to sponsor this sector or wear it like a badge. We are going to capitalize upon it whether that is on Monday or some later date.
- The fundamentals, which must go along with the technicals, must come in line to complete a bullish view. They were savaged after January.
- In my opinion, the sector also has the ability to rip higher out of nowhere in anticipation of fundamental improvement, technicals be damned. So be forewarned on that. But NFTRH is in large part, a technical service.
You can review NFTRH here.
An article at a popular gold website is talking about gold and Ukraine in the same sentence, let alone the same article. That’s not a positive. Surely people don’t fall for that one anymore, right? As for this technical buying, what is that? Chart is going up so they buy? This is pap, to be tuned out.
“The escalation of the Russia-Ukraine conflict prompted the safe-haven bid, while the improving chart picture for gold caused the technical buying and short covering.”
The other thing gold bugs should not have wanted to see was tepid volume and a failure to get back up into the bear flag on the GDX chart below. HUI, GDXJ and GLDX also sport these flags. On the plus side, MACD’s are triggered. Unfortunately, that takes a back seat to price action and volume.